Ask the Experts
Have a question related to the stock market? Here is your chance to ask our experts. While we can't guarantee to answer all questions, feel free to browse through the hundreds of questions answered already.
A friend of mine is thinking to invest in property trust, he's told the dividend could be up to 10-11% p.a., he has an idea to borrow money from the bank and invest them in the property trust in order to make profit. Does it make sense? Is there any hidden tricks behind those property trust?
Unfortunately the information in your email is too limited for us to be able to make a decision, and we are not permitted to provide personal financial advice anyway, although any investment strategy which involves borrowing is necessarily risky. We suggest your friend contacts an independent financial adviser or broker about the specific product to see if it is appropriate for them.
How do you calculate the intrinsic value of a stock in order to ascertain whether the stock is under or over valued?
Unfortunately we could write a book on your question! Calculating the value of a company is a process that takes into account both quantitative and qualitative factors. Some of these include management, market position, industry characteristics, balance sheet analysis and assessment of underlying cash flows. It is a complex process - and not one where you follow a specific set of rules to get a set outcome. It therefore involves a high degree of judgment, which is why some people think a stock is a buy while others think it is a sell. The best way to learn about assessing companies and working out possible values for them is to read as much as possible. Newsletters such as The Intelligent Investor and books on investing in companies (as distinct from trading their shares) should be of use if you want to learn more, as they will help with the things to look for in determining under- or over-pricing of companies.
What about on line trading through the banks, etc?
We're not quite sure what you mean by your question, but New2Shares talks about two types of brokers - full service and execution only. Online trading services are execution only services.
What does it mean when a company has a buy-back of shares and is it a good or bad thing?
We might refer you to the website of our parent publication The Intelligent Investor (www.intelligentinvestor.com.au). If you navigate to the Investor's College tab and search for issue number 173, you'll see we wrote an article on exactly this topic recently. All past Investor's College articles are available for free, so it's a mine of information on investing.
I'd like to know what underalying fundamental criteria is looked at, and most importantly how is that data evualated or related to a benchmark when looking to purchase new or adding shares to a portfolio.
Unfortunately we could write a book to answer your question! We look at fundamental criteria such as management, industry structure, market positioning, past performance and many other factors when assessing businesses, which is how we pick which shares to buy. This involves assessing a range of qualitative and quantitative factors, so it's not really a case of setting a benchmark or standard. And individually, each person's portfolio will be different. The best thing to do if you are looking to buy shares is to read as much as possible, and newsletters such as The Intelligent Investor can help you establish a portfolio.
If I only want to buy 200 shares and someone else wants to sell 500 shares in the same company and we agree on price, am I entitled to have the 200 shares, given that I understand all orders to buy and sell are put into a queue. And does being put in a queue mean that I would get first shot at buying the 200 shares and the next person in the queue on the list would get the 300 (or however many they wanted)?
To answer your first question, yes. If a buyer and seller agree on price, then a transaction must by definition take place. You will get your 200 shares, but the seller's remaining 300 will sit there until someone pays his price, or he lowers it. With regard to your second question, you will only be in a queue if you fail to pay the seller's asking price, otherwise a transaction would have obviously occurred. All orders are ranked by price and time. The highest and earliest bidder (buyer) will be first in the queue. Anyone who wants to buy at the same price as that bidder, but who put his order in later, will go below him in the queue.
All of the 'money' magazines, papers and web sites limit their explanation of jargon to the most known things like PE ratios; etc. Can someone please explain comments you hear on television shows such as hold short, sell long, and the like. I am sure I am not the only one who is not sure what these terms mean.
To be completely honest, we haven't heard the exact terms 'hold short' or 'sell long'. The latter is actually a combination of terms that contradict each other so I doubt anyone would use it. To go 'short' a stock means you sell it. To go long a stock means you buy it. Or if you say 'I am long ABC Ltd' it means you own it (and obviously hoping it will rise). These are technical terms used by stockbrokers and the like, but our parent publication, The Intelligent Investor, prefers not to use jargon such as this - it usually confuses rather than clarifies. I hope this helps a little.
In July 2002 I borrowed $5000 from my Super Saver Account with IOOF and invested it in Perpetual. I pay approxomately $382 in interest per year on this money. Should I keep paying this interest or should i pay off my principal?
Unfortunately we are not permitted to give personal financial advice, as we are unaware of your financial objectives and needs. We suggest you consult a financial adviser or your taxation adviser if you want advice that relates specifically to you.
I have read the book how to beat managed funds by 20%. ? When using trend lines, what time frame would be cosidered reasonable to determine a trend.
Thanks for your query about trends. Unfortunately we are the wrong people to ask! As you might have gathered from New2Shares, we are long-term focused, fundamentals-based investors. We do not look at share price trends and do not believe people who use a wholly trend-based approach are consistently successful in the sharemarket. You may like to consider a technical analysis course if you want to learn more about the area, but be aware it is no easier than fundamental analysis. In fact, we'd encourage you to learn about companies and businesses to pick stocks rather than trying to assess random price changes.
In your Q&A section you say that you like buying stocks when they are low in price, being value investors. But if you wait for the price to go down while you still own the stock, doesn`t it mean that you then have to start the building process again?
The idea behind value investing is too buy stocks when they fall in price, yes. But obviously we would prefer not to own stocks that fall in price. Preferably we wait until the stock has fallen in price BEFORE we recommend you buy shares. This has been the case with numerous Buy recommendations in our parent publication The Intelligent Investor this year. We recommended several shares AFTER they fell in price, having not owned them previously. Although occasionally you own the stock and it falls in price and you get the chance to buy more at a cheaper price. We relish this type of opportunity too but our preference is to buy in AFTER the fall.
