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Investing in shares
DIY Investing, Stock Market DIY Investing
Investing in shares makes you part-owner of a business but the expectation is that you will be rewarded by capital gain and dividends. Shares can be a terrific investment but there are always risks you need to be aware of before making a decision. We explore the basics of share investment so that you’re better informed.
Borrowing to invest
DIY Investing, Stock Market DIY Investing
You can invest in the share market by borrowing money to buy more shares than you might afford. To many this might sound terrifying and they should avoid it but it’s really much the same concept as borrowing to buy a house. Learn what ‘gearing’ means and how both profits and losses are magnified.
Investing in gold
Gold has an enduring appeal and there are plenty of ways to invest in gold from the most traditional method of buying bars, ingots and coins right through to getting an exposure to gold through junior stocks, which are either exploring for gold or starting to mine it. Our video explores the key categories and explains the benefits and risks.
Why the market pullback?
Commentary &.., Economic Market
Markets took a hit last week as a bunch of factors, including US inflation concerns and a technical default in Argentina, spooked investors. In our view, there are two main drivers for the pullback....
Bonds
A bond is issued by a government or company as a way of borrowing money. Investors buy the bonds, and receive an interest payment on the fixed dates, at the stated interest rate, or ‘coupon.’ The bond has a known maturity date, at which the investors are entitled to be repaid the money lent via the bond. It is possible that at maturity date the company or government cannot repay the bond or is unable to pay the coupons: .this is the main risk associated with owning a bond. Bonds can usually be bought and sold like shares, but if you sell or buy a bond before maturity it may have a different value than the initial amount loaned, which can give rise to a capital gain or loss.
Shares
A share is issued by a company to raise money. A share also represents a unit of ownership in the company, its assets and in its profits, as well as allowing the investor to vote on major decisions associated with the company. Shares may also pay dividends, which are a share of the company’s profit. Shares can be transferred from one investor to another. For listed companies this happens on a stock exchange or stock market which allows the selling and buying of shares. A company may also issue shares through the stock market to raise extra capital. Investors buy shares, expecting the value of the share to rise and dividends to be paid.
Stock Market
The stock market is the marketplace in which ‘listed’ shares are traded: it is also known as a stock exchange. Buyers and sellers indicate the price levels at which they are willing to buy or sell their shares: if the buy and sell price match, the shares are transferred. The day-to-day trading of listed shares is known as the ‘secondary’ market. The other function of the stock market is to allow companies to raise money to fund their business from investors. Companies will sell shares directly to investors to raise the money: this is called the ‘primary’ market. These markets co-exist.
Term Deposits
Unlike a bank account which allows you to deposit and withdraw money at almost any time, a term deposit is a deposit made with a bank for a specified term. The money in a term deposit will be locked up for that term. The bank agrees to pay you a specified interest rate – which will not change – for the term, and to repay the full amount at the end of the term. You can choose a term, from one week to five years, and whether interest is paid on a regular basis or at the end of the term (when you get your original deposit back.) You can ‘break’ the term deposit before the end of its term, but there may be a penalty cost if you do. In the hierarchy of investment products, term deposits are considered very safe and can also be eligible for the government guarantee on bank deposits, which was introduced in 2010.
Equity markets’ zombie dance
Commentary &.., Market Economic
Just when you thought equity markets were looking shaky, they’ve taken us by surprise and popped back to life like some sort of zombie back from the dead.
Around the world, the US, Asian and Australian markets performed well last week making up for most of the losses of the past month. European markets even came back a bit although it was more a stabilisation than a recovery as the issues in Ukraine continued to weigh heavily on the region.