Investments

Investing:

We become what we think about – Earl Nightingale

Investment: The purchase or ownership of something in order to gain income, capital or both. This is not just stock’s, real estate and businesses it can also be antiques, collectables and artworks.

Almost all successful people have investments. There are many different ways to invest like owning a business, Shares and owning investment properties. Some people also contribute extra to their super as an investment and let the money compound over time.

Investing in shares is one of the easiest ways to get your investment portfolio started and you can begin with as little as $500.

You only want to invest in companies or shares you believe will still be here in 10 years. Do your research and buy good growth stocks with a good dividend.

“Know what you own, and why you own it” – Peter Lynch

What is a dividend? A dividend is a sum of money paid by a company to its share holders on a regular basis generally annually.

Once you pick the stocks you want to purchase you should sign up for their Dividend Reinvestment Plan. This is where instead of getting paid you reinvest your return into more stocks. By doing this you are compounding your return and gradually growing your return over time

Albert Einstein once said “Compound interest is the 8th wonder of the world. He who understands it, earns it. He who doesn’t pays it.

Say you are 20 years old and want to start investing for your future and retirement. You have $1000 to start with and plan on contributing $100 a week to your portfolio. Obviously you would save this amount up to $1000 before investing to lower fees. You plan on all stocks having a Reinvestment plan so you can continue to compound your interest. Here is the power of compound interest:

 

 

 

A great place to start setting up a portfolio is Commsec. It is easy to use, and fairly well priced.

Another easy way to get started is RaizInvest. You can automatically set it to withdraw a weekly, fortnightly or monthly amount and invest it for you. You can get started here:

Another Easy and great way to start investing is by factional investing in property. With BrickX you can buy a small portion of a property from as little as $100 and get paid your rental return monthly. BrickX take care of paying all the bills and renting the property. With plenty of houses to choose from. Get started here:

There is plenty of information on google and youtube about stocks to buy and what to research.

Quick Tips for Investing:

  • Do plenty of research, Google and youtube has endless supplies
  • Invest long term. Warren Buffet once said “Only buy something you’d be perfectly happy to hold if the market shut down for 10 years’
  • Know when to sell. There is no point holding something in a downward trend if there is no guarantee it will bounce back.
  • Don’t take a hot tip without doing the research yourself.
  • When investing long term don’t worry to much about small dips. The market will always have ups and downs.
  • Focus on the future and set your goals.
  • A good place to start researching is the ASX top 50
  • Try stay away from speculative companies when starting out
  • Ask what you want from your shares? Capital growth or income? Or both.
  • Diversify into different sectors to minimise risk
  • When researching a company find out their core business activities, future prospectus, if they are making a profit or loss and their company strategy.
  • Also ask yourself before investing what is the company’s current position, do you see a continual demand for their products or service, where do you see their future heading.

“Risk comes from not knowing what you are doing” Warren Buffet

  • Always do research……… Even if its just watching youtube videos.

 

Stock Market Trading Terms:

Dividend: This is a percentage of a company’s earnings that is paid out to shareholders on a quarterly or annual basis.

Dividend Reinvestment Plan: A way to reinvest your dividends, rather than receiving payment for your dividends you will receive additional stocks.

Exchange: (ASX) Australian Stock Exchange – a place to trade different stocks listed on the exchange.

Bear Market: This is the term used of the market being in a downward trend or falling stock prices.

Bull Market: This is when the market is in a upward trend for an extended period of time.

Broker: This is a person who will buy/sell investments for you in exchange for a small fee/commission.

Initial Public Offering (IPO): This is the first time a stock has been on offer to the public rather than just been a privately owned company.

Order: This is an investor’s buy/sell order of a certain amount of shares in a company.

Execution: This is when an investor’s buy/sell order has been fulfilled.

Portfolio: This is the collection of investments owned by an investor. It may be just shares in one company or large amounts.

Sector: A group of stocks that are in the same sector. E.g Commonwealth bank and Westpac. Or Telstra and Optus.

Spread: This is the spread between some ones bid to buy a stock and the selling price. Or the amount someone is willing to sell a stock for and the price someone is willing to buy it for.

Volume: The number of shares traded during a particular time period, Normally average daily trading volume.

Real Estate Investment Trust (REIT):  An investment fund that trades on the exchange and uses the investment capital from many investors to purchase and manage properties to produce income for its investors. Usually commercial properties such as apartment buildings, shopping centres and industrial buildings.

Yield: This is the measure of return on an investment as a percentage. A stocks yield is calculated by dividing the annual dividend by the stock’s current market price.

Trading Halt: A trading halt is usually imposed by the exchange. It is usually due to news being released that may affect the stock’s price.

Blue chip stocks: Leading nationally known companies that continue to offer dividend payments and other strong investment qualities.

Total Number of shares: The total number of issued and outstanding shares.

Risk: The future chance or probability of loss.

Diversification: This is limiting your investment risk by buying different stocks in different sectors.

Revenue: The total amount of funds generated by a business.

Penny Stock: A penny stock is a low priced speculative stock selling at less that $1 per a share.

Net Worth: This is the difference between a companies or individuals total assets and its total liabilities.

Liabilities: These are the debts and obligations of a company company or individual.

Income Stock: A stock with a solid record of dividend payments which offers a dividend yield higher than the average common stock.

Growth Stock: The shares of companies that have had a better than average growth over recent years and are expected to continue their climb.

Futures: Contracts to buy or sell at a future date.

Exchange Traded Fund (ETF): A type of financial trust that allows an investor to buy a large number of stocks in a single security. It tracks and matches returns of the market index. E.G you could buy a ETF that tracks the ASX top 100.

Capital gain or loss: This is your profit or loss resulting from the sales of your assets.

Business day: Any day Monday to Friday excluding public holidays.

Assets: An asset is everything a person or company owns that holds value. This includes money, stocks, equipment and real estate.

Limit Order: This is where you set an instruction to either execute a buy/sell order at a certain price.

Volatility: Volatility is simply how fast a stock moves up and down. Penny stocks are often more volatile.

Day Trading: This is when you buy and sell stocks on the same day before the market closes.

Stock symbol: This is a one to three character symbol that represents a publically traded company. E.G. Telstra – TLS

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for” – Robert Kiyosaki