THIRD EDITION STARTING OUT IN SHARES THE WAY STARTING OUT IN SHARES THE ASX WAY STARTING OUT IN SHARES THE ASX WAY THIRD EDITION This edition first published in 2015 by Wrightbooks, an imprint of John Wiley & Sons Australia, Ltd 42 McDougall St, Milton Qld 4064 Office also in Melbourne Typeset in 11.3/14pt ITC Berkeley Oldstyle Std by Aptara, India © ASX Operations Pty Ltd 2015 The moral rights of the author have been asserted National Library of Australia Cataloguing-in-Publication data: Creator: Australian Securities Exchange, author Title: Starting Out in Shares the ASX Way / Australian Securities Exchange 3rd edition Edition: ISBN: 9780730315667 (pbk.) 9780730315674 (ebook) Includes index Notes: Subjects: Australian Securities Exchange Stocks — Australia Investments — Australia 332.63220994 Dewey Number: All rights reserved Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission All inquiries should be made to the publisher at the address above Cover design by Wiley Cover images by ASX Limited Used with permission Printed in Singapore by C.O.S Printers Pte Ltd 10 Disclaimer The material in this publication is of the nature of general comment only, and does not represent professional advice It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers Readers should obtain professional advice where appropriate, before making any such decision To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication Contents Introductionvii Part I The basics of the sharemarket Getting ready to invest What is a share and what is the sharemarket? 3 The main investment areas: cash, fixed interest, property, shares 13 The benefits and risks of shares 33 How to buy and sell shares 41 Your first share trade 55 Buying shares in a float 63 The nuts and bolts of the sharemarket Following the S&P/ASX indices 69 83 10 Managed funds 95 11 Gearing and margin lending 109 Part II Making informed decisions — strategies and approaches to investing 12 Why you need a strategy 117 119 13 Fundamental analysis 129 14 Technical analysis 145 15 Examples of investment strategies 167 Glossary179 Index187 v Introduction These days more people than ever before have an interest in the sharemarket It is easier and cheaper to buy and sell shares, there is more information about the market and most of us have a stake in the performance of the market through our superannuation funds So, if you are reading this introduction, you too have probably decided that you want to know more about investing But where to start? Starting Out in Shares the ASX Way is a good place to start because for more than 30 years the Australian Securities Exchange (ASX) has been educating people starting out in the world of investing You may not know: what a share is how the sharemarket operates how to buy and sell what you need to have ready before you get in touch with a stockbroker We will walk you through all this and a lot more as well People often get a bit overwhelmed about investing in the sharemarket because, for many, it is unfamiliar territory with unfamiliar language We will try to avoid jargon as much as possible, but we will explain terms to you that you are likely to encounter when you step into the world of investing vii Starting Out in Shares the ASX Way Part I of the book intends to get you thinking about why you want to invest, what your objectives are and the various choices you have We go into detail about how to buy and sell shares and how the market operates In Part II we get into the nitty-gritty of having a balanced portfolio and how to set up an investment strategy ∗ ∗ ∗ By the end of the book we hope you have a good overview of the basics of investing and can confidently take your next steps in your investment journey viii ... you step into the world of investing vii Starting Out in Shares the ASX Way Part I of the book intends to get you thinking about why you want to invest, what your objectives are and the various... STARTING OUT IN SHARES THE ASX WAY STARTING OUT IN SHARES THE ASX WAY THIRD EDITION This edition first published in 2015 by Wrightbooks, an imprint of John Wiley & Sons... chance of losing it However, Starting Out in Shares the ASX Way there is little you can to protect its buying power from the debilitating effect of inflation Investing, on the other hand, makes