Equities - Shares

Trading or investing in Shares – Equities – Stocks

Australia is believed to have the world’s highest, per-capita, shares ownership. When compared to other traditional forms of investment, shares have, over the long-term, shown to provide the best overall performance (surpassing property, cash and fixed interest).

Furthermore; investing in shares requires a relatively low outlay (when compared to property, for example) and most shares are very liquid- meaning that you can quickly and easily dispose of a portion of your portfolio if you wanted to either lock in some profit or just access some cash.

Shares are highly favoured amongst long-term investors. Particularly those who wish to take a passive investment approach and not overly concern themselves with short to medium-term market developments and price fluctuations.

For many years, buying and selling shares on a short to medium-term basis (trading) was also very popular. However, due to technological advancements, lower trading costs and leverage- most traders now prefer to use derivatives (particularly CFDs) to attempt to profit from share-price movements.

Key considerations:

  • Outright asset purchase (no leverage) means no financing costs
  • Receipt of share dividend payments
  • Preferred instrument of long term investors with a bullish (positive) view of the market
  • Relatively high brokerage costs
  • Relatively safe (no leverage), with lower profit potential
  • Short-selling (profiting from a falling market) of physical shares is restricted

Buying shares/equities/security/stocks (different terms for the same thing), as the name implies, is simply buying a share of a particular company.

As such- you are entitled to receive a share in that company’s earning (dividends) which is usually paid twice per year. Once as a smaller interim dividend and again as a final year-end dividend.

All equity derivatives are based (derived) upon the price-movements of the underlying shares, although some follow their prices directly (such as CFDs), while other are their own markets and trade at their own prices – as determined by the buyers and sellers of the actual derivatives themselves – this being case with futures and options.