Create more wealth over the long term
Why invest in Australian shares? The reason is simple. Over the long term, Australian shares have outperformed almost every other asset class. And they can offer even better returns after tax.
Research from the ASX shows that over the 20 years to December 2011, Australian shares delivered better results than any other asset class for investors on both the lowest and highest marginal tax rates, returning 9% pa and 7% pa respectively. And while residential property took first place over the last 10 years, Australian shares have bounced back from the global financial crisis to produce the second highest after-tax returns during that period.
But the potential for outstanding returns is not the only reason to invest in shares. Here are some more reasons why 40% of Australians invest directly in the sharemarket.
Five reasons to consider investing in shares
- Depending on the shares you choose, you can potentially earn dividend income, capital gains, or a combination of both. That can make it possible to create an ongoing income stream while protecting your capital and the income it produces against the corrosive effects of inflation.
- Depending on your situation, you could do even better after tax. The dividends paid by many Australian companies come with franking credits, which are like a credit for tax the company has already paid. But remember, everyone’s situation different, and Australia’s tax laws are complex, so it’s important to get tax advice before you invest.
- You can start trading with an investment of as little as $500. Unlike property, where you generally need a large deposit to get started, you can take a stake in a large organisation —a bank, a mine or a telephone network — with very little capital.
- Transaction costs are also generally very manageable, especially compared with investments like property. For example, when you invest through InvestSMART and CMC Markets Stockbroking, you’ll pay as little as $19.95 a trade.
- When you’re ready to sell, you can transact in minutes and access your money fast, with settlement usually completed in three days.
Share trading essentials
- Start by thinking about your investment goals. Are you looking to build wealth for the long-term? Or do you want to generate a reliable income straight away? Your investment time frame and preference for capital growth or income will go a long way towards deciding which shares are right for your portfolio.
- Next, choose shares that match your goals. Income investors are likely to be attracted by less volatile stocks with a high dividend yield, while growth-oriented investors might seek companies in fast-growing sectors with strong return on equity. The company financial research is a great place to start.
- Be ready to diversify. Remember, diversification is the single best way to reduce investment risk and deliver more stable returns over time.
- If in doubt, seek advice from a qualified financial adviser.
Trading shares with InvestSMART
When you’re ready to trade, all you have to do is:
- Download, print and send us your trading account application form, plus a certified copy of your identification documents.
- To trade online with us, you’ll need to be CHESS-sponsored by CMC Markets Stockbroking and open a cash account. Download, print, and send us your Cash Account Application form.
- As soon as your account is open we’ll send you a confirmation email and you can start trading. It’s that easy!