Nicholson - Building wealth through shares: how to win on the stock market

Building Wealth

IN THE STOCK MARKET

A proven investment plan for finding the best stocks and managing risk

Colin Nicholson

Acknowledgements

I dislike singling people out because, over a long time, a great many people have made contributions that were valuable in many ways to the creation of this book. However, four people were very special in helping me write and edit this book.

Michael Attwood read every word of the book. He made a great number of very important suggestions throughout. They led to great improvements. No less important is that Michael spotted a great number of typos and other errors.

My wife Rosalyn Nicholson was my first line proof reader. She corrected my grammar in many places and also found many typos and other errors. She also had to live with me while I was almost totally focused on writing the book.

Bernard Chapman is the brains behind the Insight Trader charting software which I use. In writing this book for an audience beyond the shores of Australia, there were some things that needed changing. Bernard went out of his way to help with those things, for which I am very grateful.

Janene Murdoch , who owns The Educated Investor bookshop at 500 Collins Street Melbourne, has been a wonderful support over many years. When I needed a friend with which to discuss a problem, she has been a tower of strength.

All charts were produced using Insight Trader charting software. See www.insighttrading.com.au or phone Bernard Chapman on +612 4751 2932.

The data used to draw the charts was mainly supplied by Insight Trading Pty Ltd and Vestdata. See www.vestdata.com.au or phone +613 9768 9611. Some of it was augmented by or sourced from ASX publications and website, The Australian Financial Review and www.yahoo.com.

Fundamental information used in the assessment of stocks was sourced from Shares magazine, AFR Smart Investor magazine, The Aus-tralian Financial Review, the Aspect Huntley research section of the CMC Markets Stockbroking website www.cmcmarketsstockbroking.com.au, various company annual reports and websites.

Some of the material in this book has previously been published in the same or similar form in:

My books Hot Stocks 2007 and Hot Stocks 2008 .

My book The Aggressive Investor , which was published in 2005.

My videotapes/DVDs How to Design a Trading Plan and Building Wealth through Shares and in the seminar notes that accompanied them.

Research Reports No. 1 and No. 2, which I self-published before making the videotapes/DVDs.

Articles in the Australian publications AFR Smart Investor , Shares magazine, Shares Charting Guides , Your Trading Edge magazine, the ATAA Journal , the ATAA Newsletter and the Stockwatch page on the Ozemail website.

My website www.bwts.com.au and my free newsletters.

The subject notes for FIN231 Technical Analysis, which is part of the Kaplan Master of Applied Finance (originally the Securities Institute of Australias subject E114 Technical Analysis, which was part of the Graduate Diploma in Applied Finance and Investment).

About the Author

Colin has a bachelors degree in Economics from Sydney University and the Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australasia (FINSIA).

For many years, he taught both fundamental and technical analysis for FINSIA (now Kaplan) and was judged Outstanding Presenter for 1997 by student feedback. In 1995 he was made a Senior Fellow of FINSIA.

The Australian Technical Analysts Association made him an honorary life member in 2001.

Since the late 1960s, Colin has invested in stocks on the Australian market. This was a part-time occupation until April 1987; since then, he has earned his income from investing, writing and teaching.

Over the last decade, Colin has written weekly columns in The Australian Financial Review and BRW magazine. He has also written regularly about technical analysis and investment psychology for AFR Smart Investor magazine, Shares magazine, the Shares Charting Guide , his own email newsletter, his website www.bwts.com.au and the ATAA Journal.

Most of Colins time is now devoted to investing and writing for his free newsletter and his website. He also accepts a limited number of public speaking engagements.

Important Notice

This book has been written for the sole purpose of teaching investment techniques. It neither purports, nor intends, to offer advice to any reader to invest in any specific financial product, or to use any investment method.

Readers should not act on the basis of any matter in this book without considering their own particular circumstances, taking professional advice where appropriate.

The decision to invest is for the reader alone. The author expressly disclaims all and any liability to any person, in respect of anything, and of the consequences of anything, done, or omitted to be done, in reliance, whether whole or partial, upon any part of this book.

Colin Nicholson is not a licensed adviser. His writing and speaking opportunities are totally focused on educating investors. Colin does not give either specific or general advice as defined in legislation.

All investing entails risk of poor returns and/or loss of capital.

Past performance should not be regarded as evidence that any particular method will be profitable in the future.

Foreword

A lifetime of knowledge

The recent bear market has been a tremendous destroyer of wealth. The mass media, which acted as a cheerleader during the rising market, has now turned to arm-wringing and rending its garments in fear. It is time to put emotion aside and listen to intellect. This is the atmosphere in which Colin Nicholsons book sounds its key themes: trading is a serious business; here are its essential rules and techniques; this is how you should search for value in the stock market.