Share Investment in Australia
Most listed companies' shares are traded on the Australian Securities Exchange or ASX as it is known. The ASX website shows prices (subject to some time delays) or you can access prices from your stock broker. Also most closing prices are often printed in the press, such as the Australian Financial Review, Sydney Morning Herald or The Australian the next day.
Why Share Investment?
Shares provide a great opportunity for long and short gains subject, of course, to market conditions and which shares you choose to buy. What sort of returns can share investment provide? This is a good question. The answer is quite simple - there are 2 types of returns.
- Capital gains from selling shares at a higher price than the price you bought shares.
- Dividend income - this does not require the sale of shares and can be on-going. Not all companies pay dividends.
In fact, in the modern world, there is a third method. Some trading platforms (like some forex trading platforms) allow you to trade on, a leverage basis, major shares in Australia and the USA like trading forex. This is a risky method and you need to obtain good education to learn about this form of trading.
The disadvantage of capital gains is that you have to sell some or all of your shares. This involves costs such as brokerage paid to to stock brokers. Some brokers and banks can provide loans to purchase shares. These may have margin requirements as well as interest costs. The level of security required will usually involve more than the shares that are purchased with the share investment loan. Tax also plays a part because sale of shares involves a capital gain or loss for most investors. This is an area requires expert advice. What you hope and expect is that the shares will increase in price. This will provide you a potential capital gain. However, of course, like any investment, there is the potential for a capital loss as well when you sell shares. The price of shares moves daily and you need to have done your research.
Shares are a reputable recognised form of investment and are accessible to most people. So you should consider shares as part of your investments.
Listed and Unlisted Shares
The ASX is the market for listed shares as discussed previously.
You can also buy shares in companies that are not listed. These have liquidity risks because there is no formal market to sell shares. These are pre-IPO shares. IPO means initial public offering. IPO shares can often provide good short term profits, often called, "stag profits" but have intrinsic risk because it is a new listing and the market has limited knowledge and experience of the company being floated.
Risk profiles are significantly different for listed and unlisted shares, mainly due to the liquidity issue. However, the fact that shares are listed does not necessarily ensure liquidity. There still needs to be a buyer of shares and some listed companies can still have no buyers.
Education
The days of “set and forget” share investments are long gone. Anyone owning stocks needs to be involved and this should include a range of education. The ASX and other organizations provide share investment courses. Stock brokers do also. There are many books on the subject as well as internet information on websites and blogs.
In many ways, it comes down to your reasons for investing in shares and your risk profile.
Education is different to advice. Advice can be in several forms. It can be brokers recommendations to buy, sell or hold shares. It can be advice on strategy. It can be financial planning advice. Advice can also be related to peripheral activities such as taxation, accounting or estate planning. If you are considering a share investment loan then appropriate advice should be obtained from a bank or financial institution.
Share Investment Portfolio
Most advisors would recommend that shares form part of your investment portfolio. It should not be all of your investments because share markets can go up and down. This applies equally to particular shares that you may buy and sell. A prudent investor most likely will be considering future share price as well as the possibility of on-going dividend income. The fundamentals of the company and its industry need to be researched and considered.
DISCLAIMER: We aim to provide useful and informative general information and this page is not providing financial advice. We receive compensation and commissions from the companies whose products we promote. We are independently owned and the opinions expressed here are our own. Before you sign up for any program, you should seek prior independent, professional, relevant advice and consider if it is appropriate in terms of your experience, objectives, needs and circumstances.