Sep 28, 2017  | Tags: share market, shares, Investment

Our Insights

Interesting in starting and growing a share portfolio? Adelaide financial adviser Ben Calder explains the basics. 

What is a share?

Shares are portions of ownership in a company. When you purchase a share, its value will change as the company’s profits increase or decrease. If all goes well, you could also see a pretty return on the investment you made.

Before you get started, you’ll need to be across some basic information.

The ASX and How It Works

The Australian Securities Exchange is the market in which company shares are bought and sold every day. How well this sharemarket performs is measured by an index called the All Ordinaries.

Everything is fuelled by supply and demand. If there’s a company everyone wants a piece of, that’s reflected in a heftier price tag on each share. Conversely, when many people offload their shares in a company the share price will drop.

To make a success of share investing the basic principle is to buy when a share price is low and then sell it when it’s much higher than when you started. 

How Do You Break Into the Share Market? 

First off, you’ll need a stockbroker. There are plenty of reliable and reputable online stockbrokers such as CommSec, nabtrade, CMC and others.

Your most important task may simply be to figure out which system has the most user-friendly interface when it comes to browsing shares.

All of your trading can be done online, so you just want a website that makes it simple to figure out what’s what.

If you want to work with a professional stockbroker in person, your financial adviser should also be able to provide you with a recommendation. Just be sure that you investigate all of the costs and fee structure.

How Much Do You Need?

You can start the ball rolling with as little as $1,000. In the beginning, however, only invest with your excess. You don’t want to pour essential money into the sharemarket and suffer a possible loss.

When (not if) the market takes a downhill turn, you could get stuck having to sell quickly at a loss just to recoup your money. If you invest conservatively, you can avoid that predicament.

Choosing the Right Companies to Invest In

Starting out, just stick with what you know. When you invest in a company you’re familiar with, you’ll be more confident about seeing a return. You’ll also be more likely to stick with that business long-term.

It’s great to buy a share or two in a company you work for or one that relates to an industry you’re familiar with.Is there a product you love or that’s popular in your region? You’ll be in-tune with what where that company is at.

As you get going, you’d do well to diversify your portfolio by investing in a variety of industries. 

Pros and Cons of Investing in Shares

Like any other financial venture (especially one with risks), it’s wise to carefully think over the potential benefits and pitfalls.

Pros:

• It’s easy
• It’s flexible
• There’s tonnes of information out there to help you find your way

Cons:

• There is a lot of information out there which can be hard to navigate and confusing!
• There’s definitely a measure of stress involved as you check the figures daily
• You don’t have much control in a volatile market
• There’s temptation to rely on luck and speculate if you don’t have the knowledge

Shareholding isn’t something to jump into lightly but is one type of many investments worth considering.  You may even enjoy perks from companies that like rewarding their shareholders.

Yes, there are some risks, but if you stay alert and involved, you’ll make safe decisions and see fast results.Think also of the benefits to your savings.

Simply sitting on money you save up may not be enough in view of unpredictable inflation. By putting your hard-earned and well-saved funds into the economy via shares, you’ll see its value grow in proportion with the economy.

Seek advice

The first step is to talk to your financial adviser. Not only will your adviser have a strong understanding of share investing and how to go about it, he or she will also have the best understanding of your personal financial position.

Get started by talking to the financial advisers at Calder Wealth Management. Contact us on 8373 3333 for a no obligations discussion.