If you are considering investing in the share market for the first time I am sure you have many questions, there is definately a lot to learn. This shouldn’t stop you getting started though as long as you take some time to learn what you can and get familiar with some of the key aspects, get some advice from experienced traders through books, dvd’s or courses and don’t invest all your available money in one stock or market. Here are a list of some frequently asked questions that may help…
Do you need to use a broker?
Yes you do, stockbrokers are the registered professionals who are licensed to buy and sell shares on the stock exchange. As professionals they are regulated both by the Australian Stock Exchange and the Australian Securities and Investments Commission. Brokers charge a fee for the service, the amount of which varies between brokers and also depends on the size and frequency of transactions. There are two types of brokers:-
- Full Service Brokers – They usually provide clients with advice, research and a range of other services in exchange for the brokerage fee.
- Discount Brokers – These brokers often have a flat fee for buying and selling shares, they do not offer advice or research.
If you’re not too sure what you’re doing a full service broker could well be worth the extra fees.
What is the difference between a ‘bear’ market and a ‘bull’ market?
A bull market is an overall upward movement in the value of stocks (an up-trend), it is an indication that prices and interest in the market is strong.
A bear market is a downward movement ( a downward-trend) where interest and prices in the market are falling.
The overall state of the Australian Stock Market since the the late 1800’s has been an up-trend even so the share market is by nature volatile prices rise and fall everyday. However it does indicate the liklihood of growth if you were to hold good quality (blue chip) shares over the long term.
Why does the sharemarket rise and fall?
The share market has it’s foundations in the economy but it is a market run on the fear and greed of investors. When the overall economy or an individual company is looking strong investor activity increases and the market goes up (bull) but if something should happen such as changes in interst rates or a business shake up that affects investor confidence the market will fall (bear). If you examine the economic cycle of the country you are investing in and compare it to historical data of the share market you may see a pattern emerge.
When is the best time to buy or sell?
This has to be your decision, it is your money invested and it will benefit you to have some knowledge in the particular strategy you are using, however it is also wise to listen to professional advice but make the final decision your own based on the facts you have gathered. In saying that, it is always a good idea to buy when the market is in a downward-trend and sell in an up-trend, however timing is critical and not easy to pick. If you are a long term investor then this is obviously not such an issue however whatever type of investment stategy you use it’s good practice to have a plan in place, a margin that you use to mark your entry and exit points.
Is listening to the media a good idea when buying or selling shares?
Definately not. Bad news sells and the media has a great time using terms such as ‘crash’, ‘plunge’ and ‘plummet’ when referring to the share market. Do your own research, talk to your broker and don’t get carried away with the marketing of the news.
Power Thought
I am persistent in all my endeavours.
Remind yourself of this often.
Have a great day
Teresa and the Team at
