The Basics of Investing in Shares

Share markets enable people to invest in companies. Buying shares in a company means that you own a part of that company. You may receive part of the profits as dividends and share the growth in the company value as increases in the value of your shares.

Companies will list on the share market to raise capital to expand their business as an alternative to borrowing. Long-term investors anticipate that the share price of a company will appreciate, but should be aware that prices fluctuate.

Stock/Share Categories:

Cyclical Stocks - Companies in industries or markets highly subject to macro-economic cycles (e.g. building and constrution), or companies supplying to those industries. These stocks have an elastic price sensitivity.

Defensive Stocks - Opposite to cyclicals, these are the suppliers of essential items (e.g. food and beverage, fuel) that are not subject to macro-economic cycles. As such these stocks have an inelastic price sensitivity.

Banking and Financials

Resources

Technology, Media and Telecommunications

The benefits of investing in shares:

Growth prospects - through increases in share value.
Income - through the payment of dividends.
Tax effective - many Australian shares pay franked dividends providing imputation credits (tax rebates).
Liquidity and flexibility - most shares can be quickly and easily sold, with funds available in a few days.
Diversification - shares listed on the Australian Stock Exchange range from quality blue chip companies to speculative and developing companies.
Small minimum investment - you can start with as little as $2,000 (recommended minimum investment).

The risks of investing in shares:

When buying shares in a company you buy into both the positive and negative financial experiences of that company.
Listed companies may fall into financial difficulty and there is some risk that a company may be taken over (which is not always negative for shareholders) or placed into liquidation.
Share prices can fluctuate subject to market forces and may experience a drop in value. If the share price falls and you sell, you will lose money.
Although there can be tax rebates from investing in shares, investors may also be subject to paying Capital Gains Tax (CGT) on their investment returns.

Speak with Advisers about Shares and Managed Funds investing on freecall 1800 804 296 about this in more detail, or make a time online now.

Australian Financial Services Licence No. 241177

Information contained on this website is general financial product advice and does not take into account does your individual investment objectives, financial circumstances or needs. Information provided on and available from this site does not constitute financial, taxation or other professional advice and should not be relied upon as such. Mainview Securities Pty Ltd recommends that, before you make any financial decision, you seek professional advice from a suitably qualified adviser.

Authorised Representatives of Mainview Securities Pty Ltd may hold interests in financial products that they recommend to you. Complete disclosure will be made about such interests in any advice that is provided to you by the Authorised Representative.

Please refer to Mainview Securities Pty Ltd Financial Services Guide