complete beginner to share market - questions, page-20

Hi,

It all depends on ur agenda. R u investing $5k to learn the ropes or to make money? Be prepared to lose $$$ because you will! Paper trading for 3 months is OK, but you'll certainly learn faster with real money. The 20% diversity rule is sound in the 'traditional' stock market but today's markets r manipulated by central banks, governments, traders & investment bankers creating the volatility we've seen in recent years. There is just no way of successfully predicting what's gonna happen next.

When I first entered the stock market in late 2007 (yeah I know ..great timing) I had a similar amount of money and I spread it across some high profile blue chip stocks, following the diversity rule. A month later I was down a few % on some, up a few on others. The 5k would've been safer in a term deposit. I ran out of patience (something you'll need a LOT of - can't stress this enough) and bought a spec stock that was getting a lot of attention at the time and doubled my money in a week! I simply got lucky because at the time I knew less than nothing and it was a complete gamble.

In the years since, I've learned the importance of patience, research, sticking to a sector u know, risk tolerance and the like. Look for growth companies on the verge of a breakthrough. Don't follow the hype! Do some research of ur own. HC is a very useful resource. Timing is vital, otherwise you'll be stuck in a stock going sideways or even worse .. down. Look for companies with good management. Management is very important. There r a lot of shonky listed companies. Should also be well funded for future development. Understand capital raisings, market capitalisation etc.

Blue chip stocks r OK & usually pay dividends, but lets face it .. 5k isn't enough to make money. Again for what it's worth and the risks involved you'd be better off in a term deposit or internet savings acct. The real money is in speculative growth stocks. With enough patience and research you can eliminate quite a great deal of risk. Refer to previous pparagraph.