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All about shares
What are shares?
In terms of an investment, shares are a unit of ownership in a company which entitles the shareholder to a portion of the profits distributed by the company. As a shareholder, you don't have any influence over the day-to-day decision-making of the company, but you (and all the other shareholders) do have some control in that you can vote on certain decisions regarding the company.
Who owns shares?
Business owners generally own the shares in their business, but for the majority of non-business people, the opportunity to own shares is either directly in your own name, or indirectly via your superannuation fund, and these usually invest heavily in the shares of different companies.
Can I invest directly in shares?
Yes, there are many different shares you can invest in. The simplest way of investing in shares is via a share trading account, e.g. Commsec, Bell direct or Etrade, which enables you to buy and sell shares.
Are there other ways to invest in shares?
Yes, you can also invest in managed funds, exchange traded funds, or listed investment companies.
What are the benefits of managed investments?
Investing in this way pools your resources with other investors and allows you to potentially invest in many listed shares, e.g. Westpac, CBA, BHP Billiton, in just the one investment. However, there are additional costs to consider with these options such as investment management fees.
Which shares should I buy?
Before you consider this you should really be asking yourself whether you should or should not invest in shares. Shares are generally longer term investments as their value can fluctuate both up and down. If you are prepared to invest for the long term, and accept some risk and volatility, then shares can be excellent investments.
Are shares for me?
Investing in shares is not for everyone, some people prefer to use property for their longer term investments, and if you can only invest your money for a short period of time then shares are probably not for you.
How do I get started?
In terms of which shares to buy, you should do your homework, or alternatively speak to your financial adviser. There can be other benefits of owning shares and where to hold them, such as to reduce the amount of tax you pay on the profits. A financial adviser would be able to help you in this sort of situation.
By Sally Tyrie, June 2013
Money Smart not Money Short
Keep reading...
1. Hidden costs of investment companies April 2013
2. What is investment risk? COMING SOON
3. What are managed funds? COMING SOON
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