SMSF Investing Education & Strategies

DIY Sharemarket Investing

The Australian share market is the most popular place to invest for trustees of DIY / Self Managed Superannuation Funds, with around 30% of all SMSF assets invested there.

Which is hardly surprising. Its possibly the most high profile asset class in the investment world, with many trustees believing it represents their best chance of earning an above average return over the long term. It’s an easily accessible market via either online brokers offering cheap brokerage or via more traditional phone based brokers, both of which provide trustees with a high feeling of control over their retirement assets. There is also an abundance of research available, and many different strategies and tools at your disposal.

It’s also a fairly simple investment concept to understand. When you buy shares of a company, you are buying a part of that company, and as such you share in the performance of that company by way of profits. This can be given to you as income dividends and/or capital growth through the value of your shares increasing over time. Of course, the opposite can also occur, in that poor performance or other negative external factors can result in capital losses. The companies you invest in use your money and that of other investors to help fund their business activities or its expansion, without having to borrow money (although many will do both). The main reason for companies to list on the stock exchange is to raise capital for their company, and this in turn creates a market in which the companies shares can be traded.

However as mentioned above, investing in shares can be a double edged sword. Poor investment decisions (or fundamentally flawed strategies) can wipe out large amounts (and possibly all) of the value of your fund. It is imperative that if you are going to invest in or trade the stockmarket, then you need to understand the nature of the market (which can sometimes be very volatile), the way it works, and also understand some fundamental investment methods that give you the best chance of success. Get educated — education is always your best investment. See below for our links to some fantastic FREE online sharemarket education.

ASX Online Education

This is an excellent starting point for those new to the sharemaket, or even those with some experience. These online presentations from the ASX take your through everything you need to know to get you started from basics such as what is a share, all the way through to topics such as investment strategies, fundamental analysis and technical analysis.

CLICK HERE to get started.

Value Investing Education

If your going to be successful at investing in shares, you absolutely need a logical plan or methodology for selecting your shares that is underpinned by a robust, prudent process. The concept known as Value Investing is probably the most widely accepted logical investment method for selecting top quality shares at good prices, and is a method followed by Warren Buffet — the man globally known as the worlds most successful sharemarket investor. In Australia, one of our most well known exponents of value investing is Roger Montgomery, and Roger supplies us with much of our value investing education in this section.

Investment newsletters

These are regular newsletters / reports that can provide stockmarket buy and sell recommendations, company news and research, stockmarket updates and analysis, and may include model portfolios that you can follow with a performance history. They tend to be run by industry professionals who have backgrounds in broking or research (but not always). They can be very handy for those that are time poor, who still want to use expert guidance but are happier to just pay a flat annual fee for the newsletter and place their trades themselves, rather than pay a % of funds fee to a broker, adviser, or fund manager. Some newsletters will also have a track record of recs so you can see how they have fared in the past, while some do not. See our Investment Newsletter comparison table for information and prices on these newsletters.

Trading Software & Trading systems

Trading software and Trading systems can come in a number of different formats. Please note that the marketing of these can be quite aggressive and really focus on selling you the dream of making easy money on the stockmarket, which we all know is not that easy. Take the marketing with a grain of salt, and look at the logic of the product itself, and how it has performed in the real world before making any decisions.

Fundamental analysis software sits on your computer desktop (or is web based), and via a number of filters that you can overlay yourself, tells you which stocks (and hence their derivatives) have the best fundamentals or financial strength subject to your search criteria (e.g. you might only want the best in the top 100 stocks, or only those with PE ratios less than a certain number etc). This is a very useful tool for only including top quality, financially strong companies in your portfolio.

Technical analysis software looks at entry and exit points of stocks, indices, commodities etc from a technical analysis or charting perspective. This is generally used by trustees who are more actively trading stocks, however some can be used by those taking longer term positions.

Trading systems are those where a particular set of indicators are used (which may or may not include the use of software) to provide you with buy and sell signals for individual stocks, or the market as a whole.

Note that all of these above may be initially delivered via an ‘Education’ course or DVD package so that you understand what the investment philosophy is all about and how to use the trading software or system they are selling.