Investing in shares can have many financial benefits over the long term. Shares are also easy to trade and only a small amount of money is required to invest.
Research carried out by ASX and Russell Investments shows that over the long-term, shares achieve one of the highest rates of return out of all investment types.
However, there are risks that you need to bear in mind when investing – including the value of shares can decrease and the rate of return may not meet expectations.
Strategies to suit you
Shares allow investors with different goals to pursue different investment strategies. Two main strategies are to invest for growth – where you benefit from any increase in value of the shares you own – or to invest for income, where any dividends you receive provide an income stream.
ASX's top 200 companies are among the most liquid in the world. Liquidity is where investors and buyers can quickly transaction the exchange of shares. Not all companies are equally liquid. The potential to sell your shares, or sell them for the price that you want, depends on the availability of a willing buyer.
The process of buying and selling shares can cost less than $20. You may need to pay more if you want advice and/or access to research on a company. You can invest in shares for as little as A$500 (plus brokerage costs).
Depending on your circumstances, there may be tax benefits available to you if you invest in listed shares. For some investors, capital gains tax discounts of up to 50% may be available on shares held for more than 12 months. In addition, some investors may benefit from franking credits paid on dividends. However, it’s important to ensure that any shares you buy stand up as solid investments regardless of any potential tax benefits.
What goes up …
Past performance is no guarantee of future returns and share prices can fall as well as rise. You should ensure you:
- have a sound understanding of any company that you wish to invest in, before you buy shares
- consider what professional advice that you need in your circumstances (such as investment, financial, taxation or legal advice) before you buy shares
- monitor the performance of the company and your shares and regularly re-evaluate whether your portfolio is still a suitable investment for you
- consider diversifying your share portfolio across a range of companies and industries to spread your risk.