Investing in shares

Key points

  • Shares represent a fraction of a company and are traded in a market place known as a stock exchange.
  • Shares are just one option available to investors.
  • Having a share portfolio is one way to balance risk.
  • News, announcements and natural disasters can influence share investment decisions.
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Activity on the stock market trade floor

Shares and the stock exchange
 

A share is one of equal fractional parts of the capital stock of a limited company. Generally shares are classed as ordinary or preference. If a company makes a profit shareholders may receive a payment, called a dividend, proportionate to their number of shares.

A stock exchange or share market is a market place that trades in stocks and shares.

The Australian Securities Exchange (ASX) is one of the world's top 10 listed exchange groups.

The Australian economy is among the 20 largest economies in the world and ranks as the fourth largest economy in the Asia-Pacific.


Investment options
 

Shares are just one potential option for investors looking to increase their wealth. Other investment options include:

  • property

  • superannuation

  • managed funds

Different investments offer different levels of risk.


Share portfolio
 

A share portfolio is a collection of different investments. Share portfolios can be put together so that they are balanced or diversified, meaning high-risk, high-return and short-term investments are offset with safer, longer-term investments to help guarantee a return on investment.


Factors influencing share investment decisions
 

Announcements by a company's competitors, changes in law and taxation, advancements in technology, company leadership disputes, natural disasters and conflict are just some of the factors that have the potential to affect a company's performance.

Investors use this information to speculate when they invest and trade shares in the attempt to make a profit.
 



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Doing it by the book

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Here are some important points to remember to ensure your child is following good practice for a lifetime of learning.