Let's Chat Shares
Let’s chat shares
In our recent chat with Chris Titley, a stockbroker at Morgans, we discuss all the basics of getting started with investing in shares. You may be wondering why Chris is such a great speaker. Well, he has had a lot of practice running his own podcast: Morgans Startup Series.
Chris has a wealth of knowledge investing in the sharemarket and he is excellent at breaking down the concepts so that we can all understand. If you haven’t listened yet, check it out here:
Don’t fancy podcasts? No worries, we have written out a summary of what we discussed! As our trusty disclaimer in our footer will remind you, the information on Talking Cents is just for educational purposes and is not financial advice. We are here to learn a little about a lot. Take what you learn here… and learn more.
What is a share?
A share is part ownership of a business. When you become a shareholder, you become one of the owners of the company. This means you can share in the successes and profits of the company, but also means you run the risk if the company goes bad. As you will hear from Chris, the Australian Stock Exchange (ASX) website has some fantastic resources about getting started on the sharemarket. Check out this short video to learn more about ‘what is a share’.
What is the share market?
The share market is a market where people can buy and sell shares. The price of the shares is governed by supply and demand. The sharemarket is contextualised through reference to the S&P/ ASX 200 index and the All Ordinaries Index.
The S&P / ASX 200 index measures the performance of the largest 200 companies listed on the ASX by market value. The All Ordinaries measures the largest 500 companies. These indices are used to give a sense of whether the market, as a whole, closes higher or lower at the end of the day.
Why do people buy and sell shares?
Let’s put it straight. People buy and sell shares to make money. This may be through buying shares and then and selling them at a higher price, or through a passive income stream that relies on dividends (we cover dividends, scroll down). People also invest in shares to follow companies’ growth prospects. The stock market also provides an opportunity for Australians to contribute to the growth of some of the nation's most creative companies.
Heard some tragic stories of people investing in the sharemarket? We have too. Investing on the stock market carries more risk than leaving your money in the bank. But it can also create more return. You gotta risk it to get the biscuit.
Why can you buy shares in some companies and not in others?
You can only buy shares on the ASX in a public company. This means that you can’t buy shares in your local sushi restaurant. Private companies are ones in which the ownership is tightly held between a small group of people who may sell the shares amongst themselves. Public companies are ones where shares can be openly traded between members of the public. To work out whether a company is public or not, google ‘The Company Name’ and ‘ASX’, if a share price pops up then bingo its public, you can invest in it if you chose to.
How can you buy shares?
There are several different ways you can buy shares. For our readers, we think the easiest way for you to start on the sharemarket is to set up a trading account with your bank if they offer it. Most of the big banks do. We have linked the relevant accounts for: CBA, Westpac, NAB, ANZ and Suncorp. If you google ‘online share trading account aus’ you will see there are a heap of other online accounts.
What are the different sorts of companies you can invest in?
There are many different types of companies that you can invest in. It depends where your risk portfolio lies and whether you are interested in receiving dividends. There are traditional ‘blue chip’ companies which are in the S&P/ASX 50, a list of Australia's top 50 companies. Blue chip companies tend to be long established, stable companies that suit investors looking for steady returns with less risk. Then there are more speculative companies which may have potential for large return but are more risky.
As Chris discusses, there is merit in investing in industries or business you understand. You have a better chance of recognising if a company is weak or strong if the industry is familiar to you.
What are dividends?
Dividends are a share of a companies earnings. Dividends are distributed to a company's shareholders from its profits, and are usually paid twice a year. However, there is no guarantee that dividends will be paid and the amount of dividend may change depending on the company performance.
Where can you go for more information?
We have more episodes lined up to learn more about the sharemarket so stay tuned!