Basics of Share Trading
"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." — Robert G. Allen
Disclaimer: "This article is intended for educational purposes only and does not constitute financial advice. The content reflects general financial principles and may not apply to your specific circumstances. Always consider your own financial situation and consult with a qualified professional before making financial decisions."
Investing can seem like a daunting task, but the reality is that today investing is easy as. All you need is a smartphone and $10 to get started. But before i go into that we will explore your options if you are considering investing.
SHARES
Investing is quite straightforward. As an investment, I'd recomend starting with stocks first, even if you have $10 to spare. There are two types of income you can receive from a share:
Increase in a shares value -A shares value relies of how well the companies doing, although other factors such as politics and economic conditions can also impact prices. It is also determined by consumer faith, that is ; how much people think its worth.
Dividends - Some companies also pay a divident in which a company distributes a percentage of profits to shareholders. A company can pay quarterly, half yearly or yearly which is directly paid to you, the shareholder.
But lets get down to brass tax; where do we start? Here are some basic steps you can dive straight into.
1. Find a platform - Find yourself a share trading account. Popular affordable ones include superhero, etorro, CMC invest, Moomoo to name a few. Sign up to an account and transfer the amount you wish to invest in (eg $1000)
2. Search for companies - Search the ASX and internet for companies that may interest you, and make a list of potential companies you'd be interested in investing in.
3. Research financial performance - Research the companies historical performance. Most trading applications have a section where you can view a companies financial performance over a 5 year period. Alternatively you can usually head to the companies website to review financial documents. Lookout for any increases in costs, increased revenue and debt as some indicators to determine whether a stock is a good buy.
Pros: Better returns than savings accounts, owner stake in companies, diversified portfolio
Cons: Market volatility, requires market knowledge.
Most trading platforms should have a section that shows a companies historical performance.
It is essential to review a companies financial performance before investing money.
c) Check the current affairs - Check the companies current state of public relations. Is the company embroiled in lawsuits or leadership issues? Also consider general current economic and political factors that may affect the companies industry your investing into.
d) Review your choice - Search for a stock and review its price including dividends. Does it seem over valued? Does it seem like a bargain? Have a look on sites like the motley fool, google and yahoo finance (amongst many others)
e) Purchase - Review the brokerage fee and purchase the number of shares you are satisfied with.
BUYER BEWARE
There are higher risk shares and their are lower risk shares. Major supermarkets, banks and other established businessess are considered lower risk, whilst businessess such some fin tech and new startup companies may be considered a higher risk. As a result higher risk companies offer a promise of higher returns. To start, focus on major players that have a history of good returns. If you are comfortable with the risk tolerence over time, you can increase it accordingly to the areas your most interested in.
If you are unsure, the motley fool is a good website to have a look at for recomendations.
Conclusion
Trading is a powerful way to grow your wealth, but it requires knowledge, patience, and a strategic approach. By understanding the basics and starting with a clear plan, you can navigate the investment landscape with confidence.
