Investing in Shares

Submitted by Marco Palmero on 25 March, 2008 - 20:26

Investing in Shares

Want to take a break from share trading? Or want to extend your trading profits into a safer diversified sharemarket investment? Well here's how. The process to investing in shares is similar to trading but remember the end goals and the day to day actions are totally opposite to trading. Investing is for the long term. And in the long term the investor would be riding out the peaks and troughs: the volatility of daily, weekly and monthly market fluctuations. Being an investor means that you’ve got to step back and look at the bigger picture. That’s both technical and fundamental – but more on the latter side of things.

Though Investors Eyes: The Bigger Picture of your Investment in Shares

For genuine investors you'll just be looking at fundamentals.

You’ve got to step back and look at the bigger picture. Look at Warren Buffet. Yeah, everyone looks at him. He’s basically the god of stockmarket investing. He only buys REAL investments and puts money on the boring companies: the necessities. The bigger picture also means looking at the economic fundamentals and the long term charts. Technical charting can work in investing. If some companies shares have been in a long term up trend or downtrend for a few years, what’s the chance its suddenly going to reverse? (But that idea is for traders only: normal investors won’t think like that, and I bet they won’t put a stop loss on a trade like that either)

For genuine investors you'll just be looking at fundamentals. Like the interest rates, employment levels, trends and so on. The underlying trend at the moment is the rising Australian interest rates. Over the past few years it has been rising gradually. With rising interest rates people would theorise that since rates are higher, consumers would have less to spend. Also the rate rise would affect the housing market and the employment market. Think about which companies would continue to grow if there is an economic slowdown. It might be wise to look at the necessities like Buffet: food and energy like petrol and electricity.

Investing in Education is Worthwhile

Be careful who you ask for advice. Consider their share investment history, where they’re coming from: consider their bias. I would suggest by starting from books. A must read for those venturing into investing is the influential and best book on investments: “The Intelligent Investor” which was originally published in 1934 by Ben Graham. Be wary of the numerous free or paid courses in the market. There are also plenty of great resources (your reading one of them) to learn from the internet. Another great website is ASX.com.au which provides a wealth of information.

Shares Investment Plan

As with anything, your investing must have a plan. What is your investment strategy and plan? If you're totally clueless you can go and hunt for a financial planner for some advice. The most important part of planning is knowing why you are entering the sharemarket to invest. Then set performance goals for one, three, five and ten years.

Shares Investing Means Diversify

As a trader you were probably groomed to focus, focus and FOCUS. Well investing entails diversifying. You need to diversify, diversify and DIVERSIFY. It’s all about spreading the risk for safer returns. To diversify in the sharemarket you should make sure you have a range of stocks in your portfolio in different sectors and in blue chips.