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
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Margaret's BlogWritten for Investment Group 2 as a source of some information LinksHandoutsArchives
June 2016
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