From Getting Started in Shares For Dummies Australia, 3rd Australian Edition. Anyone can buy shares, and investing in the sharemarket can grow your wealth better than any other investment. Understanding how the stock market works, researching companies, assessing the risk and using a good broker will help you buy shares wisely and build a robust, diversified share portfolio. Avoid picking stocks at random: Find a good broker, do your research and buy shares that will grow your wealth for you.

Your first requirement is some spare money. You can invest any amount in the sharemarket, but because of the buying costs, the more money you have to invest, the cheaper the brokerage fees. Finding a broker is next. Brokers work for firms that simply take your order and enter it in the market, or firms that take you on as a client and provide advice, research and financial planning to help with your investments.

Choosing stocks is next.

For a long-term investor, 8 to 12 well-chosen stocks will give you a portfolio with far less speculative risk than just 2 or 3 shares. Research the companies whose shares you buy.

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Buying shares you know nothing about based on tips from friends or acquaintances even worse, strangers is the same as going to a casino. If someone tries to sell you a foolproof investment formula, ask yourself — if it really worked, why would they share it with me? Investing in shares is a long-term commitment.

The Super Investor | Stock Market Investing For Australian SMSF

Keep a long-term perspective. You never go broke taking a profit. If you believe that one of your shares has risen so far that a fall is imminent, take a profit. Take out your original investment and leave all the gain still riding on the share. A capital loss occurs only when you sell your shares.

Until then, the loss is only a calculation on paper. The sole reason for investing in growth assets is to get capital growth. If you do sell and take a capital loss, the consolation is that you can use it at tax time to offset against some of your capital gains.

Be an investor not a trader. Remember that a diversified portfolio is a safer one. When you buy different assets, you minimise your overall risk. Your goal in diversifying is to benefit from the performance of different assets that are usually not synchronised. If shares are performing poorly, property or bonds may be performing well.

You should include at least one other asset class with shares to diversify your investments. Investing in shares is a great way to increase your wealth. Shares go up in price, and also down.

If you buy shares at a high price and the market falls, you may lose money.

Shares have an excellent long-term track record of generating wealth. Shares are a risky investment. Using shares as a short-term gamble can give some big wins, but this strategy is fraught with danger. Shares provide the best return on investment. You take an added risk by holding shares because they provide better returns than other investments.

Investment is about creating wealth first, and then using that wealth to fund your retirement. You need the capital gains that shares can bring. Shares need time to increase in value. Sharemarket crashes do happen. The sharemarket suffers occasional alarming falls, but has never failed to get back to, and subsequently exceed, its previous high point. But sometimes as in the aftermath of the —09 crash it just takes a bit longer!

Shares bring wealth through the magic of compounding. If you reinvest your dividends from shares, the rate of return you earn will be cumulatively larger than the amount you initially invested. Over time, compounding has the effect of accelerating the growth of your wealth.

How to Teach Teenagers About Investing in the Stock Market - WSJ

Owning shares means tax advantages. Your tax situation can benefit from using the tax advantages that come with fully franked dividends. Sharemarket investment is fun. The sheer range of things that companies do is interesting and informative, and unlocks the mysteries of that nebulous beast, the economy. Toggle navigation Search Submit.

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How Traders Find the Dominant Trend on Weekly Index Charts. How to Calculate Simple Moving Average in Trading. Share Investing For Dummies Cheat Sheet Australian Edition. Maintaining Your Share Investment Portfolio Investing in shares is a long-term commitment.