Investing in shares
Wanting to learn more about the features, risks and benefits of investing in shares?
Investing in shares
Wanting to learn more about the features, risks and benefits of investing in shares?
You can use shares to help you build wealth. You can do this in two ways:
Like any investment, shares have risks you need to understand before trading. You should seek independent advice from a professional adviser before making a decision.
A share price generally goes up because people value the shares in that company and offer increasingly higher prices to buy them. A share represents a part ownership in a company. If the company performs well, you can benefit from share price growth, income paid as dividends or both. There is no guarantee your shares will rise in price while you own them or that the companies you invest in will prosper.
Shares can also be used to bring diversity to your investment portfolio and play a part in your overall investment strategy.
The quickest way to identify whether a share is anything other than an ordinary share is through its ASX code.
Every product traded on ASX has a unique identification code which is displayed on ASX ticker boards and in media sharemarket tables. All securities issued by a company will incorporate the company's code. For example, the code for any security issued by Commonwealth Bank of Australia will include the code ‘CBA’.
The code for the ordinary shares of an ASX-listed company is the same as the company code, with three characters. If there are more or fewer than three characters in the code, the security is likely to be something other than an ordinary share.
For example, preference shares usually have a five letter code consisting of the company code and a two letter suffix, generally PA-PZ. Partly-paid shares usually have a five letter code consisting of the company code and a two letter suffix, generally CA-CZ (except CP).
Shares can be a sound long term investment, are easy to trade and require only a small amount of money to invest.
To receive a return on the money you are investing, you need to be prepared to place that money 'at risk'. Generally the greater the risk associated with an investment the greater the rate of return investors will expect.
As a shareholder you are entitled to a share in the company's profits or earnings. For many investors, share selection depends on whether a company pays dividends and the size of those dividends.
Many ASX listed companies pay dividends twice each year, usually as an 'interim' dividend and a 'final' dividend. Companies are not limited to paying twice a year and may pay more or less frequently. A company may also pay a 'special' dividend, related to a particular event. There is no requirement for the company to pay a dividend from earnings, some companies might elect to reinvest the earnings back into the business.