For those who are looking at investing in the Australian stock market (ASX) for the first time, there will be a lot of questions asked about how to go about purchasing shares, what are the right amounts to invest, and what types of shares make for the best investments. While all of these questions can be answered over time, the first one that Australian investors should consider is the ultimate goal of their investing efforts in the stock market.
This is a question that you will want to answer first before taking the next step. This is because investing in the stock market should be part, but not your entire investing portfolio. While the obvious goal is to get higher returns to increase the amount of money that you possess, there are other methods of investment that also provides returns.
Investing in the stock market is best suited for achieving long-term goals. This is because while the market itself will go up and down, the general trend over the decades is up. So, you will want to make investments that have the long run in mind. Once you get near the ultimate goal which is usually retirement savings, you will need to sell your stocks at the most opportune time and then re-invest the money into something less volatile such as bonds.
If that is your ultimate goal, then stock market investing is right for you. However, if you are looking at very short term goals, then you may want to consider other forms of investing that are risky, but offer higher returns in a shorter amount of time.
This is actually the easiest part of investing in the Australian stock market. There are two basic methods when it comes to purchasing shares;
- Shares Purchased from Other Investors through the Sharemarket
- Shares Purchased Directly from the Company through a Float
A float is where a company seeks to raise money when it offers shares to the public, often for the first time. However, purchasing shares from other investors is the more common method. Either way, you will make the purchase with a designated broker. A broker is someone familiar with the market and will make the purchases for you.
This will require setting up an account and providing the funds needed for the stocks before the purchase is actually made. It may take up to a week to properly set up an account, but once it is in place you can start to make purchases. It is from this account where the broker can buy stocks for you. The account allows you to pull the profits or add more money for purchases. Ideally, the profits from your first purchase should build upon itself, but quite often people usually will have to add more money to the account for larger buys.
Once you have set up an account, you can purchase shares through your broker. The two different methods start with making your order “at market”, which means that once you find a prices that is acceptable, you’ll take it. Or, you can buy “at limit” which means you tell your broker the highest price you will pay or alternatively the lowest price at which you will sell.
The purchasing process will include advice from your stock market advisor or broker so that you can make the best informed decision. Keep in mind that you are not bound by a broker in terms of what you can purchase. However, you should take their advice seriously before you buy or sell. You’ll want to inform them of all the pertinent details which include the following;
- Number of shares you will purchase
- Number of shares you will sell
- The price limit that you will buy or sell
Your order will be confirmed by the broker or advisor before it is completed. This can be done over the phone or online where many brokers and advisors conduct business. Depending on the nature of your order, it may be fulfilled quickly if the market price is near your wishes or it may take some time.
Keep in mind that when you purchase shares of companies which are listed on the stock market, you are buying them from the investors. This will require the services of a stockbroker to complete.
This is the question that has no singular answer. Ideally, you should purchase stocks at a time just before you think they will rise in value and sell when you think that it will no longer increase. However, there is no real way to know when that will happen, you are only playing the odds that it will happen during a particular time frame.
So, this is where you will need some assistance to ensure that you make the best informed purchase or sale. You can meet with a dedicated financial planner, talk to your stockbroker, or expert in the field. You can also keep with the news, which includes the financial and political world that will have a direct effect on the price of the stocks that you intend to buy or sell.
The more information you can gather from legitimate sources, the better informed you will be before making your decision. However, keep in mind that timing is a key element when it comes to making a considerable amount of money in the stock market. Yet, long term investing is something that requires less attention, but more patience.
In the end, you will need to make all of your decisions based on your overall goals. If long term investing is what you are trying to accomplish, then once you make your purchases sticking to the stocks for a period of years is recommended. However, if you see an opportunity to make a considerable amount of money in the short term, then you will need to conduct a lot of research so you can make the best decision possible.
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