Making money in shares may be a simple matter
Another year and another 100-odd articles on the sharemarket put away. Every year I think about putting them in a book, but the last one I wrote, even though we've almost sold the 10,000-copy print run, earned me only $4 a pop, which worked out on an hourly basis to be somewhere just less than half the minimum wage.
Maybe that publisher I turned down after they wouldn't budge on my 10 per cent cut was right - you don't write books to make money.
So rather than put me through another 5000 hours on the minimum wage and you through another five hours reading my sharemarket moralising, let me sum it all up.
The sharemarket according to Marcus:
■ Making money in shares boils down to what shares you hold and when. The rest is unnecessary complication.
■ If all the kings and queens, presidents, bankers, central bankers, investment bankers, brokers, financial planners, accountants and taxi drivers couldn't predict the global financial crises, what makes you think you can predict the market?
■ Consensus forecasts do not make you money; they simply tell you why the share price is where it is.
■ The smart money is all the institutions that marketed the research idea before it was released to you muffins. Sorry to tell you, but by the time you read a piece of research, it is almost certainly in the price.
■ Investing for income is a bit of a joke. Share-price risk in equities is vastly more vital to your investment success than the dividend benefit.
■ An obsession with franking is amateur. A dollar is a dollar however it arrives and if franking distracts you into giving the share price the benefit of the doubt, you'll pay in other ways.
■ Return on equity (ROE) is not important. The trend in ROE is.
■ If you invest in a sustainably high ROE company and it pays you a dividend, complain.
■ Average returns are a marketing tool, not a forecast.
■ So far the financial crisis has cost you five years. At average returns, it'll cost you another four. That's why you have to time the market, because you lose time, not money, and time is the most precious commodity.
■ To succeed at dividend stripping, you really need to buy quality shares you are happy to hold, that are trending up, in a rising market, that just happen to be going ex-dividend as well.
■ You will miss the long term in the sharemarket by trying to make it in the short term.
■ If you fluke it, bank it.
■ If you could do it the Warren Buffett Way, wouldn't there be a fund manager doing it and we would all be billionaires?
■ If you have a mortgage, every dollar you lose costs you $2.50 over 20 years. Are you sure you should be investing?
■ Don't buy a portfolio. Buy shares and your portfolio will miraculously reappear.
■ People love gambling. You can't stop them and they don't want to be stopped. The confusion for some new investors is that the bookies have moved into the sharemarket and are using the jargon and integrity of the sharemarket built over hundreds of years as a camouflage for short-term, highly leveraged, risky bet-taking. If you want the sharemarket to be a gamble, all the tools are at your disposal. If you want it to be an investment, it is still bubbling along there somewhere under the surface.
■ During the 33-year debt boom, the sharemarket went up 11.7 per cent a year compound for 33 years. Property did something similar. If you lived through that golden era of investment and now have a house worth $2 million that cost you $200,000 and a share portfolio worth $1 million that includes a holding in the CBA bought on listing, then stop whining about the term deposit rate and count your lucky stars, because you are, indeed, blessed. Our kids will not be so lucky. Don't lose it!
■ For 33 years before the debt boom, the sharemarket grew at 2.9 per cent a year less inflation of more than 4 per cent. You didn't make money just investing, you made money picking shares. If the debt boom is over, we're going back there.
■ There are only two fail-safe indicators you can rely on: Harry Hindsight and the Marcus Today newsletter. Harry and Marcus are never wrong.
Don't forget to turn the sharemarket off some time and focus on the more important things in your life. That's what I'll be doing. Have a good one and I'll see you back here in 2014.
Marcus Padley is a stockbroker and the author of sharemarket newsletter Marcus Today. For a free 14-day trial, go to marcustoday.com.au.