How I became an online share investor

As I mentioned in Blog 2 I ‘got into’ shares using a large and well known broking firm. I described how my first foray into shares based on their recommendation was rather disastrous. After some time, I imagined that perhaps I might be more successful using a smaller broker so I made the switch. Unfortunately this change didn’t improve the overall outcome greatly and my successes and failures based on his advice were fairly evenly matched.

But a major change to share investing was on the way and by the mid 1990’s personal computers started appearing in homes and the internet was accessible to most Australians. During this period, CommSec commenced business as an online broker. I kept my account with the offline broker but dipped my toe into the water and started trading shares online. CommSec didn’t provide any advice and I now needed to make all my own decisions about which shares to buy and sell and when to do so. Hallelujah, my results improved so I gradually converted to the online mode until I finally traded shares exclusively online.

The story doesn’t quite end there. Around this time an article about shares and the market written by a respected stockbroker was published in the weekend edition of the paper I read. I was impressed by his commentary and insights and when he mentioned that his company successfully traded options I decided to get a slice of the action. I had no experience with options trading so I decided to use the broker to trade on my behalf. He advised that the safest way of trading them was by writing ‘covered call options’ over my blue chip shares and this would provide additional income on them. So I transferred these shares to his company and they periodically sent me reports outlining what option they had written and traded on my behalf. Unfortunately the results didn’t match the hype and after several years I cancelled the arrangement, closed out my option positions, and again had to swallow the bitter pill of a financial loss.

I don’t want to give you the impression that all the financial advice I’ve received over the years was poor. On occasions I received some really good advice mixed up with the bad. The best financial advice I ever received was when I retired as Head Teacher of TAFE. I’d been contributing to State Super and had the choice of taking an annual pension or a lump sum. I was inclined to take my super payout as a lump sum because both my parents had died at a comparatively young age so I thought my chances of living to a ‘ripe old age’ weren’t crash hot good. I consulted an investment advisor who counselled me to take the pension. After much deliberation I took his advice and by my reckoning I’m way in front financially.

However, his advice wasn’t all good because he also urged me to set up allocated pensions with my spare funds. He produced glossy brochures which indicated that if I took the minimum pension annually my invested funds wouldn’t fall over the years but in fact rise a little due to the increase in value of the fund’s investments. Unfortunately (I seem to use this word a lot with financial advice) this didn’t prove to be the case and all my allocated pension balance fell over the years.

I finally decided to close out my allocated pensions and set up an online SMSF using my remaining funds. This has proved to be well worth the effort and my invested capital continues to grow even though I withdraw an annual pension from the fund (as required by law).