Shares (Why should everyone own them?)

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This blog aims to explain some of the benefits of owning and investing in shares as well as a quick summary of the first steps to invest.

In short, education and investment skills.

It all starts with sparking an interest. As a young child, I was taught that shares provided an opportunity to save and to grow those savings.

Next, the question of which type of shares to buy, the lower risk ‘blue chips’ or a higher risk, smaller stock.

I would suggest starting with a well known ‘blue chip’ stock. The reason for this, is that it’s relatively easy to grasp what a large company does as a business (at least at a high level). Large companies are also often in the media, so it’s easy to keep track of what they’re doing. Finally, the media also often provides commentary on a) what’s happening within the particular industry, and b) what external influences impact the industry.

For example: Given it’s somewhat topical right now.  Take Standard Chartered Bank. It has a share listing on the London Stock Exchange. As a large public company, there is plenty of media coverage about the company, not only at a high level, but also at the individual business or country level.  Google Finance also provides an industry and competitor comparison in terms of share price performance.

First Steps

As far as actually making your first share purchase, consider the following basic steps.

  1.  Save up the initial amount required.  Most banks and share platforms will have a minimum investment amount, usually somewhere between $500 and $1,000.
  2. Next, decide upon a trading platform that you can use.  Most banks will offer the service and via a Google search you’ll be able to perform a comparison of the various providers.
  3. Once you’ve linked your funds to the trading platform, the next step is to actually decide on what shares to purchase.  There are hundreds of thousands of companies listed on stock exchanges across the world, but don’t let the sheer number of options discourage you from trekking down the investment path.  I would suggest one of two approaches, if you have an industry or product that is of interest to you, use the stock screener on Google Finance to apply the various filters and refine the possible list of investments for you to choose from.  If on the other hand, you would rather invest in a pre-defined ‘mixed basket’ of shares which could either by generic or industry-specific, Google the term “ETF” or Exchange Traded Fund.  ETFs are traded on stock exchanges exactly the same as shares, however rather than purchasing shares in a single company, you’re essentially purchasing share in a ‘mixed basket’ of companies.  Betashares and iShares are two well known ETF providers.
  4. Once you’ve decided on the direction you want to take, login to your trading platform, search for the share or ETF you want to buy, enter the number of shares and the price.
  5. Enjoy the ride of ‘ups’ and ‘downs’.

Note: Risk as a topic, warrants its own blog entirely, however, as a consideration, every investor should have a view on the level of risk they are willing to take on.  Risk, doesn’t necessarily mean that you need to accept that you could lose your entire investment (that’s what gambling is), but rather that you need to accept that there will be a risk that you could lose some of your investment.

The question is how much are you expecting to gain, weighed up against the risk of losing a portion. For example, for you to make a 20% gain, are you willing to risk a 5% loss?

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