Ever thought of investing in the stock market online?
Well, you aren’t alone. In fact, many people invest in the stock market online and the best part… It is really easy once you get the hang of it. But what does it take to invest in the stock market and how can you do everything online?
Rather than the old days of calling your broker, hoping they give you a good stock to invest in, and sending a cheque through, all you have to do is hit the button from your side and you will own the stocks you want. You can invest in shares online using a broker that allows you to do so. There’s brokers like Commsec, who allow you to own the shares without leverage, or there’s brokers like Pepperstone, that allow you to use leverage and trade Share CFD’s. Once you have an account set up and funded, you can simply place your orders from the comfort of your own home.
How to invest in stocks and shares
Its one thing to set up with a broker and have an account, but the biggest concern you are probably facing is what stock to choose. If that is the case, read on.
Learning how to invest in stocks and shares can be filled with fear, or it could be an incredible journey. Let’s face it, your first moves in life (for anything you do) often have errors and mistakes that you learn from. Investing in stocks and shares will probably be no different. Start small, and use what you know to make a reasonable decision. Let’s face it, no one really knows what will happen in the future, so try sticking with a blue chip stock (in the top 100 or 200 of the ASX or NASDAQ), that will likely be around in 100 years. Then, filter these stocks by price as you don’t want to pay too much and buy in at the highest point that company ever reaches.
Below is a simple guide to stock selection, ideally you will practice, invest in small amounts until you feel confident in your decisions. Your first investment probably won’t be your best one and that ok. It’s about getting to a level where you understand the market a little more and what makes the most impact in your selections.
Simple guide to Stock Selection
Filter stocks out of the top 200 of your local stock exchange (such as the ASX or Nasdaq).
Filter stocks that have decreased in price from their high’s this year.
Research the stocks that show up in the filter. You can do this by finding their annual report and see if they are making profit and a range of other factors that effect share prices.
This is a simple way to identify stocks that will hopefully hang around over time and you aren’t buying them at their highest price ever.
A little more insight into picking stocks to invest in
There’s plenty of ways you can analyse a stock. Try not to over complicate things as you will slowly grow your knowledge. One of the biggest factors in building wealth through investing is time in the market, thanks to compounding interest. So the longer you let fear hold you back, the harder it gets to start your learning process. Here are the top information points of a stock to look for and research before buying one.
Net profit – Is the company making a profit?
Strong Balance Sheet – Can the company stay in business long term and pay all its bills? Will it need to raise more capital to stay in operation? (this reduces your stake in the company if you own stocks)
Directors – Are the directors doing a good job, and what sort of pay are they taking in comparison to the business profit. If it’s too high, the directors may not have the interests of the company and shareholders at heart. Looking into the directors history of past companies can be a great indicator of how they might go at this company.
Debts – Can the company service their debts? Is the debt huge or is it reasonable for the amount of profit they are bringing in?
Spending – Is the company spending a fortune on things or are they making sure the business is sustainable?
Price – Where is price right now in comparison to it’s history? Some of the best investments can be made when a good company is trading at a very low price. This is particularly true when it reaches a low that it previously bounced up from.
Dividends – Dividends can be a great source of income once you start building a good position size. Consistent and growing dividends are a good benefit of owning a stock. Beware of massive dividends as they often mean something is wrong with the company and the stock price may fall heavily later on.
Reliability – How reliable are the reports? While the regulations are intense in many countries, some foreign based stocks will not report as they should and figures can be very misleading. Stocks that look incredible often continuously decline, so it is important to know where the companies are based and what their laws are to increase the financial report’s reliability.
Industry – What is the index price of the industry overall? As an example, Telstra (TLS.asx) is part of telecommunications and it was down over 30%, and Telstra was also low in price. The industry pricing can help to determine the cycle of investment for the industry as a whole.
Stock Index Market – The Stock Index Market is another good place to check, to see where the economy is sitting overall. For example, the NASDAQ might be sitting at its highest point ever and that could mean the market will turn the other way shortly. Shares are most valuable to buy when they are low in price, so that there is more upside. Buying at the top of the market can seem tempting so that you don’t miss out, but it can also mean there’s a long way down if you are wrong. Value investors like Warren Buffet like things to be well priced, not overpriced when making an investment.
Business – Understanding the business that the stock operates is important. How do they make their money, are their risks involved in what they do and could something else come along and make that business void. These are all important things to think about. Consider Taxi driver income before Uber came in. Uber has changed the landscape of how we travel and charge much less. They made it much easier and more reliable to get private transport and as a result they took a large market share. Investors in Taxi licenses took a serious hit financially on that one.
How to invest in stocks in Australia?
Australian stocks are a great place to start investing. They are heavily regulated and provide plenty of opportunity for profit. Australian shares provide some of the best, most reliable dividend stocks on the global market which is an incredible bonus.
To invest in stocks in Australia, you need a brokerage account and some money. Then all you need to do is choose what stocks you want to buy using our guide. Investing in stocks in Australia is easy and there’s plenty of great resources out there to do your research, listed below:
www.asx.com.au – This is the official stock exchange website for Australian Shares. You can find a range of information including news and reporting updates for each company.
Yahoo Finance – This is a quick and easy way to find information on price as well as key information on the financials of listed ASX shares.
Stock Screener – This Stock Screener allows you to select your exchange (in this case the Australian Share Market) and filter based on criteria you are interested in. You can filter Austrailan stocks based on price, change this year, dividends and more.
The Company Website – The company website of the stock you are researching is a great tool to see what the company is about and also to access historic financial reports if you want to see how they were performing years ago for the price of the stock at the time. Google search the company name and you should see it on the first page.
How to invest in stocks dividend?
If you are chasing dividends, you will be able to filter stocks that pay dividends via the stock screener link above. Dividends are often paid periodically and it’s important to see if they are growing over time. Many stocks average around a 5% dividend per annum but of course that varies depending on the stock. Dividends generally range from 1% to 10% and it is rare to see a good stock that is paying more than that. One important thing to note however, is that dividend percentage return is based on it’s price right now. So if you paid less for the stock years ago, (or the stock rises by double) then your real dividend return might be much higher because you paid less for the stock than it’s worth right now.
So how do you invest in stocks that pay a dividend? It’s the same process as in this article, however you just need to ensure the stock you buy pays dividends.
Easy right?
Hello,
Is there anything similar on ASIC?
Mutual Fund Analyser: https://www.investor.gov/financial-tools-calculators/financial-tools/mutual-fund-analyzer
The Financial Industry Regulatory Authority (FINRA) Fund Analyser offers information and analysis on over 18,000 mutual funds, exchange traded funds (ETFs) and exchange traded notes (ETNs). This tool estimates the value of the funds and impact of fees and expenses on your investment and also allows you the ability to look up applicable fees and available discounts for funds.
Help on finding and choosing an Australian based Stock Broker is also appreciated.
Kind Regards,
Mike.