Investing in shares is a great way to make your money earn better returns than it would sitting in your bank account. In Australia, the average yearly return is 5.5% higher from shares than it is from a savings account. However, with any gain there are always risks involved. Understanding the benefits and potential hazards of DIY investing is important to make the right decisions and get the best return from your money.
Understand how you can make money from your shares
There are simple ways to achieve this. The first is by capital gain (also known as capital growth). This means that the prices of your shares have increased, and you will make a profit by selling. Another way you can make money is by dividends; when a company pays a portion of their profits to shareholders. Not all companies pay dividends, so it is important to consider this before making your decision.
Think long term
Choose a company that is expected to make gradual increases in their shares overtime. Stick to the larger companies in the stock exchange, and have a look at their history of shareholder returns. Take note of the supply need for the business, and stick to something that is in high and consistent demand. If investing solely in one company seems daunting, you can obtain a small piece of several companies by buying into ETFs (Exchange Traded Funds). This is an ideal option for new DIY investors.
Understand the risks
There will always be risks when it comes to purchasing shares; nothing is guaranteed. Don’t let this deter you! Educate yourself on what makes a wise investment. One of the most common risks involves losing money from selling your shares for less than the purchase price. To protect your money, avoid high risk investments from small companies with bad stock records, as you will rarely gain a profit in the long run. If you are unsure on how to identify the best time to buy or sell, there are mechanical investing tools that help take the guesswork out of it.
Have realistic expectations
It is important to understand that you won’t get rich overnight. Make sure you keep a close eye on your shares and monitor their progress. If you are still not confident, mechanical systems provided by Share Wealth System are here to help guide you through. Be patient and make sensible choices, and the more you educate yourself, the better you will be in the long run. Good luck!