If you have never invested in the share market and aren’t even sure what a ‘share’ really is the whole concept can seem overwhelming. Never fear!
This blog aims to break down the share market in simple terms to help you navigate your way through investing.
What is a share?
A ‘share’ or a ‘stock’ represents a piece of an organisation. If you hold shares in a business you essentially own a portion of that business meaning you have a share in the profits, losses, risks and assets of that company.
What is the share market?
The share market is where the selling and buying of shares and other securities takes place.
The ASX – Australian Stock Exchange is Australia’s largest share market with around 2,200 companies and issuers listed.
These companies are usually divided into 10 main sectors. For instance all the banks fall into the Financials sector and stocks like Telstra or TPG fall into the Telecommunications sector. There’s also Materials, Industrials, Utilities, Consumer Staples, Consumer Discretionary, Health Care, Information Technology and Energy sectors.
How to decide what to buy?
Before you invest in shares you need to consider your investment goals. Are you a risk taker, or risk averse? Do you want shares that are more likely to climb slow and steadily, or more volatile shares with peaks and troughs?
How do I invest in the share market?
There are two ways to purchase shares. Directly from the company or via other investors on the share market. Both methods require a stock broker, or a middleman to make the transaction on your behalf. You might have heard of Commsec or Etrade on the news when they give the daily financial update. These are stock broking arms for Commonwealth Bank and ANZ bank but there are many other brokers an investor could use.
When a company wants to release shares to the public they submit their details and proposed shares to ASIC in a prospectus document.
Once this has been lodged through ASIC the shares are available for prospective investors like you to purchase. You may have heard of Medibank Private as a public offering recently. You can then decide how long to hold onto the shares and when to sell.