By David Woodside, ASA member
Recently I was invited to give a talk to our newly formed Griffith Branch of the ASA about my experiences in investing in stocks. I am a retired farmer, keen photographer, and travel with my wife, Enid and give talks to local communities about our travels.
So how did I get involved in the stock market? The story goes back to the early 1950’s (after the Korean War) when my parents were forced to sell half their farm (along with other land holders) for closer settlement. My father was interested in shares, so he invested that money (about $75,000 – in today $’s) into the stock market. In those days you had a stockbroker and held share script.
I started my farming career in 1969 and unfortunately my father died some months later. He was in the process of changing his will to reduce death duties (pre-capital gains tax).
Death duties were assessed at $460,000 (or about $3.0m today’s $’s). This represented about 75% of total assets – land, livestock, plant and ASX stocks. How were we going to pay this amount off? We talked to our local bank – they were less than helpful. After much soul searching we sold the shares, about half the farming land and borrowed money from the bank. The shares sold were valued at about $150,000 or $1.0m today’s $’s and sold on a falling market. With hard work, some good seasons and asset sales, by 1975 we had paid off death duties.
My first experiences with the stockmarket was the “Poseidon” and mining boom in late 1960’s and early 70’s. That was followed by large bear market from Jan-73 to Dec 74 when the market dropped 50%. During the 1970’s we had had a currency crisis – the $AUS/$US rose to about $1.15. We also had the first oil shock when oil went to about $US40/barrel and high interest rate – up to 18%. During the 1980’s things were more settled until 1987 when the market crashed about 50%.
By 1997, Enid and I were planning retirement as our children had moved into non-farming careers. That year on the advice of a stockbroker we bought 4,000 ERG shares at $4.00. ERG was Perth based automated ticketing company and the shares hardly moved for 18 months. In 1999 they started to move up strongly and by January 2000 they were about $30. We were sitting on a gain of over $100,000, we had very dry seasonal conditions and tight cashflow. Against broker advice we sold. By 2003 they were worthless.
Enid and I retired in 2003, and the ASX was starting to rise. We moved from dial-up internet on the farm to broadband and ADSL in Griffith and setup online broking accounts.
So how do you find shares to buy? I did a 3-day course and bought some propriety software. In 2006, I bought BullCharts software and data and still use it today. I have always believed that graphs show much information and that is why I now use technical analysis with an eye on fundamentals. There is a wide range of charting software programs and data now available.
During 2006 and 2007, I made some good and bad decisions (hindsight is a wonderful thing) and had made money. When the 2008 GFC downturn came I gave back some of my gains. My big mistake was not getting back into the market in March-09 and I held back for a couple of years.
The last 5 years – what have I learnt? I still make mistakes but I am more disciplined. I scan for stocks in the ASX-300 that are trending up on a weekly basis. It sounds simple – not always.
I am not a fan of managed funds as many have very poor returns after all fees and charges – I think the current Royal Commission is highlighting these issues.
While I have a few core stocks, I am not a “buy and hold” person as the market is undergoing more rapid sector changes. The ASX is still dominated by the big financials and the mining sector but smaller tech stocks and companies supplying to China are gaining more exposure, for example A2M. I also monitor overseas indices such as the US S&P500 and the UK FTSE.
Finally, the internet has a huge amount of resources, be selective, avoid information overload, think charts, be patient, use common sense and beware of the sharks.