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A Quick Introduction to Investing in Shares in Australia

Is investing in shares something you’re interested in? Before you dive into investing in shares in Australia, first, there are a few things to know about.

Investing in shares is not a cakewalk; there’s what appears to be a never-ending number of risks, obstacles, and challenges every step of the way. However, if you have done your homework, chosen a suitable share, and are willing to take the risk, you could put yourself on track for future returns.

This quick guide will teach you the important things you need to know about investing in shares.

Investing in Shares and Understanding the Market

The share market, also referred to as the stock market, is a regulated and transparent marketplace where the shares of public companies are sold and purchased. There are many different share markets today, and some of the most popular ones are the New York Stock Exchange and the London Stock Exchange. The share market is a 24/7 global economy that is constantly buzzing with activity.

In Australia, we have the Australian Securities Exchange (ASX) and Cboe Australia. All stockbrokers in Australia must provide sellers and buyers with access to both share markets.

The share market has two main responsibilities:

  1. operating the primary market for companies to raise money by issuing shares for sale, and
  2. running a secondary market for investors to buy and sell shares at prices determined by market forces.

The Shares

A share is a portion of ownership that you have in a company. Its value depends on several factors, such as the company’s earnings, its future growth potential, industry trends, and economic climate.

Some of the most common factors that can move a company’s share price are dividends, earnings growth, supply v demand, economic influence and political influence.

There are thousands of public companies in Australia on the share market across many industries. Selecting a combination of shares from different sectors i.e. diversifying your portfolio – can help minimise your risk.

The Shareholder

A shareholder is an individual, group, or institution that owns shares in a public corporation in a particular country. Simply put, owning shares means that the shareholder has an indirect ownership in the company, which entitles them to a stake in its profits and assets. The more shares you own, the higher the stake of ownership in the company and its earnings.

The Benefits of Being a Shareholder

Having a stake in a public corporation can bring many benefits, but it also comes with many responsibilities.

Shareholding gives you a voice in the company. Most companies will hold an annual general meeting where shareholders can vote on important issues that affect their current and future business.

  • Ownership in a company’s profits: When a company makes a profit, your shareholding in the company profited by the same ratio.
  • Ownership in the collateral of the company: The majority of companies that are listed on the share market have physical assets that can be viewed by anybody wanting to invest in them.

Public vs. Private Shareholder

There are two types of shareholders; public and private.

A public shareholder is any individual or institution that holds shares in a public company listed on the share market. As a public shareholder, you have a stake in the company’s assets, profits, and dividends.

A private shareholder owns shares in a private company not listed on the share market. Usually, a private shareholder is part of the company’s management team, such as the owner and investors. A private shareholder usually owns a majority of the company’s shares.

Invest Now

That’s a quick introduction to the world of investing in shares. Shares can be a great way to diversify or portfolio and grow your money through the market’s natural growth cycles.

Work with some of the most experienced financial advisers in Newcastle and the Hunter today. Newcastle Financial Planning Group has a team of experienced financial advisers that can get you on the path to financial freedom with a tailored investment plan. Call us today to book your complimentary first meeting.

 

DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
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