Share market ABC

IF you have never traded on the ASX before, you will probably find that due to the internet there is an abundance of information available that was not previously so easy to access. This might well cover the technical operations of the ASX but not the day to day operations which makes one feel that one had landed on a new planet, with its own language and set of laws.

Terminology such as buy backs, initial public offers, takeover bids, share placements are all new concepts that can overwhelm the new investor. We feel that a great place to start is the Australian Securities Exchange website and the Australian Securities and Investment Commission's consumer website FIDO. Both have plenty of information about share market basics, advice on trading strategies, and reallife examples of the results of different trading strategies.

There are essentially two ways to buy and sell shares: Through a stock broker, or by doing it yourself over the internet.

The websites charge a range of prices, depending on how frequently you trade, but start at about $30 a trade.

Depending on how much you are willing to spend, or how much you trade and generate commissions, the sites provide a range of research tools, such as stock recommendations from brokers, price charts, financial balance sheets, information about major shareholders and so on.

For traders who have a small portfolio, or who are confident in their ability to do their own research, the online brokers can be the perfect trading solution.

Stockbrokers are useful for investors with a slightly different profile to those with larger portfolios, who may not be confident or have the time to manage their investments, or those who are seeking professional advice on their investment strategy.

Goldman Sachs JBWere director Andrew Bradley says advisers offer much more than just stock buying advice.

"An adviser is a licensed professional who can bring a whole range of products and services to clients and really bring a whole of portfolio perspective,'' Mr Bradley says.

"The advice, therefore, becomes much more specific and tailored.''

Mr Bradley says GSJBW advisers follow a rigorous process, with risk assessment a core element.

He says advisers have long term relationships with their clients and look at the big picture, including involving other family members, superannuation issues, philanthropy and changing financial goals.

Other sources of investment advice include investment clubs, newsletters, subscription based and free investment magazines, and daily newspapers.

For the technically minded, there is a number of analysis products available, which suggest trades based on trading patterns in a particular stock or index rather than the actual performance of the business.

Fat Prophets's Australasian Equities Report is an example of a paid for newsletter. For a tax deductible yearly fee, investors receive a weekly newsletter with advice on stocks.

How to pick shares

  1. BEWARE the red hot tip. If it sounds too good to be true, it probably is.
  2. WORK out your risk profile and invest accordingly. Are you a risk taking speculator or looking for slow, steady wealth accumulation? Perhaps a bit of both?
  3. THE hardest decision is when to sell. Many investors have forgone good profits in the hope of excellent profits.
  4. DEVISE a trading strategy and stick to it. Emotion is the enemy of the successful investor.
Published on June 6-th, 2008 in Financial Planning
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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