Marcus PadleyMAppFin. LLB MSAA ADA (ASX)

Stockbroker

Available from The Educated Investor Bookshop outside

The Stockmarket Newsletter for Every Investor

Specialises in EquitiesInvestment portfolios

Daily trading IdeasDaily Stockmarket News

An Education

Ten Investors

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Being Stupid - Predators

The Thirteen Investors

RATING CRITERIA

Element of GamblingRelies on the Market going up

Employs Timing SkillsUses Trading Skills

Uses Company KnowledgeRequires PatienceTime Consuming

Intellectual – Interesting - Fun

The Thirteen Investors

1. The Plodder

Your Portfolio - $1m

The Banks (40%)Macquarie (sold)Babcock & Brown (bugger) BHP (maybe RIO) WoolworthsWestfield (WRT) TelstraFortescue (sold in 2008)WoodsideQBECSLMyer No QRN (wish you had)

Faith in the BanksFaith in ChinaFocus on FrankingCapital Gains issuesFull Service broker80:20 but really 99:1Sat out the GFCGold maybeTerm DepositsThe Warren Buffett WayIntelligent Investor

The Plodder Not a lot of risk

Not going to blow upBut going to take the market on the nose

Relies on the market going upVulnerable to a GFC Faith in the Banks

Faith in China OK if you don’t need the money

2. The Income Investor

The Income Investor Things you should know:

You make less money in high yielding stocksYou exclude the Super stocks – (PDN)

You can’t buy Resources – best bitThe yield trap

Yield Trap

The Income Investor Things you should know:

You make less money in high yielding stocksYou exclude the Super stocks - restricted choices

You can’t buy Resources – best bitThe yield trap

ROE more important - TelstraCapital gains are income too

Change of mindset - Make moneyChange of mindset - Spend capital

The Return on cash can be as good as equities

3. The Value Investor

The Value Investor Sounds good

Cerebral exercise is impressive – but effective?Reality - No-one is Warren BuffettDeny ability to time the marketPatience takes a lot of moneyPatience takes a lot of timePatience takes a lot of faith

Not practical – edge of the envelope (School fees)Vulnerable to a GFC

Rubbish in rubbish out – Forecast reliant

Otherwise…Great!

4. The Daytrader

The Daytrader

Roots are in free leverageNot investment

ComputersHerd trading

SoulessBoring

StressfulProne to shocks

Very time consumingLike walking onto a battlefield wearing orange

5. The Trader

The Trader Not just Technical Analysis

Trading Skills are for everyoneStructure – Controlling the outcome

A plan – Sleep at nightDiscipline - Vigilance

Playing probability - No pride No fearAny time frame

Same intentions as an investorNeed education – a commodity

Time consumingPredators

Long term results the goal

6. The Sophisticated Investor

The Sophisticated Investor

Certificate required – saying you are richSpeed of the essence

Free option on financial opportunities

Reality No product disclosure statementsNo-one taking the blame but you

Fine line between a Sophisticated Investor and a Bunny Depends on broker relationship

Are you sophisticated – or do you just qualify as one.

7. The Top Down Investor

The Top Down Investor

The money is made out of what the analysts don’t knowThe money is in the Big Drivers - rarely in the detail

Good news follows good sectorsGood managers are in good sectors

Good luck is in good sectorsM&A happens in good sectorsMy client with the Midas touch

8. The Stock Picker

The Stock Picker Average returns don’t exist

ALL ORDS AVERAGE RETURN

ALL ORDS EXPECTED RETURNS

ALL ORDS ACTUAL RETURNS

ASX 100 RETURN

ASX 100 EXPECTED INDIVIDUAL STOCK RETURNS

ASX 100 ACTUAL INDIVIDUAL STOCK RETURNS

ASX 100 ACTUAL INDIVIDUAL STOCK RETURNS

Difference between picking the top ten stocks and the worst ten stocks in the:

ASX 100-37.5 +83.1 = 120.6%

ASX 200 -51.0% +248.9 = 299.9%

ASX 300 -66.1% +273.9% = 340.0%

ALL ORDS-70.2% +444.3% = 514.5%

The Stock Picker Average returns don’t exist

Making money is about buying stocks that go upAvoiding stocks that go down

Avoid anyone hiding in averagesValue anyone trying to pick stocks

Value time spent trying to pick stocksFind a stable of good stocks

Apply trading skills

9. The Zombie

10. The 10 Stock Gambler

11. The One Stock Portfolio

12. The Boat Fund

13. FOREX and CFDs

BEST APPROACH

BEST APPROACH

Looking for high probability outcomes(It is a gamble)

BEST APPROACH

Looking for high probability outcomesUsing both Fundamental and Technical

(Weak alone – stronger together)

BEST APPROACH

Looking for high probability outcomesUsing both Fundamental and Technical

(Weak alone – stronger together)

Cannot shut eyes to “The odds”(knowing when to play the market)

BEST APPROACH

Looking for high probability outcomesUsing both Fundamental and Technical

(Weak alone – stronger together)

Cannot shut eyes to “The odds”(knowing when to play the market)

Identify and trade Individual Stocks(Buying stocks that go up – Avoiding stocks that go down)

BEST APPROACH

Looking for high probability outcomesUsing both Fundamental and Technical

(Weak alone – stronger together)

Cannot shut eyes to “The odds”(knowing when to play the market)

Identify and trade Individual Stocks(Buying stocks that go up – Avoiding stocks that go down)

Time entry (not the sole focus)

BEST APPROACH

Looking for high probability outcomesUsing both Fundamental and Technical

(Weak alone – stronger together)

Cannot shut eyes to “The odds”(knowing when to play the market)

Identify and trade Individual Stocks(Buying stocks that go up – Avoiding stocks that go down)

Time entry (not the sole focus)

Trading skills to control outcome

BEST APPROACH

Don’t nail yourself to one mastValue stock pickers

Learn Technical basicsGet trading skills

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