During the last six months there has been a surge in a number of clean energy shares on the Australian share market. You can check this out on the financial pages of The Age. Here is a direct link to the market pages.
Australia is uniquely positioned with lots of sunshine in the summer months, and we have seen the proliferation of rooftop solar in 230,000 households and businesses to 2014. The take up of wind power has not been so popular, with several groups opposing the establishment of wind farms, particularly near highly populated areas.
However, in the last year there has been increased discussion about the necessary change that will have to happen in energy production for Australia to keep its commitment to the clean energy target which it signed at the Paris talks this year.
A share which have benefited from this clean energy discussion has been Infigen ( IFN) which has seen a 250% surge on its price in the last twelve months from $0.32 to $1.09 per share. Infigen is a developer, owner and operator of renewable energy generation assets in Australia.
The realisation by the Australian community that clean energy is the future has led in turn to discussion of the storing of solar energy with the use of batteries. This has become a distinct possibility with the development of lithium batteries. Australia has approximately 30% or the world lithium resources. Hence companies which are involved in the exploration and mining of lithium have had a surge on the stock exchange in the past 12 months.
An example of such a company is Galaxy GXY. We have seen the price of Galaxy shares increase by 1288% in the last twelve months. Other companies involved in the exploration for lithium includes Orocobre ORE, Pilbara Mining Ltd PLS, Neometals NMT, Altura Mining AJM and Volt resources VRC and GMM General Mining. Galaxy acquired General Mining in an off-market takeover which was accepted at the end of May 2016. The most established lithium miner Orocobre Ltd has seen a 132% increase in its share price in the past twelve months.
For this trend to persist we need Government support of clean energy and the development of reasonably priced lithium batteries. This would enable owners of residential properties in Australia to then be convinced to invest in battery storage for the energy produced by their rooftop solar panels.
25 June 2016
At the November meeting of Investment Group 2 we looked at basic taxation rates in Australia, United States, United Kingdom and New Zealand as shown in a comparative table. We noted that the rates of taxation in Australia were considerably higher than those in New Zealand. Also the number of levels of taxation in the United States is much larger than in Australia. There is no doubt that the Australians could benefit from an overhaul of the current Australian taxation system, especially if the rates of taxation in each bracket were to decrease by 3% or 5%.
Whilst taxation rates are not a priority to share investors when they commence investing, over time they can become of increasing importance. This can happen when your share portfolio is increasing in value and you wish to sell a particular share. In this situation Capital Gains taxation rules are important, in particular the rule of holding an investment for twelve months to pay reduced tax on the capital gains. Readers should refer to the Australian Taxation website www.ato.gov.au and look up capital gains for further information.
You might like to save the basic comparative taxation rates to your own files.
Keeping accurate records of your share portfolio is important for two reasons.
The first is that you have an accurate record of what shares you bought, when you bought them and the cost base of these shares. You need to know this so that you can calculate if you have made a profit or loss when selling the shares.
The Source mentioned here is who you buy them from e.g. Commsec or a broker.
Name of share // Date purchased // No shares // Price ea // Source // Brokerage cost // Total cost // Unit cost // Total shares
The second reason for accurate record keeping is that you need to know what income you have derived from the shares when you are completing your annual tax return. Filling in columns below the following headings will give you sufficient information to complete your yearly tax return.
Share // Date // No shares // Rate // Franked // Unfranked // Frank cred // Div Amt //
There are three main types of Investment:
Shares may be purchased through a full service broker (you get advice, often a newsletter and someone to talk to on the phone) or through the Internet. Internet brokers include Commsec or Etrade or Westpac or NAB has broking arms. Charges for internet brokers are less than $30 per $10,000 trade (buy or sell) whereas full service brokers may charge considerably more than that (approx $100 per trade).
There is a lot of information available on the Commsec website. You can see past performance of the company’s shares on a chart, see the market capitalisation of the company, past dividends and to what per cent it is franked, and also read announcements that have been made by the company. There is a part which also tells you what the company is about, who runs it etc. You can compare charts of different companies to see who has made the most gains in say 12 months, and lots of other things as well. However, when you press the buy or sell button it is then legally binding. Buying shares either through a broker or on the internet, you have to pay for the shares you are buying within 3 trading days (this excludes week-ends and public holidays). Likewise if you sell shares through a broker or through the internet you can count on the money being transferred into your bank account in 3 days (excluding the day you sell them). So shares are relatively liquid for providing cash if you want it compared to property investments. The minimum trade to buy is $500.
Like a lot of things on the Web you get more information if you register with Commsec. To do this you have to pretend you are going to buy and sell shares through them. They are very reputable; I have had no trouble with them in over 10 years. They do ask for bank details, as one of the things is that they need authority to be paid for a share transaction out of a bank account (does not need to be a Commonwealth account) or pay the proceeds of selling shares into a bank account. The form to register with Commsec is quite long, but I would say worth the effort.
Whilst I use Commsec (attached to my Westpac banking account), other members of my family use E*TRADE and Westpac online broking. It is a matter of personal preference.
Before you open say a Commsec account you need to work out what name it will be it. Is it going to be in your name, in joint names or in a SMSF? The reason for this is that the bank account that it is attached to needs to be in the same name. There are possible tax implications with whose name it is in as I think you can work out.
There are a lot of different shares available broadly divided into Industrial stocks and Mining stocks. A lot of mining stocks are almost speculative, meaning that you can make a large amount of money if you pick the right stock, or alternatively you can lose quite a large amount of money.
To commence a portfolio it is probably better to start with a few ‘blue chip’ industrial stocks. However, this totally depends on your attitude to shares. In the newspapers there is a list of the top 100 companies – it often tells you the latest price that day, the high and lowest price for the last 52 weeks, what the dividend is etc. There are often news stories on stocks in the business section of the Sun or Age.
Some people like to know quite a deal about the company they are investing in. There are a lot of retired people who own bank stocks as the dividend they pay are currently better than the rate you get for term deposits from the same bank. Also the bank shares have dividends which are fully franked. That is they pay 30% of the dividend towards your tax bill. That is on top of the dividend you receive. Franking of dividends can be important as it helps pay the tax you may have to pay on income you receive during the year.
There are a lot of other companies who pay fully franked dividends on their shares. Telstra is a good example. As is Wesfarmers (owns Coles and Bunnings) or Woolworths.
Each company on the stock exchange or ASX has a three letter code. So there are CBA shares (Commonwealth Bank), Westpac (WBC) ANZ and NAB. Telstra is TLS, Wesfarmers WES and Woolworths WOW.
However, shares are not capital guaranteed, whereas Term Deposits are capital guaranteed. Even though shares in the bank will pay a better dividend, it is probably still prudent to keep a reasonable amount of money in Term Deposits. Banks in Australia are unlikely to fail; there is a Government guarantee for the first $250,000 of your deposit with the bank. But the bank shares are not Government guaranteed.
From time to time companies may offer new shares to current shareholders, usually at a discount. These new shares often depend on capital requirements of the company. For instance, the company may be taking over another company and need to pay for the takeover.
The above information concerning investing was prepared for a new member who joined Investment Group 2 at Benalla U3A in 2015. It is not sophisticated advice, and is general in nature