So, you have decided you would like to build yourself an investment portfolio that includes some shares but what does that mean and where do you start? Investing in shares will make you part-owner of a business. Shares can be a sound long-term investment but are very risky to use in the hope of making a quick buck.
When talking about shares you may find that shares may also be referred to as stocks, securities or equities and here’s some advice on how to get started in the sharemarket and what you need to buy shares and build up a solid, diversified share portfolio. It’s important that you avoid picking stocks at random and make sure that you do your research and buy shares that will grow your wealth for you.
Step 1 – Find some spare money.
You don’t need much to get started. 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.
Step 2 – Find a great Broker and get some advice.
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. While the former may be cheaper, the dearer fees of the latter while being more costly will pay out with quality advice in the long term.
Step 3 – Decide whether you’re a trader or a long-term investor.
As an investor, you’re in a safer position for share investment and more likely to succeed. Traders (meaning professionals and committed semi-professionals who buy and sell shares daily) are legitimate investors in the sharemarket, but this kind of activity is only for those who know what they’re doing.
Step 4 – Choosing the right stocks.
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. What you buy depends on the return you’re hoping to make, the risks you’re prepared to run, the time frame you’re prepared to invest for, and whether you’ll need to take the money out before then.
Step 5 – Research the companies whose shares you buy.
Find out what the companies do and how they’ll make money for you. Buying shares you know nothing about based on tips from friends or acquaintances (even worse, strangers) is the same as going to a casino. A blue chip at $20 mightn’t look as exciting as a goldmining share at 10 cents, and the latter can double much more quickly — but it can also reach zero value faster.
Step 6 – Don’t look for shortcuts to investing success.
Unfortunately, you won’t find a guru or blackbox software tool that can predict which shares will rise and which will fall. If someone tries to sell you a foolproof investment formula, ask yourself — if it really worked, why would they share it with me?
If you want to start your own share portfolio or review your existing share portfolio we can help. Contact us today and we can help you make informed decisions over a ‘barista-style’ coffee or gourmet tea!