When I was younger I wanted to be a stockbroker, the idea of one day working on Wall St sounded really cool. Then I realised the reality of that dream which involved quite a lot of risk and volatility, which then lead me to embark on a career in commercial finance and become a bean counter instead. The idea of trading short term on the stock exchange sounded exciting and fast paced but the reality of it is there is a lot of risk in short term share trading. Studying accounting and business may have given me a better understanding of how to value companies but I do believe anyone can get started in investing in shares. I started buying shares around six years ago but only really got more serious about it in the last two years.
The main advantages of buying shares is that you can start investing with a small amount of cash and its fairly cheap to trade using an online broker. I believe you should invest for the long term unless you reassess your shares and decide its the right time to sell. I believe in the Warren Buffet (best investor in the world and generally pretty cool guy) way of investing which generally is always for the long term and I don’t invest in anything I don’t understand. Also Warren’s number 1 rule in investing is don’t lose money and number 2 is don’t forget rule number 1. I choose blue chip companies which are profitable ongoing businesses. I also choose companies that I support from an ethical standpoint.
So HOW do you get started? Well first thing to do is to start saving a little each month which you can invest. Next you need to set up an online share trading account and attached bank account for when you purchase or sell shares. This can be done quite easily with the big 4 banks here in Australia and they all charge similar brokerage fees. The next step is to do some research on what company you want to invest in. I would recommend making your first investment with a listed investment company (LIC). LICs are listed managed funds which you can buy into on the sharemarket and generally have pretty low management fees. They usually own a diversified portfolio of assets including shares, property and cash. This can be a good way to get started and also is lower risk than just buying into one company.
When you want to get some further advice on what shares to buy I would recommend signing up to a share investing newsletter or joining a club like the Barefoot Blueprint which I am a member of. That way you can get trusted advisor recommendations and know what buy price you should be buying in at and what companies may be possibly a bargain at any particular time. I believe we should all have diversified portfolios and a good way to grow wealth is by having both property and shares. You don’t need to know everything about finance or be able to read a balance sheet to invest in shares. If you invested $10,000 in the share market 10 years ago you would have more than doubled your money today which is a better return than what you get from having your cash sit in a savings account for the same amount of time. By starting small and investing regularly it will lead to a healthier financial future for yourself. What are you waiting for?
Here are the steps to get started:
Step 1. Save some cash to invest. As with all savings accounts I recommend having a set amount come out around pay day for investing.
Step 2. Set up a trading account with your bank or shop around for the best account for you. The big 4 banks have pretty good trading platforms and the brokerage ranges from $14.95 per trade upto $19.95 for trades under $10,000. You will also need to set up a bank account linked to your trading account. This is where the money needs to be transferred to when you buy or sell your shares.
Step 3. Do you research by either signing up to a few investment newsletters or join an investment club. Always invest in companies that you understand what services or products they provide.
Step 4. Buy some shares by placing an order and requesting a price you are happy to pay per share. You will need to transfer the funds into your settlement account so that if your order is successful the money is there to pay for your shares.
Step 5. Watch your investment grow