Paul's Insights: How to buy shares tops online enquires
Recent data from Google Trends shows that ‘how to buy shares’ is a hot topic. This isn’t isolated to Australia. Investors in the US are also jumping online to find out how to get into equities.1
Why is this happening?
When share prices hit a low point, the market offers plenty of buying opportunities. It’s like stocking up on purchases at sale time.
We saw significant losses on the Aussie sharemarket in March. But there were also periods of big gains – as much as 12% over some days towards the end of the month. This potential for sharp rises plus the value we’re seeing in the market right now, is likely to be driving the uptick in investor interest.
I can’t guarantee the market won’t fall further. No one can. We are dealing with an unprecedented situation, and asset markets remain volatile.
That’s why diversification is so important right now. Not every industry is feeling the pinch of Covid-19 in the same way. We’ve seen how demand for staples like groceries has skyrocketed. With more of us working from home, we are relying more on the internet – and that’s good for the telcos. On the flipside, travel bans and social distancing have taken a heavy toll on the tourism, travel and hospitality sectors.
This is where exchange traded funds (ETFs) are such a handy option for investors. They offer an easy and low cost way to spread your money across sectors, industries and geographic regions.
There are even ETFs that focus on defensive assets like government bonds. So you can pull together a diverse portfolio for a lot less money than if you invested on a share-by-share basis.
As ETFs aim to replicate particular market indices, the costs are very low. That way, more of any returns go straight to an investor’s pocket.
An actively managed approach, where either you or a fund manager try to second-guess the market by picking the shares you believe will do well, creates higher costs. It demands more research and often a higher level of brokerage. Despite the extra cost, there are no guarantees of success. Consistently outperforming the market is extremely difficult.
In my books, ETFs offers an affordable way to get into the market at a time when investors can get plenty of bang for their buck. Along with diversity, they also let you keep investment fees to a bare minimum.
1 https://www.ccn.com/google-trends-data-rings-a-warning-the-stock-market-crash-isnt-over/
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Frequently Asked Questions about this Article…
Recent data from Google Trends indicates a surge in interest for 'how to buy shares' as investors look to capitalize on market opportunities when share prices are low. This trend is not limited to Australia but is also seen in the US.
The market is attractive due to significant losses followed by periods of big gains, offering potential for sharp rises. This volatility presents buying opportunities similar to stocking up during sales.
Diversification is crucial due to the unprecedented and volatile market situation. Different industries are affected differently by Covid-19, making it important to spread investments across various sectors.
ETFs provide an easy and low-cost way to diversify investments across sectors, industries, and regions. They replicate market indices, keeping costs low and allowing more returns to go directly to the investor.
ETFs are generally more affordable than actively managed approaches, which involve higher costs due to research and brokerage fees. Actively managing investments does not guarantee success and consistently outperforming the market is challenging.
Yes, ETFs can help build a diverse portfolio by allowing investments in various sectors and defensive assets like government bonds, all at a lower cost than buying individual shares.
Sectors like groceries and telecommunications are benefiting due to increased demand for staples and internet services as more people work from home. Conversely, tourism, travel, and hospitality are facing challenges.
Paul Clitheroe is the Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board, and chief commentator for Money Magazine, providing insights and guidance on investment strategies.