Beginner investor: how did you start investing and where to get started?

Stocks
,
23

This is absolutely true, as mentioned earlier in the thread.

If, with investment experience, allocation decisions expand, then especially when investing in certain emerging markets, I would definitely recommend an actively managed fund with a smart cost structure. A great example of this is PYN Elite, which currently operates primarily in the Vietnamese market. PYN Elite has historically excelled in the Thai stock market, shifting its focus to what they perceive as the unwinding of undervaluation in Vietnamese stocks.

I no longer own any index funds today, and the only actively managed fund I have is a holding in PYN Elite for my own retirement, which will likely remain in my portfolio until the proverbial end.
PYN’s cost structure is quite smart. Everyone can look into it themselves, but broadly speaking, subscription and redemption fees are 0%, management fee is 1%, plus “12.0% of the return exceeding the fund-specific HWM (High-Water Mark)”.
The current HWM is 325,362 eur (Jan 31, 2018). Today’s NAV (Net Asset Value) per share for PYN Elite is 281,165 eur, meaning for now, only the 1% fee is paid, and when exceeding the HWM, it’s 12% of the exceeding return. It’s a fairly large fee, but it really incentivizes fund managers to deliver results, and it’s good to understand that the percentage is only on the exceeding portion.

This is just a small curiosity in case one wants to seek diversification benefits or otherwise allocate to certain markets, for example, emerging ones.

Index funds are a great way to invest today. I started with them myself, and it’s possible that in the long run, in terms of returns, I should only invest in them. However, stock picking keeps the spark alive in this endeavor, and according to @Massen’s teachings, investing is sometimes entertainment that you have to pay for :wink: Well, so far at least in my case, the decision has paid off, but time will tell what happens in the future.
Perhaps my own mentality wants to try to perform a little better than average somewhere :smiley:

I would also like to emphasize that investment decisions do not necessarily have to be conclusions based purely on raw data. If you are simply not interested in spreadsheets and valuations, excellent stock picks can also be made by observing other things. It is an undeniable truth that monitoring company figures is key when making investment decisions generally, but fortunately, for numbers-haters, help is available, for example, from Inderes’ excellent analyses and relatively plain language output.

I strongly recommend reading Peter Lynch’s “One Up on Wall Street”, where Lynch vividly describes making stock picks based on “daily fundamental analysis”. Sometimes his wife had noticed certain stockings were just so incredibly good, other times Mr. Lynch had found certain donuts to be tasty and observed strong sales. Once the spark for an investment idea has ignited, it’s time to examine the company in a more critical light – what are the drivers of growth and development? Is the business scalable, does it support current megatrends, what is the competitive situation in the market? And so on.

For example, if you believe in the future contraction of central kitchens and the outsourcing of municipal food services, the increasing work-orientation of private individuals, and thus the growth in demand for ready meals – you might be interested in the food industry. If you find yourself pondering the poor shelf life of foods, you might be interested in, for example, Feelia’s autoclave technology. If domestic origin, local food, and a reduced amount of additives are, in your opinion, things that will guide consumer demand in the future, you are probably already quite excited. You don’t like “food mafia” and expensive distribution chains. Feelia, by the way, doesn’t use them.
What on earth is Feelia? Well, it’s owned by Fodelia. What else do they do? Among other things, oat snacks. You love sour cream & onion chips but can’t eat dairy – you’ve noticed more and more people avoiding dairy. You find Oikia’s PirteĂ€t Britat (Cheerful Brits), which are a lactose-free alternative.
You believe in this whole package very strongly.
Now, only a superficial review of Fodelia is needed. If you strongly believe in a company’s future potential, especially in growth-oriented companies, pricing is often such that the current value doesn’t have as much significance when considering the future. The shorter the timeframe one looks at a stock, the greater the importance of its current price.
It is clear that in certain growth companies, investors are willing to pay more for growth. These stocks are, of course, good to identify and consider whether the price paid for a potential growth option is genuinely justified or not.

I strongly recommend starting to invest in simple index funds and, as experience grows, choosing at least one or a few meaningful companies for your portfolio whose growth or, alternatively, strong profitability you truly believe in.
It brings a completely different kind of spark to this endeavor, and even if you don’t want to dedicate much time to investing, good insights can sometimes earn quite a bit of money. However, it’s good to keep the weightings of these stocks moderate compared to, for example, index funds.

P.S. Nowadays, there are already certain “smart ETFs,” such as Nordea’s Enhanced funds. These are generally index funds maintained with moderate cost structures, where some “bad” stocks are filtered out using certain parameters.
I won’t elaborate on their performance or operations further, but I thought it would be useful to point out that these alternatives also exist. Especially when investing in unfamiliar markets, they can be appealing if regular index funds feel boring :wink:

8 Likes
24

https://www.iltalehti.fi/rahavinkit/a/36174c49-dc0d-47f9-9fc0-fde451af0d51
These can’t really go wrong, can they, if Seppo Saario also trusts them now. Or is this just the so-called cruising gear that has been engaged? :thinking:

3 Likes
25

Alright, thanks to everyone who replied!

I’m not yet ready for direct stock purchases, so I decided to go with ETF indexes. The bank offers a fairly affordable OMX Helsinki 25 ETF. So, I was thinking of putting in €750 to start with, just to get started with investing?

3 Likes
26

Why Helsinki, why not the world?
What does “rather inexpensive” mean?
Are you planning to continue investing in the same instrument? If so, with what amounts? (A fund might be smarter due to free acquisition costs, even if it has a higher management fee)

2 Likes
27

@Hurde summarizes it well, the important question words in investing are why, how, what, when, and how much. When you ask yourself these questions when considering an investment, the number of mistakes decreases.

3 Likes
28

Helsinki because it’s the most familiar.

Maximum 1% commission, minimum 7€.

I wasn’t planning to.

I’m not sure about this, but since it’s a one-time deposit, would an ETF be better?

1 Like
29

An ETF is just a fund that is traded on the stock exchange. While a normal fund is a basket that one can join by paying money into the fund and receive money upon exit, an ETF unit can be sold directly to another party on the market. For holding purposes, it’s the same whether it’s an ETF or a traditional fund. The key difference for a small investor is how quickly one can divest from the unit. Returns are affected by fund fees; however, ETFs are often cheaper.

One must be careful not to cross into investment advice. However, if you absolutely want an OMXH25-tracking fund, Nordnet’s Superfund Finland is completely free of charge (no management, redemption, or subscription fees). You should not pay your own bank anything for a similar product. That said, Nordnet has recently started to adjust its terms in a detrimental direction for investors in some respects.

This should not be interpreted as a recommendation to buy an OMXH25-tracking index or any other instrument. But if you yourself have decided that’s what you want, you can get it even without fees. (for now)

Generally speaking, once the underlying asset has been selected, it is important to be careful when choosing the ETF (fund) itself. Numerous different funds and ETFs track the same index, and they have different cost structures. In this case, one should naturally choose the cheapest one. Since these are primarily for long-term holding, the management fee is usually the most significant, as it recurs every year. Of course, redemption and subscription fees are also a factor. In the example of OMXH25, the cheapest is still free.

9 Likes
30

Oh Pentele, what a question you’ve thrown at this old man!! A whole novel could be written about this. :slight_smile:

Over the past couple of years, this old man has probably shared around 500-600 pages of investment advice on this forum, and he’s never failed to recount how he started his investment journey in the late 70s with paper shares of Nokia Rubber Factory inherited from his grandmother. Just dive into the forum threads and read Uncle Masse’s collected works :muscle:

But one thing this old man will tell you about those Rubber shares, here and now, is that selling them quickly was the worst mistake of his long investment career (the old man sold them during Nokia’s early rise out of foolishness and ignorance, as a young lad could get a brand new little Suzuki with the proceeds). If he had forgotten them in a drawer and then sold them at Nokia’s peak, he would be a multimillionaire!! On the other hand, everything in life is relative: if the old man had kept the Rubber shares, he wouldn’t have charmed Aunt Masse with the Suzuki, wouldn’t have had children, and perhaps most importantly in economic policy terms: he wouldn’t have come to Inderes forum!

You’ve already received (and continue to receive) modern investment advice from the always-ready (and 24/7 on-call) younger investment veterans here on the forum. It’s worth checking out: there’s a lot to read and learn. If you want to take a shortcut, one way is to just follow Uncle Masse’s investment guide here on the forum. The old man constantly updates his “investment truths” in the form of ramblings, in suitably small doses, so even a beginner won’t get overwhelmed at the start. :slight_smile:

Let’s start right from the opening words of the guide, chapter 1, verse 2: “Buy low, sell high” :slight_smile:

No more for one sitting. Welcome, Pentele, to the Inderes forum, especially its coffee room! You won’t be flagged there or taken to Inderes’ notorious basement.

Uncle Masse, FA, No advice or recommendations, but plenty of views, opinions, and stories about my own doings :heart_eyes: :heart_eyes: :heart_eyes:

30 Likes
31

Thanks for stating the obvious :slight_smile:

3 Likes
32

Thanks for stopping by, kind mass-uncle :grin:

And nice stories about Nokia, even though I think I only witnessed its downfall.

I’ll definitely swing by there too :slight_smile:

2 Likes
34

You should listen to rahapodi and inderespodi! I’m still a rookie, but I’ve learned an incredible amount just by listening to these. So, you should use all your “extra” time, like commutes, to listen to them. :+1:

5 Likes
35

It might also be worth mentioning that temporal diversification should probably be remembered now, so as not to invest everything at once, especially now that equity valuations seem to be quite tight.

3 Likes
37

It’s important in stock picking. :+1:
I myself started with an index fund.

1 Like
38

If I understood your comment correctly, you think that time diversification is not important when investing in an index fund, even though it absolutely is important.

3 Likes
39

I didn’t say that.

Time diversification is good to do, both when picking stocks and when investing in an index fund.

I’ve only just started investing and still have a lot to learn, and I guess I only mentioned stock picking. :slightly_smiling_face:

2 Likes
40

I thought for a long time whether to present my views or not, but I’ll say it anyway, I know this will cause a stir - I don’t care.

I wouldn’t buy funds as a beginner; instead, I’d jump straight into the deep end and buy stocks directly. Why? Because owning something like Sampo is a hundred times more interesting than following some OMX25 stock chart. You’ll learn and become interested in investing in a completely different way. Since most people will end up buying stocks sooner or later anyway, it’s worth starting that learning process immediately. In ETFs/funds, the share of an individual stock is at most a few percent, which doesn’t interest me at all. Many people’s enthusiasm for investing quickly fades, and for many, the reason might be that following index funds is the famous spectacle comparable to watching paint dry.

End of announcement. This was not investment advice and should not be published in Tampere.

36 Likes
41

I hear you in Tampere, and good points are always welcome. I agree that direct stock investments can work right from the start, as long as you find out what those companies are and what the future looks like. Also, keep brokerage fees and other costs in check, and start with a suitable amount that you can add to later. The worst option is to get involved with the “wrong” company with high fees and believe that it will turn around. Belief and emotion are bad companions in these matters. That’s how you end up in the investment mistakes forum, recounting your so-called “school fees.”

So, rather than diving straight in, it’s better to research these things calmly for a few months and then start selecting companies. Or, start with funds for a while and switch to direct stocks once you’ve learned more. I personally avoid the idea that “investing should start immediately.” In my opinion, it should start immediately when you know what you’re doing. Or, indeed, with funds (which you also need to know how to choose) and not everything at once, to avoid sudden drops in prices and unnecessary frustration right at the beginning. If a football team always attacks with the whole squad, their own net will start ringing quickly, and it’s still incredibly difficult for their own team to score goals and turn the tide of the game.

I personally no longer want funds (I’m open to changing my mind), because following interesting companies brings more pleasure and new information. This benefits not only myself but also my environment. Funds would be better in the sense that you wouldn’t tinker with them, which is perhaps my biggest area for improvement in my own activities. Often, tinkering goes wrong, and that’s why I’ve learned to avoid it. Summa summarum: know what you’re doing and keep costs in check. Belief won’t save prices from rising, but cold facts will. Prices rise and fall from time to time, and with a good company, occasional roller coasters don’t matter. You should also enjoy this whole thing, so act accordingly


7 Likes
42

Some combination of ETFs and stocks could be good for a beginner. Currently, I have a 50/50 split between stocks and the iShares World Momentum Index.

Secondly, I would say it’s really worth researching these indexes before investing in them. The S&P 500 has risen about 950% in the last 30 years, while Japan’s Nikkei 225 has fallen about 35% in the same period. They always say that historical returns are not a guarantee of future performance, but in that situation, I would still choose the one that has performed better.

Timing diversification is also worthwhile. I’m currently nearly 1000 euros down from my ETF/fund tinkering because I didn’t do it right from the start. If I had used my current time diversification method from the beginning, I would be 1000+ euros up.

5 Likes
43

Hey, could someone help me understand the accounting aspects of growth companies?

It’s often said that P/E is useless for growth companies. Why is that?

Apparently, debt can be reduced from the reported net income. What if the company invests in growth? Are investments directly deducted from net income, or how does it work?

And finally: how should the valuations of these growth companies be approached if a large portion of the earnings is invested in growth? In that case, the earnings would be much higher if growth investments weren’t made.

2 Likes
44

  1. Growth companies prioritize growth, not earnings, as a general rule, which is why the E-component is usually high or negative.

  2. Investments are not reflected in the income statement but in the cash flow and balance sheet, only indirectly through potential interest expenses. Net income can be used for growth investments; it doesn’t change net income but rather cash flow. This excludes personnel costs and other direct expenses that reduce net income.

  3. See point 2: if you invest by increasing staff, net income will naturally decrease initially due to increased expenses. If you invest in equipment or product development, these do not directly affect net income.

3 Likes