Helps to start by a brief definition right? Shares/equities/stocks/securities give you part ownership of a company that is listed on the stock exchange. The more shares you own, the greater your portion of ownership in that company.
Shares are bought through a stockbroker. In NZ, here is a list of accredited stockbrokers https://www.nzx.com/investing/find-a-participant.
The minimum you can invest for any share depends on its tick size. You don’t really need to know this. Approximately $300 will suffice to get you going on a company of your choice. So if the company shares are trading at say $10 per share, you only get 30 of them, if you’re investing $300.
For owning that part of the company, you are entitled to the company’s dividends – a payment made by the company out of profits to all investors who hold pieces of that company. You are also entitled to capital gains, that is, as the company grows, and gets more opportunities to expand, the portion you invested in the company also grows. For example, if you bought A2Milk last year at $4, your investment would have tripled as the share is currently trading at $12.
But how do you know which shares to buy? You’ve got to love reading company news. And to know which signs to look out for. Such as : Is the company doing well? Its management? The strategy they are choosing. Their partnerships? Annual reports? All that and more! Which is why there are financial analysts to do the donkey work for you, finding which stocks are great buys and which are sell ones. And you pay a fee for their services.
(Just a tip here, NZ cab drivers know a lot about shares to buy. I think airport waits give them ample time to look for company news. Ask them casually which shares they are buying or selling next time you hitch a ride. Then do your own research obviously to see if they are right. It was actually one of them who introduced me to bitcoin long before it was famous. And yet another who told me about trouble at a certain company, before the news was announced. Eavesdropping on their executive passengers I bet! )
However, I should hasten to add that investing also involves risk. Because share prices are always going up and down in response to a whole lot of factors which we cannot go into here.
For example, events such as elections (Zimboz hello) can have either an up or down swing on shares. So be aware that with investment comes risk. And volatility. By and large though, investing in stocks over a long period of time, if you choose the right shares, should fetch you a reasonable gain.
There are other ways of investing if you don’t like following news or finding an analyst to help you choose the right shares to buy. Today I’ll just pick Smartshares. Maybe later, we can talk about managed funds and bonds.
You can invest in Exchange Traded Funds. These are called Smartshares in NZ. They are basically baskets of carefully selected shares that you can buy and sell anytime as one share. So instead of choosing which shares to buy, you can just go for a basket of well performing shares, which you buy as one. In NZ you have the choice of buying the 10, 50, 100 top companies as a basket. You can even buy top 500 companies listed in the US, top 200 listed in Australia etc as one share through these Smartshares. See their products here: https://smartshares.co.nz/invest-now#participants.
How much? You can get these with about $500. There is a $30 admin fee. You can then continue to grow your investment with as little as $50 per month. The benefits you ask?
- Diversification – that it, you have a mixture of shares in your basket. Some will perform well when others are not doing as great. That way your basket is profitable most of the time.
- Lower fees as compared to other managed funds.
- Global portfolio – you build your portfolio to include well performing global investments
So without boring you to death, I will end here. The points I make are:
- with as little as $300 you can buy shares in NZ. I have included the links of brokers for you to check out. Maybe you bank with one of them, and that makes it even easier to start investing. You can do it online as well, once your provider has set up a management account – where you buy and sell your shares from.
- If you don’t like having to follow the news, go for Smartshares. Remember diversification, global appeal, lower fees. $500 and $50 monthly thereafter and you’re good to go. You can sell them anytime as you wish.
Last year alone, the NZX top 50 companies grew by about 23%. That’s some serious return on investment right there.
Before I go, I’ll share a short personal investment story. I asked my friends, who had offered to throw me a baby shower to encourage my other friends to bring monetary, instead of “in kind” presents. It happened. I invested the cash and have been adding $50 monthly. She’s turning two in a week’s time, and she already has a nest egg from her wonderful aunties and uncles. Now I know some people may feel some type of way about this. But the point being: find like-minded people who will find no fault in and support your efforts in trying to build wealth for your family.
Till next time, happy investing.