How to decide what to buy?
When it comes to deciding what shares to buy, the most important thing to consider is your investment goals, in particular, the performance goals you set for the share investments portion of your portfolio.
For example, you might be aiming to achieve an average after-tax dividend yield of 4% p.a. and capital growth of 8% p.a. over the next 10 years. In that case, you could buy some shares that provide reliable, tax-effective dividends and the expectation of solid year-on-year growth.
Alongside long term investing, there are share trading opportunities that offer the chance to grow your investment capital more quickly. Active or daily trading carries with it certain risks that need to be considered carefully. With this in mind, looking at the range of categories that shares fall into can be a useful place to start.
(Long term investors aim to capture an upward trend in market value. Short term investors try to capture value from the volatility in the share market.)
Income shares - Pay larger dividends, compared to other types of shares, that can be used to generate income without selling the shares, but the share price generally does not rise very quickly.
Blue chip shares - Issued by companies with long histories of growth and stability. Blue chip shares usually pay regular dividends and generally maintain a fairly steady price trend.
Growth shares - Issued by entrepreneurial companies experiencing a faster rate of growth than their general industries. These shares normally pay little or no dividends because the company needs most or all of its earnings to finance expansion.
Cyclical shares - Issued by companies that are affected by general economic trends. The share prices tend to fall during periods of economic recession and rise during economic booms. For example, mining, heavy machinery, and home building companies.
Defensive shares - The opposite of cyclical shares. Companies producing staples such as food, beverages, pharmaceuticals and insurance issue defensive shares. They typically maintain their value during economic downturns.
http://www.asx.com.au/courses/shares/course_01/index.html?shares_course_01
When it comes to deciding what shares to buy, the most important thing to consider is your investment goals, in particular, the performance goals you set for the share investments portion of your portfolio.
For example, you might be aiming to achieve an average after-tax dividend yield of 4% p.a. and capital growth of 8% p.a. over the next 10 years. In that case, you could buy some shares that provide reliable, tax-effective dividends and the expectation of solid year-on-year growth.
Alongside long term investing, there are share trading opportunities that offer the chance to grow your investment capital more quickly. Active or daily trading carries with it certain risks that need to be considered carefully. With this in mind, looking at the range of categories that shares fall into can be a useful place to start.
(Long term investors aim to capture an upward trend in market value. Short term investors try to capture value from the volatility in the share market.)
Income shares - Pay larger dividends, compared to other types of shares, that can be used to generate income without selling the shares, but the share price generally does not rise very quickly.
Blue chip shares - Issued by companies with long histories of growth and stability. Blue chip shares usually pay regular dividends and generally maintain a fairly steady price trend.
Growth shares - Issued by entrepreneurial companies experiencing a faster rate of growth than their general industries. These shares normally pay little or no dividends because the company needs most or all of its earnings to finance expansion.
Cyclical shares - Issued by companies that are affected by general economic trends. The share prices tend to fall during periods of economic recession and rise during economic booms. For example, mining, heavy machinery, and home building companies.
Defensive shares - The opposite of cyclical shares. Companies producing staples such as food, beverages, pharmaceuticals and insurance issue defensive shares. They typically maintain their value during economic downturns.
http://www.asx.com.au/courses/shares/course_01/index.html?shares_course_01
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