5 Tips Before Investing In Shares

Written By Alla Levin
January 19, 2021

5 Tips Before Investing In Shares

Shares sometimes referred to as equities, are small parts of a company. When you own a company, you are entitled to a small part of the profits. There are several options when it comes to shares. For instance, you might be the sole owner or a joint owner with other individuals (funds). Having sole ownership of the share means you can also vote on certain business decisions. Before investing in shares, there are several considerations that you should make.

Spread the risk

Share prices can change depending on various factors, such as how the business is performing and on the economy. When share prices reduce, so makes your investment. Obtaining shares in only one business can be high risk. If the business comes upon hard times, you could end up losing out. When you buy shares in a few different companies, you’ll spread and reduce the risk. All of the most experienced investors understand the concept of spreading the risk, for example.

Wayne Blazejczyk ASIC is a shareholder of multiple companies across Australia.

Avoid smaller companiescreating a balanced portfolio

When you’re starting, you’ll want to reduce risk as much as you can. As a newbie investor, you can reduce risk by avoiding smaller companies, sometimes referred to as penny shares. It can sometimes be more difficult to find buyers for these, meaning you could end up losing money. Before investing in small companies, it’s important to assess the risks involved. You’ll want solid predictions that indicate the potential growth and success of that company.

Choosing the right companies

To choose the right shares to buy, you’ve got to identify the right companies, trading at the best prices. It would help if you looked for companies with solid fundamentals and the potential for long-term profits. Choose businesses that have a competitive advantage, low debt, and great ROI. It’s important to conduct thorough research before you choose which companies to buy into.

A broad range of industries creating a balanced portfolio

As briefly mentioned above, diversification is the key to creating a balanced portfolio; when you choose shares, buy across a broad range of industries. Different industries and markets will experience success at different times. Diversification is another great way to lessen risks.

Investment manager

Once you’ve started to build up your portfolio, it can help work with an investment manager. These professionals work on behalf of a client to make investments in alignment with their objectives. Investment managers handle the day to day activities, from purchase and sales to portfolio tracking, performance analysis, and transaction settlement. From the best financial advice to winning investment strategies, an investment manager can help you create a great portfolio.

With the right tips and support, you’ll create a solid investment portfolio, helping you to boost profits and reduce risk. Other investment options for beginners include Robo advisors, investment apps, or real estate options.

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