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Online Share Trading

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First discussion of the Installment club.

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Super Contributor
1.Every member i hope is fully conversant in how installments work.If not go to the Installment education and do the installment course.Suffice to say that installments are NOT warrants,they have no time decay and are partially paid for up front.The ultimate idea is to make enough money to eventually buy the share. 2 INSTALLMENTS only work really well during bull markets as now and because they are geared loose during bear markets more than holding the actual share,as many forumites found out,myself included during this recession. 3There is no need to sell during small reversals,only if the trend is major over say a couple of months. 4 I did well on installments before the recession,then held none for about seven months and started buying again in April. 5 An advantage is that paying less than a full share you can hold many more installments.Another advantage is that you receive the full dividend,just as if you held the share. 6 I'll explain my method in detail later.Suffice to say it involves holding installments up to the LDT date plus one day now. 7.Now i must grumble,Why in heavens name is there no Installment over NPN? its money for jam!!!
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32 REPLIES 32
Super Contributor
Yes NPN is already on a PE of 29 and i see many forumites see it as a short about to happen any day now.It had great results with a sixty percent increase in profits,but in the recent pass there were many companies with even better results and they did not stir the markets.The reason i think its running is its the only show in town at this stage and now self forfilling enthusiasm driving it higher every day.I don't expect a reversal before its LTD date which is in September.during the last bull market if i remember correctly Liberty-International drove its PE ratio up to a rediculous 64 so don't hold your breadth while waiting for this to happen!
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Super Contributor
Please add your comments,queries and ideas.Heres a thought,MAKE FAILURE YOUR TEACHER NOT YOUR UNDERTAKER !
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Super Contributor
Hi Barry, like you, I have also been burn't by installments. Chartist (Mark) once communicated to the forum, the importance of keeping a jnl when entering a trade, detailing your thought process, stop losses and exit strategy. Looking back, the journal was indeed handy, but what was even more importance was the apparent lack of Technical Analysis at that time. Chartist also did say "Any fool can make money by holding a share over a period of time". This statement I will never forget. The downside of SBK installment is that SBK consistently messes up the unit price especially when you are constantly buying and selling to existing position. Remember existing position is not closed. So technically, you think you are making a profit when in reality you are still in a loss position. Guys ,please be extremely weary of this. Check Unit Cost of installment everyday.
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Super Contributor
Thanks Preston,where i have the greatest difficulty is exiting an installment and sometimes find i make less than what appeared on my portfolio.Hoping that this club will add to our knowledge so as to avoid all these traps.
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Valued Contributor
preston, unit cost will only change with a transaction or corporate event ..
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Regular Contributor
As far as I understand there is time decay on a Instalment but not as much as a warrant as Instalments are longer dated.One more thing just cause the market has rallied and is in an uptrend does not necessary mean that it is a good time to buy instalments does it.
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Super Contributor
Thanks for this B. I started buying installments after you first mentioned them a couple of years ago. As you say they worked very well in the bull market. I also stole your trick of buying them a month or two before the divi was due, getting the run up and the full divi. One I am watching at the moment is PPC, the hoteds one. Divi coming up in Oct/Nov. Only thing now, is what is the PPC divi gonna be like.
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Super Contributor
Yes, Simon. If i had 10 bilste installment, i sell 6 and then buy 5 at a lower price, the unit cost does change,but that change is incorrectly applied.
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Valued Contributor
well yes.no.maybe .. many different ways of doing it an you don't like our way .. but yes, a part sell or extra buy will cange unit price ..
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Super Contributor
Glad to have you on board!In my book this is the only way to buy and get ahead,though sometimes a slightly longer veiw with a couple of months more gives good results.Yesterday i bought an installment on ABIL as its coming up to its final by year end.I was pleasantly surprised when it was already in profit by day end.
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Super Contributor
Hi Barry.. I had fantastic sucsess with these in the bull market..2 points..get to know the dealing desk and when you want to buy or sell ask them to work the delta for you. That way you can substantially decrease the trading spread. Also i used to only buy in volumes that matched my asset allocatin of the vanillla share.. so if I could afford 1000 agl I would not buy 2000 aglstb . That way I was never over geared I found it kept me in the trades longer. I also target companies that had potential corpertate action as it often lead to special div's not already priced in. hopes this helps.
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Valued Contributor
ya, they are a bull market product .. an a low interest rate enviroment ..
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Super Contributor
ya interest rates are a massive component
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Super Contributor
Simon, you are missing the point.The point is "Standard bank is placing its customers who support them , by buying SBK installment in an unfavourable position.Incorrect unit cost calculation will result in incorrect profit being earned and adverse Income tax implication"
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Valued Contributor
I ill check the calcs again .. but as I recall the calcs were correct .. but as mentioned there are different methods ..
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Super Contributor
hello John,thanks for the advice 'bout the delta,i never thought of that!
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Super Contributor
1.Every member i hope is fully conversant in how installments work NOPE.
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Super Contributor
Please Maggie,for your own financial well being,just run through the installment course under help and education,even if u don't understand all,i'm sure any questions will be answered by Simon or somebody that knows the answer....I'm still grappling with some of the points.
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Super Contributor
Here are some items of interest(to me anyway)....As i said i try to buy installments about four or less months before the usually final dividend unless there are special circumstances.At the moment i'm holding REM..ABL. FSR..OML all SB...Interesting since 19/June 2009 the FSR share has climbed by 14.5% while the installment has climbed by 20%
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