Guide to investing in stocks from Australia – Forbes Advisor Australia – Forbes

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First, we provide paid placements to advertisers to present their offers. The payments we receive for those placements affects how and where advertisers’ offers appear on the site. This site does not include all companies or products available within the market.
Second, we also include links to advertisers’ offers in some of our articles. These “affiliate links” may generate income for our site when you click on them. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor.
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Published: Oct 11, 2022, 11:45am
Stock markets can be scary places for anyone new to investing: a mass of numbers, flashing screens and impenetrable jargon. A far cry from dropping coins into a piggy bank, or paying cash into a savings account.
It’s an especially formidable time to be a stock market investor in Australia—or anywhere else for that matter. While we may lucky enough to avoid a recession, there is concern that the US will enter one, which will have widespread implications for global economies. As recently as October 11, Treasurer Jim Chalmers warned that the “world is bracing for another global downturn”.
However, if you’re saving for the future let’s say, five years away at the very minimum—investing in the stock market has the potential to produce greater rewards than cash deposits. And it can also head off the corrosive effect of rising inflation.
Here’s a run-through of investing basics, plus a look at the ways beginners can buy stocks and shares.
Note: before you consider going down the investing route, it’s sensible to build up a ‘rainy day’ cash fund worth at least three (and preferably six) months of your usual outgoings and to seek independent financial advice with regards to your individual situation.
It’s worth starting with a definition of what investing is, and why people do it. Investing is the process of using your money to generate a profitable return (although it should be noted that investing carries with it the risk of loss, except where holdings are kept as cash).
The investing process involves putting your money into a range of investments.
There are four main types, which you’ll hear referred to as ‘asset classes’. They include:
Other asset classes exist such as fine wine, art and classic cars. But mainstream financial products tend to focus on the above list.
An accumulation of assets is often referred to as a ‘portfolio’. There’s nothing to stop an investor focusing on just one asset type, but there’s an ‘all-your-eggs-in-one-basket’ risk associated with doing this.
Spreading your money among different asset classes—known as ‘diversification’—is a sound investing policy.
Every investment carries a degree of risk, some greater than others. Generally, the higher an investment’s potential return, the higher the risk of losing your money.
In terms of the asset classes outlined above, the risk associated with each tends to increase as you read down the list.
For example, with savings accounts, the risk of Australian savers losing their money is virtually zero thanks to strict compensation rules in place under the Financial Claims Scheme (FCS) should a provider ever get into trouble.
The trade-off, however, of savings accounts is that the returns you can expect are modest at best, from virtually nothing up to around 3% a year.
With Australian inflation running at more than 6%, as per the June 2022 quarter update, and tipped to increase further by the end of 2022, this means that the real value of money held in deposits decreases year-on-year because of rising cost-of-living pressures. 
Corporate bonds are riskier than cash because there’s the chance an issuer will not meet its interest payments and ‘default’. Again, the trade-off comes in the shape of a slightly higher rate of interest than cash, typically in the range 2-3%.
Many Australians are fans of property investment, with some buying into commercial developments through managed funds.
Shares are often an investor’s first foray into stock markets, so that’s where we’ll focus on for the rest of this article.
Historically, the return on equity investments, between 3% and 6% a year going back over 120 years, according to Credit Suisse, has outstripped other asset classes (although past performance is no guarantee for the future).
However, before parting with any cash, it’s worth taking time to weigh up whether investing in shares is definitely for you and to ensure you do it in a sensible and secure way.
With equity investing, you need to keep your ultimate financial goals in mind and be prepared to ride out stock market ups and downs.
Whichever method you choose (see below), there’s also a cost consideration. It doesn’t cost anything to open a deposit account with a bank. But, when buying shares, extra charges will be incurred beyond the cost of owning a piece of the company itself.
Investing in shares also means there may be tax considerations, for example, when selling part of your portfolio.
Before taking the plunge with any form of stock market-linked investment, ask yourself five questions:
There are several ways to invest. You can opt for one, some or all of the following. It boils down to your goals and how actively involved you’d like to be in managing your portfolio. The main options are:
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DIY investors require access to a dealing account, such as the ones offered by online investment platforms and trading apps. These provide would-be investors with a range of share-dealing services.
Investment platforms, such as SelfWealth, Stake and CMC Markets Invest, offer a range of features for both new and seasoned investors, with some offering access to international markets as well as the ASX. It’s also worth checking whether the share trading platform automatically registers your ASX share trades and transfer of ownership with the Clearing House Electronic Subregister System (CHESS).
No single investment platform or app is going to suit all types of users. Personal preference, look and feel, ease-of-use, as well as cost-per-trade, will play a part when making a choice. On top of these considerations, it’s important that a provider offers access to the investments you’re looking for.
It’s also important to pay as little as possible for each trade you make and to minimise charges. Check to see whether there are any additional administrative fees in addition to the cost-per-trade.
If you have a sizeable amount to invest (say $10,000) but the prospect of being responsible for all your own trades seems a little daunting, you could opt to use an Australian robo-adviser.
Robo-advisors are a simple, inexpensive way to invest in stocks: a half-way house between a DIY approach (above) and full-blown face-to-face investment advice (below). You provide information on how much you earn, why you want to invest, your financial goals and attitude to risk and are given a ready-made investment portfolio by an automated system.
Once you’re up and running, the robo-adviser provides you with updates on your investment performance. This approach is convenient and relatively cheap – fees start at around 0.3% p.a., based on a $10,000 placement. They’re also fast – you could have a live portfolio within a matter of hours.
But because the process is automated and uses data provided by the customer, robo-advisers do not make intuitive recommendations. Depending on the provider you choose, there may also be limited choice in terms of the options on offer and the asset classes you can access.
If you have a larger amount to invest, for example a six-figure inheritance or windfall, you could pay for the services of a financial adviser.
But you still need to decide what kind of advice you need and the goals you’re working towards. For example, are you investing with a particular event in mind, such as retirement?
You also need to decide your appetite for risk, how long you want to tie up your money for, and whether you need advice on different types of investment such as ones run according to ethical or environmental principles.
When you meet with an adviser, you should:
Note: the investments listed above are intended as factual information and do not amount to recommendations of any kind.

There are a range of platforms that you can use these days that don’t require direct contact with a broker. These are technically forms of brokerage, as they are run by brokers, but many people prefer online platforms because they are fast and easy. You can opt for platforms that offer trading on both the ASX as well as some international markets, such as IG Trading, CMC Markets Invest, eToro or Tiger Brokers. Do your research on trading minimums, fees and other terms and conditions.
If you want to cut out the share platform or broker altogether, then there are lots of ways to buy shares via other methods. You can invest via your super fund, which is likely to have at least some exposure to shares, or you can invest via a managed fund. You may also buy shares through taking part in an Initial Public Offering, in which companies list on the stock exchange.
Buying shares online is easy these days, and many traders prefer it to going directly to a broker in person. It’s helpful to think of these platforms are basically brokerage services without the direct human contact. Some investors prefer to stick with one platform that trades across a range of markets (US, UK, ASX etc), while others will have multiple share trading platform accounts dedicated to their various investment streams, such as ETFs, tech stocks, ASX, and so on.  You can choose a dedicated share brokerage platform or use the trading app that your bank provides. Be aware, though, that this may not be the cheapest option and you need to do some research into the best trading platform for you. Pay attention to the platform interface and user experience, the fees (brokerage and any additional fees), customer support, level of complexity (is it aimed at more experienced traders?) and access to markets.
To be clear: it’s not always a great idea to buy stocks when they are low. Only you (or your broker) can help you determine whether a low stock is worth pouncing on. This strategy is called ‘buying the dip’ and involves traders buying up stock when a company’s value is downgraded or it receives bad press that lowers its value for a certain period. Do your homework to make sure the downgrading does not reflect a new reality for the company you’re investing in, but is rather a blip on the radar in an otherwise strong performance. This is ultimately your call to make, but be aware that buying the dip can backfire and you may lose your money.
If you’re a new investor, then it makes sense to play it safe. The Government’s Moneysmart site recommends sticking with the established performers, known as ‘blue chip’ companies. These are listed on the the S&P/ASX 50.
The minimum amount for any ASX trade begins at $500, but if you’re young and want to get started with less than that, there is a range of micro investing sites, or apps, that will accept a lot less, some as little as $5.
Associate Editor at Forbes Advisor UK, Andrew Michael is a multiple award-winning financial journalist and editor with a special interest in investment and the stock market. His work has appeared in numerous titles including the Financial Times, The Times, the Mail on Sunday and Shares magazine. Find him on Twitter @moneyandmedia.
Johanna Leggatt is the Lead Editor for Forbes Advisor, Australia. She has more than 20 years' experience as a print and digital journalist, including with Australian Associated Press (AAP) and The Sun-Herald in Sydney. She is a former digital sub-editor on The Guardian and The Telegraph in the UK, and lives in Melbourne.

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