Showing posts with label Invest in Shares. Show all posts
Showing posts with label Invest in Shares. Show all posts

Research and Practice: A Step-by-Step Guide to Investing in Stocks and Shares

In the first post, PNG Insight emphasises the importance of research before investing in stocks and shares. Here is the link to the earlier post 'Why investment must have the right balance of the three starters: Research, Money and Approach'.
Unlock your investment potential

This follow-up post is, basically, a beginner's guide to finding your own way around the stock market by:

•    Investigating the 2 common methods for analysing stocks; 
•    Identifying 8 key stock-picking tactics; 
•    Setting up Stock and Share Account; 
•    Monitoring stocks over time; 
•    Choosing a Research that works for you; and
•   Busting 5 stocks and shares investment myths.

The whole bullet point is a process.  It can take years to confidently make the first investment. 

If you think investing in shares is something you can do in the future, you’ve got to start now . Understandably, researching and understanding the market now adds to your knowledge base as a potential investor. As you grow older you become wiser, making the the right investment decisions.

Let’s make a start.

1.    Analysing stocks – the key to successful investing

Two *common* methods of analysing stocks are called the Technical Analysis and Fundamental Analysis.

The technical analysis is used where stock researchers use price, volume, charts and behaviour of a particular stock to understand the overall performance of that stock before (during and after) buying the stock. This method is very technical in nature. Chartists are examples of technical analysts who use charts to identify patterns and trends to *predict* future share price movement.

Fundamental analysts research a company’s cash-balance statement, management reputation, global and local economy, commodity prices, and the overall *intrinsic* value of the company. A key indicator many fundamental analysts look for is the company’s cash.

Note: Both Technical and Fundamental analyses can be used together depending on what works for you as an individual investor. 

The minerals and oil & gas exploration companies are the *high* risk investments. Many of the *exploration* companies do not have cash at hand. If you are going to tread there, it is important that you tread carefully. 
2.    Pick stocks for analysis

This step is supposed to come before Technical and Fundamental Analyses discussed above. It is placed second because you need to know how to analyse stocks and shares before picking them. (No point picking stocks when you do not know how to analyse them)

The 8 ways to select shares before researching are listed in the table (not a complete list): 
PNG Insight Compilation 14/11/2017 (click on image to enlarge)

 3.    Practice makes perfect: fine-tune your stock picking/research skills

Now that you’ve picked a stock that you *think* (Step 2) to be undervalued and *confirmed* (Step 1) the stock is undervalued in your analysis, it is time to put your stock to test. This step is crucial to determine whether you can use the research technique employed here on serious investments in the future, or not. It is about finding out what works for you.

One way to do this is to create a Share Account with ASX and build your Watchlist. 

Step 1 – Open an account (free)

Go to MyAsx Registration page and sign up.

Step 2 – Create a Watchlist 

You can add, edit and view your Watchlist. Be realistic about the number of shares you are buying and how much you want to spend. Avoid adding random shares onto your portfolio - only add the stocks you researched. This will make it easy to test (compare) the stocks against your in-depth researches. A good practice.

Source: Screenshot 14/11/2017 (click on image to enlarge)
As mentioned earlier, it is important to track the stock you’ve picked and analysed (in Steps 2 & 1, respectively). And, to also find out *if* the research you did was worth replicating when making serious investments in stocks and shares.

Here is an example of a Watchlist. Though the monitory value is virtual (not real money), the other features (volume, chart, prices, announcements…) are live market feeds- delayed by 20 minutes. 
Source: (click on image to enlarge)


1. Brief

Image: MIT Environment
Solution Initiative 
Nautilus Minerals is a small cap Canadian company, registered in Brisbane Australia and majority owned by an Oman Group. Described as an *experimental* seafloor mining company, engaging in the exploration and development of Seafloor Massive Sulphide systems in the Bismarck Sea. The company has planned to use remote-controlled heavy machinery and hydraulic pump to mine the minerals, including gold and copper. 

2. Planned Experimental Mining

The latest project update indicated that the planned mining activity will start early 2019. But no definite date was announced. In fact, the company has postponed the start of production from 2017 to 2018 and (in the latest update) to 2019. 

Mike Johnston, Nautilus’ CEO was positive about the seafloor production system: 
"The system remains on track for initial production during the first half of 2019, subject to further financing as indicated previously.” (project update, 10/10/2017)
Nautilus Minerals concept of deep sea mining is not very popular among the people living along the coastal regions of Morobe, Madang, Sepik, Manus, New Ireland and East New Britain. There is also *strong* opposition to the project voiced by prominent locals, Church leaders and national politicians (click here for details).

IMAGE: Nautilus Minerals via  Massachusetts Institute of Technology website 

How to Start: Young Papua New Guineans Can Invest in Stock Markets

This post is the beginning of PNG Insight's take on why young Papua New Guineans should start investigating possibilities for investing in overseas share markets - especially the ASX, LSE and NYSE. 

Investing is like starting a fire. For the fire to start, three things must be present: spark, fuel and air. It would be absolutely impossible to get the fire started if one of the three is missing. 

Investment must also have the right balance of the three starters: Research, Money and Approach.

Research: First, take the 'spark' as the drive to do something for you and your family not only now but also for the future. And that is to *find* out about investing - whether it be investing in stock market (as intended in this post) or in other areas. Read. Read. Read.

After a good research, put the research to test. This is crucial to find out whether the analysis (increase/decrease in price prior to the stock selection) is going to work or not.

One way to do this is to create an online account with with the likes of ASX, AIM, ADVFN or any online platform that uses real-time stock market data. Your can do this for free and easily. Here is a summation of 5 starter points: 

1. Create an online account (e.g. with ASX);
2. Select 1 or 2 companies (you can build the list of companies up over time) using your research;
3. Add the companies to your portfolio; 
4. Track your companies (from your research you should have a fair idea about the 'price sensitive announcements'); and
5. Re-evaluate your research and choose what works for you.
* Note: If you are a beginner doing it yourself (DIY) the steps 2 - 5 can take several years before you are confident with your researches and, ultimately, where to invest your money.
Money: Second, the fuel is your capital - money. Young Papua New Guineans, especially those who earn a fortnightly income, *can* venture into capital investment.

Approach: Third, the right approach to grow your investment is like the oxygen to the fire. Starting a fire from a spark has to be a gentle approach. You'll have to make sure the wind that is blowing around you is not too strong or the soil too wet to get the fire going. Do not rush into investment. 

You do not have to wait till you have got the money. You can start right now. Start with getting the *spark* going! Read about how to Invest in stocks and bonds or anything you could invest in for the long term and retire comfortably.

There are a few challenges of investing if you are living in the country. One of this is finding a broker. This is a topic for another post as it is a different stage - the stage where you are taking action. Right now is all about getting the little sparks going.

Starting is, in fact, the easiest bit. Most of you reading this post are on Facebook or Twitter. Follow the Australian Stock Exchange (ASX) or London Stock Exchange or any account that meets your investment taste. 

Read the blog posts and articles about how to find the stock that is going to increase by 100% in the next 5  - 10 years.

Today access to Internet is really cheap. For example, Telikom PNG data rates can enable you to read widely.

This post is the first of a planned series on investment in Stock Markets. The series will enable readers to *learn the importance of research and practice* before making serious investment. Join PNG Insight on Twitter and stay in tune for more of the investment series coming up.