Shares, also known as stocks or equities, are a core asset class within the financial markets, offering individuals the opportunity to invest in businesses and participate in their growth. This article aims to provide a basic understanding of shares, including their types, features, risks, and how to compare and invest in them.
Shares represent ownership in a company. When you purchase shares, you become a shareholder and own a fraction of that company, which means you have a claim on the company's assets and profits.
Companies issue shares primarily to raise capital, and they can typically be bought and sold on stock exchanges such as the Australian Stock Exchange (ASX).
When an investor buys shares, they're essentially purchasing a small portion of the company. The value of these equities fluctuates based on several factors, including the company's financial performance, overall market conditions, and investor sentiment.
As the company grows and becomes more profitable, the value of its shares might increase, benefiting the shareholders. Conversely, if the company faces challenges or losses, the share price might decrease. Apart from potential price appreciation, shareholders might also receive dividends, which are a distribution of a portion of the company's profits.
It's also worth noting that owning shares gives shareholders certain rights, such as voting on company matters at annual general meetings.
With these potential rewards come risks, as share prices can be volatile and there's no guarantee of future returns or dividends.
The main features of shares are:
There are two main types of risks of investing in shares:
It is important to diversify your portfolio, conduct thorough research, and consider your risk tolerance before investing in shares.
There are two main types of shares:
Some common classifications of shares include:
Growth shares represent equity in companies that are expected to grow at an above-average rate compared to the market. For example, Microsoft is a popular growth stock.
Value shares are undervalued equities that are believed to have significant valuation upside potential. For example, BHP is regarded by many investors to be a value stock.
Blue-chip shares represent equities in large, well-established, financially stable companies with a long history of reliable performance. For example, ANZ is a well-known Australian blue-chip.
Dividend shares pay regular dividends to shareholders, providing a steady income stream. For example, Fortescue Metals is regarded as a dividend stock.
The distinction between "listed" and "non-listed" shares is important to understand. Here's an explanation of both:
Listed shares are stocks of a company that are listed and traded on a stock exchange, such as the Australian Securities Exchange (ASX).
Key attributes of listed shares include:
Unlisted shares are stocks of a company that aren't listed on a public stock exchange. These can be shares of private companies or public companies that have delisted.
Key attributes of unlisted shares include:
Some common ways to compare and analyse shares include:
The three main ways to invest in shares are:
Shares offer investors the opportunity to participate in the long term growth and success of companies. Understanding the different types of shares, their features, risks, and how to compare and invest in them is crucial for making informed investment decisions. By diversifying their share portfolios and conducting thorough research, investors can navigate the stock market and potentially achieve their financial goals.
The amount of money needed to start investing in shares can vary. Some brokers have no minimum investment requirements, allowing you to start with as little as a few dollars. However, it is generally recommended to have a sufficient starting amount to diversify your portfolio and cover transaction costs. A common rule of thumb is to aim for at least $1,000 to $2,000 to start.
Timing the market is challenging, even for experienced investors. Instead of trying to predict short-term fluctuations, focus on a long-term investment strategy.
Investing consistently over time, regardless of market conditions, is generally considered a sound approach. This strategy, known as dollar-cost averaging, helps mitigate the impact of market volatility.
When selecting a broker, consider factors such as fees, customer service, ease of use, available research and analysis tools, and the variety of investment options offered. Look for established platforms with a good reputation and consider reading reviews or seeking recommendations from experienced investors.
In Australia, shares are subject to capital gains tax (CGT) when sold or disposed of. The tax treatment of Australian shares depends on the holding period and the individual's tax residency status.
Here are some key points to bear in mind regarding the taxation of Australian shares:
Tax laws can be complex and subject to change. It is advisable to consult with a tax professional or the Australian Taxation Office (ATO) for specific guidance on your individual tax situation and the most up-to-date information regarding the taxation of Australian shares.
A market order is an instruction to buy or sell a stock at the best available price in the market. This type of order is executed immediately, but the price at which the trade is executed may differ from the current quoted price due to market fluctuations.
A limit order, on the other hand, allows you to specify the maximum price you are willing to pay when buying a stock or the minimum price you are willing to accept when selling. The trade will only be executed if the stock reaches your specified price or better. Limit orders provide more control over the execution price but may not be filled if the stock does not reach your specified price.
Dividends are a portion of a company's profits that are distributed to shareholders. They can provide regular income for investors and are often seen as a sign of a company's financial stability and success.
However, not all companies pay dividends, especially those in the growth phase that tend to reinvest their profits back into the business.
Diversification is key to mitigating risks. By spreading your investments across different companies, industries, and even countries, you reduce the impact of any single investment's performance on your overall portfolio.
It's also important to stay informed, regularly review your portfolio, and consider seeking advice from financial professionals.
The length of time you hold onto your shares depends on your investment goals and the performance of the company. Some investors may hold shares for several years or even decades, while others may have shorter-term investment horizons. It's important to regularly reassess your investments and make decisions based on your financial objectives.
Generally, when investing in shares, the maximum amount you can lose is the amount you initially invested. However, in certain scenarios, such as leveraged investments or trading on margin, losses can exceed the initial investment.
It's crucial to understand the risks involved in different investment strategies.
To stay updated on your investments, you can regularly review your portfolio, track the performance of the companies you've invested in, and stay informed about market trends and investment news.
Many brokerage platforms offer tools and resources to help investors monitor their investments, and financial news websites and apps can provide valuable information as well.
This article contains information of a general nature only, and should not be regarded as advice, either general or personal. Anybody considering investing in managed funds should seek professional financial and legal advice prior to making investment decisions.
The Fund typically invests in a select number of attractively valued companies exposed to emerging markets or listed on emerging market stock exchanges (usually a minimum 30 long holdings).
The Fund aims to achieve positive returns over the long term by predominantly taking both Long Positions and Short Positions in Australian equities and equity derivatives.
The objective of the portfolio is to grow the value of your investment over the medium to long period of time, through capital growth in a portfolio of international shares while aiming to outperform the Benchmark over rolling five year periods.
The fund is a diversified portfolio of Australian equities across a range of impact focus areas that seeks to demonstrate a financial return along with measurable positive impacts on society and the environment.
Through the ALF we seek to take advantage of opportunities available in the LIC sector, with a focus on LICs trading at attractive discounts to NTA. Through LICs, the Fund provides access to a broad range of investment styles, strategies and geographies.
The Fund is highly focussed on investing in long-term winners in attractive transforming markets when they are undervalued and offer outsized return potential.
The Altor Emerging PIPE Fund is a concentrated fund focused on investing in special investment opportunities in listed and pre-IPO emerging companies. (for Wholesale Investors only)
Pacific Retirement Estates (PRE) is a leading retirement village operator and property developer in Australia.
The Fund aims to outperform the S&P/ASX 200 Accumulation Index after fees over the medium to long term with an actively managed portfolio of long and short positions.
Through Invesco’s proprietary investment model, the Fund seeks to unlock persistent long-term excess returns by investing in smaller companies listed on the Australian share market, predominantly outside the S&P/ASX 100 Index.
Aims to achieve superior absolute total returns by providing medium to long term capital growth without the constraint of a share market benchmark.
Using Allan Gray’s contrarian investment strategy, the Fund seeks to provide a long-term return that exceeds the S&P/ASX 300 Accumulation Index (Benchmark).
A high conviction portfolio with a sustainable edge.
Maximise long-term returns by borrowing to invest in a diversified portfolio of global companies. (For Wholesale Investors only)
The Fund objective is to achieve attractive risk adjusted returns over the medium to long-term while reducing the risk of permanent capital loss.
