10k to buy shares in Irish companies

If you are interested in growth but more importantly protecting your capital, the best funds to choose are those that perform well when markets are both up and down. There are funds out there that generate outperformance (not absolute or positive returns) in both bull and bear markets offering more downside protection for your money. Contray to what a lot of people think some fund mangers have qualifications such as MBAs, CFAs etc and have years and years of successful investment experience. That does often put them in a better position to select stocks that may outperform. If you do invest in a fund do so with a medium - to - long-term time horizon.

Regarding investing in individual stocks, of course we can all be lucky and find that killer company whose share price doubles over a year. However, these companies are the exception rather than the norm. So don't go into the stockmarket with the illusion that you will become an overnight millionaire. If you invested money in apple back in 2000 you would have made a killing, it would have been a very different story if you invested in Enron.

If you are going to invest in individual stocks then make sure you don't put all your eggs in one basket, spread your money across at least ten different stocks, preferably with some sector diversification (unless you are very confident on an individual sector). You could also consider investing in one or two mid or small cap stocks to add additional diversification to your portfolio (small caps have outperformed large caps over the last few years, they are predicting that 2007 will be the year of the large cap but they said that in 2005 and 2006 and small caps significantly outperformed in those years!). Before and during your investment in a company, watch out for things like the companies earnings announcements etc, key financial ratios such as Price/Earnings ratios, Price to Book ratio, dividend yields, free cash flow etc. For a more qualitative feel for the company, frequently go on the companies web site to hear of new product launches, Merger and Acquisition activity etc. All these factors influence the companies share price. Activity in competitor companies can also have an effect.

Happy investing! I hope it works out great for you guys.
 
Carrie2006 said:
they are predicting that 2007 will be the year of the large cap but they said that in 2005 and 2006 and small caps significantly outperformed in those years!).
Click to expand...

Great post. What do you mean by caps?
 
Carrie2006 said:
Contray to what a lot of people think some fund mangers have qualifications such as MBAs, CFAs etc and have years and years of successful investment experience.
Click to expand...

Some fund mangers have qualifications such as MBAs, CFAs etc and have years and years of unsuccessful investment experience.
 
sherib said:
Does this mean selecting a number of shares on the ISEQ and investing in them via a Stockbroker?
Click to expand...

If you have the shares selected then you could go to a broker (or bank) to buy them as execution service only, or you could open an online account.

As for the Top Ten, read the advice (in Key Posts?) by Brendan Burgess. The top ten are the largest companies (market capitalisation) on the ISEQ. You'll get that from the financial pages of the daily papers. Some, handily, just list the top ten. One thing where this does fall down a little is that you are very exposed to financial stocks. If the banks come tumbling down (falling with house prices?) then you don't have much diversification.

Incidentally, I'm not a professional at this, and as I now am in the proud possession of a mortgage I haven't actually bought anything since 2005. But my prior purchases have been great.
 
Diziet said:
The trouble with funds is that the charges eat into your earnings
Click to expand...

This too can happen when you go diy, if you allow yourself to be swayed too much by selling this, then buying that, then this, that...
Fees and duty eat profits.

Diziet said:
while some are good at their jobs
Click to expand...

This is a great point. Just think of your own workplace. Some are good/great at the jobs. Others are sshhiittee. No difference in finance.
 
phoenix_n said:
Market Capitalisation

Why would they predict that these companies may fair better this year over small cap companies ? What factors would lead one to believe this.
Click to expand...

I often wonder this. Financial shows on the radio love talking about the old reliables. I guess that's why... they are reliable.

But elephants don't gallop!
 
Large caps are cheaper than small caps in PE terms at the moment. They are also reasonaly valued relative to their long-term historic average (currently approx 13X versus five year average of over 17X).
 
zephyro said:
Some fund mangers have qualifications such as MBAs, CFAs etc and have years and years of unsuccessful investment experience.
Click to expand...

Yes of course there are! That is why you careful check the managers credentials and performance history before you put any money in!!!
;)
 
Will you get sufficient diversification with the five shares you have identified? If you buy individual shares you are assuming additional specific risk that you would not have if you had invested in an Iseq tracker or the Iseq Etf, where you will assume only market risk. If you invest in a tracker, such as QL’s or New Ireland Smartfund’s, you also will be able to cost-average in. (Broker’s fees appear to make cost-averaging into etfs expensive.) If you have only a limited amount to invest I think it would be prudent for you to consider a split between Iseq and Eurostoxx euro denominated trackers. You’ve no currency risk and get the gains from the IE and EU markets. Note that if you have pension / PRSA it may be more tax efficient to up your pension payments.
If you are interested in specific IE shares you should look at the business section of last Sunday’s ‘Sunday Times’ on Merrion Stockbrokers’ 10 Stock Model Portfolio. You can check this out on the Merion Stockbrokers site. (I’m not recommending these stocks – I’m an index tracking boy).
 
Could you post a link to one of these studies - it's not that I don't believe you (I do !!) but just want to see my suspicions confirmed in writing.

SPC100 said:
Unfortunately academic studies show it is impossible to identify which funds will do well in advance. Their advice is to be invest passively, buy and hold, when the market falls, you should be buying more.

It is only when markets fall, that you get better long term returns. This is why you need to invest when markets are falling in order to get the best possible returns from stock markets.
Click to expand...
 
Markjbloggs said:
Could you post a link to one of these studies - it's not that I don't believe you (I do !!) but just want to see my suspicions confirmed in writing.
Click to expand...

Check out: 'Bogle on Mutual Funds: New Perspectives for the Intelligent Investor', by John Bogle, founder of Vanguard Securities
 
I think a more balanced view to whether you should invest in mutual funds or individual stocks should be considered. Yes some people have access to Bloomberg, DataStream, Reuters etc... they can understand share price movements when they read them in the newspapers, they are completely comfortable with understanding a business strategy and reading their balance sheet.

However, in reality some people do not have the financial acumen to understand why one stock is better than another, they may not know how to read a balance sheet, I could go on and on. In that case, rather than playing ennie meanie miney mo (or however you spell that) in the hope that they pick the right companies, giving their money to a professional who understands the market, has in-built diversification and has a solid performance record may be an eminently more sensible idea. For the record, I know plenty of portfolio managers who have generated solid consistent returns through a variety of markets and I would personally trust to manage my money effectively.

I am not saying that direct investment in stocks is a bad idea, however it may not be a suitable investment solution for everyone. This website outlines the advantages and disadvantages to both.
http://msucares.com/pubs/publications/p2273.htm
 
Fact: Investing in individual shares is far riskier than investing a diversified portfolio
Fact: Individual stocks can significantly underperform a benchmark
Fact: If you invest all your money in one stock and it declines by 50%, then you loose 50% of the value of your portfolio. If however you invest all your money in a fund that invests in a portfolio of 30 - 50 stocks you loose a hell of a lot less!
Fact: past performance is not a guide to future returns at both a stock level and a fund level
Fact: Investors have different levels of investment knowledge and largely follow the herd when it comes to investing in individual shares rather than knowing anything about the company. How many people in Ireland lost out because they followed the herd and invested in Eircom and didn't cash out at the right time.
Fact: getting someone else to manage your money is much easier for a lot of people
Fact: the asset management industry is huge, if mutual funds are such a bad idea why do these companies exist?
Yes, there are a million arguments as to why stocks are better than funds, but there are a million arguments that work the other way too. I could argue the merits and demerits of both types of investment, however, I seem to be defending Portfolio Managers.
I am not going to say anymore on the matter, people can make up their own minds. I did enjoy the intellectual debate however! :D
 
Fact: getting someone else to manage your money is much easier for a lot of people

If you don't want to manage your own money, stick it into an index fund rather than paying a group of overpaid under-performers.

Fact: the asset management industry is huge, if mutual funds are such a bad idea why do these companies exist?

Why do they exist??? To make a profit at the expense of naive clients who don't know that they are being ripped off.
 
Investors ... largely follow the herd when it comes to investing in individual shares

So do fund managers. As Gordon Gekko puts it in Wall Street; "Ever wonder why fund managers can't beat the S&P 500? 'Cause they're sheep, and sheep get slaughtered".
 
Some examples of funds who have outperformed their benchmarks (and hence would outperform index trackers) just in the European equity sector:




[broken link removed]

[broken link removed]

[broken link removed]
 
You must log in or register to reply here.
Back
Top