With changing working practices and longer lives, the need to build additional wealth outside of normal income is more important than ever before. There are numerous ways to make your money work for you, but if you ask someone about investing, they would think of the share prices that
Yet, despite investing in shares being one of the most known forms of investment, very few actually, understand what it is and how it works. Given that share investment offers a great opportunity for investors of all kinds, this knowledge is important, so we will start with the basics.
A share is legal ownership of a part of a business. Companies issue a number of shares, each share representing an equal part of the company, so a thousand shares would mean each share represents 1 thousandth of the entire business. The exact number of shares and how much each is worth varies from company to company.
Investing in shares means buying shares in a specific company, or a number of companies. As the business grows and prospers, so the value of the company increases, meaning the value of each share also increases. Like any asset, you can sell shares as they increase in value, the difference between the price you buy at and the price you sell it at, less a small amount for fees, is your profit.
In addition to owning a piece of the organization, some companies also pay out a dividend to shareholders. The exact amount varies, but it is a value per share. This usually applies to larger established companies, but it is a nice extra income for investors.
Shares have an inbuilt risk, in that any company has the ability to fail, no matter how big they are. In the case of a company closing, then share prices fall to zero, meaning that all the investment is lost. As with any investment, careful choice of share and market can minimize risks, however, it is important to understand the potential, worst case scenario with any investment choice you make.
There are two approaches to investing in shares. You can use a traditional or online broker to buy and sell shares yourself, or you can use a managed account, where an investment expert will buy and sell shares on your behalf to deliver growth for your funds.
Which best suits you is a personal choice, but for beginners with no previous experience of analysing and choosing shares, a managed account is a good option. If you understand financial markets, and also have the time to monitor and adjust investments yourself, using an online broker allows for investing from home and complete control of your money.
Whichever route you take, careful analysis of companies when choosing shares is important. Share prices are also affected by overall economic conditions, and much of the process of investing in shares is spent analysing data to pick out shares that have growth potential.
For the full breakdown of investing in shares check out our article: Investing in Shares
We welcome you to give our team a call to discuss your investment goals and objectives.
You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.