Thinking about investing in shares?

Thinking about investing in shares?

Shares are a popular investment for Australians for many reasons. Starting a share portfolio involves a smaller initial outlay than investing in property for example and there are no ongoing costs. Depending on the company, shares can provide a regular income stream through dividend payments as well as the potential for capital growth over the long-term.

How do shares work?

When you buy shares on the ASX you’re buying a piece of a public company. And as a part-owner, your shares could entitle you to a slice of the company profits through dividend payments.

If the company grows and their business expands, the share price could increase over time, giving you the benefit of capital growth.

The ASX has over 2,000 listed companies, so there are a huge variety of companies you could invest in through shares. Some established companies have a history of paying regular dividends, whereas others could offer the potential for greater capital growth.

With the advent of online broking accounts, owning shares has never been more accessible. An investor can open an investing account online, decide what shares to buy and place their order online in moments.

Deciding which shares to buy

Although investing in shares may be easier than ever, deciding which shares to buy and sell and when to do it still takes some skill. As a rule of thumb, it’s a good idea to build a diverse portfolio that invests in companies from a range of sectors. It’s also important to keep in mind what your investment goals are – do you want to earn a regular income from dividends, or are you in it for the long haul and after capital growth?

Whatever you decided to invest in, it’s important you do your research. When buying shares in a company you’re becoming a part owner, so take the time to get to understand the business. That includes knowing the market it operates in, who the management is (and how good they are) as well as an understanding of the overall economic conditions that could affect the business.

What about investing overseas?

Should you want to diversify further, you could consider investing in international shares. Even though there are over 2,000 you could choose to invest in on the ASX, this is dwarfed by the size of the different share markets around the world, with listed companies that include internationally- recognised names such as Facebook, Apple and Google. However, should you decide to invest overseas, there’s a range of different risks you’ll need to manage such as currency risk.

One way to get exposure to international markets without owning the shares directly could be through a managed investment. Otherwise, some brokers offer access to global share markets.

Getting investment help

If the thought of deciding which shares to buy seems overwhelming, one option could be investing in a pre-packaged portfolio of shares where you choose the type of portfolio to suit your investment goals and investment experts take care of the rest including managing the portfolio on your behalf.

Aside from taking the decision work out of which shares to buy, they can also be a good option if you have limited funds to start investing.