So how do shares work?

[want2bewealthy]

Im thinking of investing in shares as another way to improve wealth,
the onlty thing is.. I dont know anything about them!!...

I have a few basic questions

1. Do you need lots of money invested in shares for it to be worth while?

2. What sort of risks are we talking about?

3. Are shares long term?

4. Whats the standard rate of return as opposed to property?

5. are there tax deductions involved?

6. Are there any taxes when withdrawing your funds?

I guess there are probarbly quite a few shareholders here and I would love an explanation on all things shares.

 

[letiha]

Hi.

Thats a lot of questions, some very simila to what i had recently.

Possibly you could get a book or 2 from the livrary or even buy just to get your head around it a little. But here goes.

1. Do you need lots of money invested in shares for it to be worth while?

Well your rate of return will be the same if you brought 1 share or a million of the same share. obviously if you can use margin lending you can increase your borrowings to by more share and make more profit, the same as you would eb property.

2. What sort of risks are we talking about?

Well the same risks as with property, there are bue chip shares that you will always see a good return on, then there are others that are more speculative or risky.

3. Are shares long term?

I like to look at them as medium to long term, this goes hand in hand with risk

4. Whats the standard rate of return as opposed to property?

Can't help you here

5. are there tax deductions involved?

Yes you can claim interest on funds used to borrow for shares- basically negative gearing.

6. Are there any taxes when withdrawing your funds?

If you make a profit there is CTG

Hope this helps, i am also just starting out with shares and meeting a financial planner on wednesday.

 

[Simon]

Im thinking of investing in shares as another way to improve wealth,
the onlty thing is.. I dont know anything about them!!...

I have a few basic questions

1. Do you need lots of money invested in shares for it to be worth while? What is a lot to you? Start with $2000 and build it over the long term. Buy
and never sell in my philosophy developed over years.

2. What sort of risks are we talking about? What is the risk of doing nothing?

3. Are shares long term? Yes

4. Whats the standard rate of return as opposed to property? No standard. Expect a yield of 3-5% and capital growth over the long term.

5. are there tax deductions involved? Yes. Many dividends carry franking credits because the company has paid company tax already. This needs a bigger explanation that you can find at www.asx.com.au

6. Are there any taxes when withdrawing your funds? Same as IPs. CGT.[COLOR="Red"][/COLOR]

I guess there are probarbly quite a few shareholders here and I would love an explanation on all things shares.

You need to join up at www.asx.com.au and read a lot. Check your library too. Find a mate to explain it all over a brew sometime.

 

[Simon]

H

Hope this helps, i am also just starting out with shares and meeting a financial planner on wednesday.

I would be surprised if any Financial Advisor recommended direct share ownership. They don't get paid that way.

They will dress it up with a reason why Managed Funds are better but the reason is their comission.

Keep this in mind and let us know how you get on.

 

[Jase H]

I would be surprised if any Financial Advisor recommended direct share ownership. They don't get paid that way.

They will dress it up with a reason why Managed Funds are better but the reason is their comission.

Keep this in mind and let us know how you get on.

Simon,

There are still some fee for service financial/investment advisors out there that tend to be more independant. However, I must admit they are a dying breed.

Jase

 

[Welcome]

Well the same risks as with property, there are bue chip shares that you will always see a good return on, then there are others that are more speculative or risky.

Not quite, MBL was probably seen as a blue chip before the last few weeks..... however over the long term the 'blue chips' are generally a safer option (but also may not get some of the CG of some companies with a smaller market cap.)

All about the risk you are willing to handle.... some people enjoy playing with stocks such as IMI, PES (and hundreds of other mineral exploration companies) that pay no dividend, have no income and run on hype and speculation. While other people wouldn't bat an eyelid at them.

Have a read around www.asx.com.au and I'm sure you could answer all those questions pretty quickly

 

[letiha]

Hi Simon.

yes i'm already clued on too this, my whole idea of share ownrship is like property, control. i'm the one ho gets to decide when to buy andsell not some manager.

That way even if there is a crash or similar i am happy not to sell but bide my time and wait it out, whereas a fund may want to cut and run.

Ido however see a place for MF as part of my total portfoli.

 

[sue78]

One thing I have noticed in my portfolio is that shares is definitely NOT long term. One particular share went down below IPO then above IPO then below IPO etc and now it's down again. It has been I think at least 3 yrs ownership!!

If I had been bothered to track my shares and sold when it was high and purchase more low then it would be more worth my time. Overall, I am still probably neutral...maybe even down.

I have actually never sold any shares...I don't even know how to. I am tempted to just sell everything, cut my losses and invest in LPTs.

Managed funds is much easier. Bought into it in June and received a nice surprise cheque paying $0.19 cents distribution per unit....well I would have known if I had been bothered to read the letters they send. Apparently, the final distribution is always higher but they do distribute quarterly. Last year the fund returned 20% income and 20% growth....lets hope they can replicate that this year too!

 

[momo]

I think on a percentage basis, shares have a better return than property, taking into account yield(including franking) and CG. I am however uncomfortable with the prospect of borrowing(margin loan) to buy them, unless the margin is small.
I will9and have), however, redraw from a home equity loan to buy them , when the opportunity is there, eg in this market, post 9/11, post 2000 tech wreck.
My goal , after accumulating enough net worth through accumulation of property (excellent because of leveraging), redraw on that net worth to buy shares, especially if the timing is right, to place a bucketload into shares with reasonable yields, franked of course, and reasonable prospects of CG. Timing helps in the sharemarket, of course. When property is up, shares are down.

 

[Simon]

One thing I have noticed in my portfolio is that shares is definitely NOT long term. One particular share went down below IPO then above IPO then below IPO etc and now it's down again. It has been I think at least 3 yrs ownership!! That really depends on the share. Anything from a recent IPO is probably not a Blue Chip share!

If I had been bothered to track my shares and sold when it was high and purchase more low then it would be more worth my time. Overall, I am still probably neutral...maybe even down. If you knew when to pick the highs and lows you would be the richest person in the world - if it is true can you please email me with the secret to it?

I have actually never sold any shares...I don't even know how to. I am tempted to just sell everything, cut my losses and invest in LPTs. Yes sell low buy high - resist that temptation for now ...

Managed funds is much easier. Bought into it in June and received a nice surprise cheque paying $0.19 cents distribution per unit....well I would have known if I had been bothered to read the letters they send. Apparently, the final distribution is always higher but they do distribute quarterly. Last year the fund returned 20% income and 20% growth....lets hope they can replicate that this year too!

Well done - which fund was that?

Cheers,

 

[Sunfish]

One thing I have noticed in my portfolio is that shares is definitely NOT long term. One particular share went down below IPO then above IPO then below IPO etc and now it's down again. It has been I think at least 3 yrs ownership!!

I'm a little surprised Sue. Could I suggest that you don't abandon ship after this experience? You have already learnt some lessons so why not use them.

Acey was warning about high oil prices years ago and I (remember Thommo) was calling the resource super cycle. There are still opportunities out there and a little diversity will avoid calamity but not volatility. In times like these one must simply believe (you've done the research and bought accordingly) and stay staunch.

May I remind everyone again that I am not a financial advisor and anything I say is simply personal opinion but banks and financial services are probably past their use-bys. There has been a swing to productive enterprises which have a product or service in demand. As an example (not a recommendation) Neptune Marine Services has developed an under-water welding system and they are expanding into the Gulf of Mexico.

And don't sweat the daily fluctuations in metal prices or the resulting share prices. You can invest and still avoid the bustle and fury of the market.

 

[natmarie73]

I think it depends on what your definition of long term is. 3 years is to me the very short term whereas long term is 20 years +. Does anyone really think that blue chip shares such as major banks, BHP, CSL etc will be worth less in 20 years than they are today? I know it is possible, but looking at the data for the past 20 years, highly unlikely. Unless you risk the gamble of speculative shares, they are not a way to get rich quick (IMO).

I have been dabbling in share trading and such for the last few years - made a profit on some and a loss on others, and I have definately changed my perspective to a much longer buy and hold strategy.

 

[steveadl]

I think it depends on what your definition of long term is. 3 years is to me the very short term whereas long term is 20 years +. Does anyone really think that blue chip shares such as major banks, BHP, CSL etc will be worth less in 20 years than they are today? I know it is possible, but looking at the data for the past 20 years, highly unlikely. Unless you risk the gamble of speculative shares, they are not a way to get rich quick (IMO).

I have been dabbling in share trading and such for the last few years - made a profit on some and a loss on others, and I have definately changed my perspective to a much longer buy and hold strategy.

Same for me. Love the stock market and been following it for years. I've always bought small caps and waited for cap gains - some went fantastic, some I lost the whole investment.

I've recently however started to look towards the longer term instead, and am trying to find shares with good dividends (and a DRP - that's a MUST in my case). I think my property investing has been partially the cause of this change in mindset I like the idea of Absolute Return Funds (eg. Everest Babcock Brown), however it also remains to be seen how they actually perform during a crash.

 

[sue78]

When it comes to shares...yes it seems I do everything backwards! lol

Is Virgin Blue blue chip? It was above $2.70 for ages and now it's back to IPO price.

I had invested some money in a dodgy property company and they paid me back with shares in their company (FIC)...overall I still lost loads of $ so we decide to take the offer since $5k was better than nothing...within 6 mths the shares price has gone to $0

Now, I did buy some shares through smart investor buy recommendation but they're not performing well.

The LPT is Rreef Paladin managed by Deutsche Asset Mgmt. I am very happy...first time I've received good dividends apart from when VBA was owned by Patrick for a shortwhile and was forced to pay investors dividend.
I was not happy that it was sold to Toll!

 

[Brenda Irwin]

I like to buy shares with good longterm history. I like this company as they have been around a long time and the longterm graph shows mostly all up growth. Their dividends also mostly all go up each year too. That's progress.

I don't fret too much about short term mini drops in companies of say a year but they'd better be talking improvements and growth in their company reports after that. Yes, I read most all of their reports, with lots of coffee as most of it is boring.

Best thing about shares is you can sell and have your money in 3 days as opposed to selling a house which takes longer and with longer settlement. You cannot sell a part of your house, whereas you can sell a portion of your shares. If you hold shares over a year, the same cgt discount of 50% could apply as in house sales.

 

[Simon]

How did you get onto MLT Brenda? Via your broker or your own researching?

You sure have come on leaps and bounds since you discovered the stockmarket - was that only earlier this year?



Cheers,

 

[Brenda Irwin]

How did you get onto MLT Brenda? Via your broker or your own researching?

You sure have come on leaps and bounds since you discovered the stockmarket - was that only earlier this year?



Cheers,

Hehehe, it's called access to the brokers research section on their website. I haven't worked out that candling stuff yet tho.

 

[austini]

Hey Brenda,

MLT (and ARG also) have been fantastic performers over an incredibly long period of time. Wonderful, sleep-ezy, set and forget stocks with bugger all management fees. Have hardly ever missed a dividend over decades. Milton's performance in particular has been incredible so well done on your selection.

If it weren't for our current situation which makes it very difficult to long term invest in shares / funds we would be heavily invested for the very long term in: MLT, ARG, AFI, STW, SLF and a few others things such as MIR (for small coy exposure) etc. Will just have to be patient.

Cheers - Gordon

 

[Brenda Irwin]

Currently I have 48% invested in managed funds, and 13% in banks. The rest is spread across oil, capital goods, pharmaceuticals, healthcare, metals and mining, real estate management, technology, automobiles, food beverage & tobacco, commercial services, and construction materials.
Can't let all those managed fund have all the fun.