October 24, 2017

Entering the Sharemarket for the First Time

There is a huge misconception that investment is only for the wealthy. Mutual funds, brokerage firms, and individual companies provide investment opportunities for the investor with a limited amount of funds available. If you can save $10 per week, you can think about how to start an investment portfolio. Here are some tips if you are considering to invest in the stock market with little money.

Think before you invest

If you want to know how to invest in stocks, spend time researching a company before making the decision to invest. By understanding the general operation and running of an organisation, you will increase your chances of selecting stocks that are profitable. You should also educate yourself on investment strategies such as diversification and dollar-cost averaging.

Specific Stock Research

There are documents regarding a company’s information that are available to the public. These include the company’s current quarterly report, and their annual report. Firms that are publicly traded often post this information on their websites under, “Investor Relations.”

You can also check websites such as MSN Money, and Yahoo Finance for in-depth past and present financial information.

You should pay attention to the company’s ability to generate profit and the effectiveness of its management team.

Compare the company and its competitors in terms of market share, profitability and growth.

Mutual Funds

Mutual funds raise their capital by selling shares to investors. The capital that is generated is used to purchase a basket of stocks selected by a fund manager. Some mutual funds require a minimum investment of $1,000, but there are some that will allow you to open an account with a few hundred dollars. Some funds will permit you to implement the dollar-cost average strategy by paying monthly installments debited from your bank account.

Get a Stockbroker

Regardless of what you think, there are some stockbrokers out there that will deal with smaller investors and help you select shares based on your specific requirements. Getting professional advice is always important when you are thinking of investing in an area that you are not well versed in. Arming yourself with the most information possible is always important.

Final Thought

If you have just started investing, and you have a limited amount of capital, the above suggestions are great ways to reap the benefits of having a professionally managed investment portfolio.

Got any tips for those starting out in investing in Australian shares? Comment below.

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4 Ways to Invest Money in Shares in Australia

Perhaps you’ve seen the indices speeding hastily across the bottom of your TV screen, or listened to business news and heard the ASX is an at all-time low or high. If it all seems like gobbledygook to you, that’s understandable. Even though we are told by numerous experts that we must invest in the sharemarket, finding information on how to invest money in shares can be tough to find. We hope to cut through the noise with this list of ways to invest money in Australia

Share Funds

Share funds are one way to invest money in shares indirectly. To invest you simply purchase units in a fund. The price of each unit will rise and fall depending on performance of the shares it holds. In Australia you can choose between managed funds (sometimes called active funds) and Index funds (sometimes called passive funds). Managed funds are headed up by an investment advisor who charges management fees. The investment advisor makes decisions how which shares to buy and sell, based on performance and their own expertise. Managed funds are the simplest way to invest in shares as they often have a low initial investment and allow regular contributions. Index funds simply track an index, such as the ASX 200. As they don’t require management, index funds tend to charge lower fees.

Directly with a broker

Individual shares must be purchased via a broker. The type of broker you use will depend on your level of expertise. A full service broker can offer advice and recommendations but you pay higher fees. This is good option for the brand new investor. If you choose to use an online broker (sometimes known as a discount broker), you need to be confident in your own research and purchase decisions, as they offer little to no advice, however their fees are much lower.

Pro tip: If you think picking stocks is the way you want to go, check out the Sharemarket Game, available here. You can invest $50,000 any way you like, without losing any real money!

Via your Superannuation

Almost all superannuation funds invest in shares. If your portfolio contains a balanced or growth fund, up to 80% of your super fund could be invested in shares. Check with your super provider on the split, and remember you can change the allocation of your super balance if you want to hold more shares.

Employee Share Schemes

Some companies offer shares in an employee share scheme as part of their remuneration package. You may be offered a discounted purchase price or low brokerage fees if you decide to participate. Investing in an employee share scheme holds the same risk as investing in any other shares, however as a shareholder and employee, you have a vested interest in helping the company perform.

Whether you choose to start investing in shares by purchasing units in funds or directly with a broker, remember to do your research before committing. If learning how to invest money is overwhelming or you’d just like to learn more, the ASX has an a range of excellent online courses available for free. You can check them out here.

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