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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Your no-nonsense guide to trading shares and succeeding on the share market Starting your share investing journey is easier than you might think. You don't need a heap of capital, just a few basic rules and strategies. In Starting With Shares you'll take your first steps toward building a profitable, sustainable portfolio. Written for beginners and packed with informative illustrations, straightforward tips and proven techniques, this essential guide will help you to become an effective and financially successful share investor. From Roger Kinsky, Australia's foremost share-investing educator and the best-selling author of Teach Yourself About Shares and Online Investing on the Australian Sharemarket, this guidebook will show you the simplest ways to make money from shares and protect your hard-earned dollars in the process! Unlike most sharemarket guides, this book explains in simple language all the stock market terms and definitions you need to know, with uncomplicated tips and straightforward strategies for earning returns. Learn how to get started and get ahead, buy and sell shares, build a portfolio, manage risk, deal with dividends and choose the best shares. Intimidated by jargon and unsure about where to start? Starting With Shares is a unique book that is shorter, simpler and more visual than other trading and investing resources, making it an excellent choice for you if you have little or no prior sharemarket knowledge. * Learn to buy and sell shares from the best-selling author of Teach Yourself About Shares * Start investing right away, even if you are an absolute novice with no knowledge of the markets * Appreciate the simple, accessible explanations and informative illustrations of share investing basics * Discover uncomplicated strategies that you can use for long-term investing success In Starting With Shares, you'll not only learn how to start your share investing journey, but you'll discover how to maximise your profitability into the future.
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Seitenzahl: 309
Veröffentlichungsjahr: 2021
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Table of Contents
Cover
Title Page
Copyright
Introduction
Chapter 1: What you need to know
Meet Michelle
Trust yourself
Knowledge level you'll need
Markets are unpredictable
Risk and reward are related
Shareholders are owners of a business
Chapter 2: Getting into shares
What are shares?
Making shares available for trading
Becoming a shareholder
Shares you can't buy
Why share prices change
Chapter 3: Profiting from shares
Making profit from capital gains
Profiting from dividend income
Comparing capital gains and dividends
Chapter 4: Is share investing gambling?
Similarities between share investing and gambling
Differences between share investing and gambling
Chapter 5: Benefits and pitfalls of share investing
Are shares a good investment?
Investing rules
Chapter 6: Sectors and shares for your portfolio
Understanding two key terms
Considering sectors
Share selection using a market index
Sectors and shares you may want to consider
Chapter 7: Setting up to trade
Reasons for wanting to trade shares
Deciding between offline and online trading
Finding a broker
Understanding CHESS
Chapter 8: Getting to know your shares
Using fundamental analysis
Obtaining the info you need
Chapter 9: Getting your timing right
Using charting to guide your trading decisions
Identifying trends
Trend trading
Chapter 10: Buying and selling shares
Getting down to the nuts and bolts of trading
Types of order
Market and share price movements
Developing your trading plan
Placing orders
Chapter 11: Managing your shares
Four key activities
Trading frequency
Compiling and maintaining records
Chapter 12: Turbocharging your share investment
The power of compounding
Varied portfolio
Averaging
Momentum
Applying principles (rules) to boost returns
Good money management
Chapter 13: Let's recap
Important points to remember
Profiting from shares
Using fundamental analysis
Charting to time your trades
Trading
Managing psychological factors
Managing your portfolio
Go for it!
Appendix: Details of my portfolio spreadsheet
Index
End User License Agreement
List of Tables
Chapter 3
Table 3.1: Grossing‐up factors for dividends with different franking levels...
Chapter 6
Table 6.1: The main Australian market indices
Table 6.2: Makeup of the XTL, July 2021
Chapter 9
Table 9.1: Suggested combinations of time periods, time intervals, type and purp...
Table 9.2: Sensitivity, smoothing and application for different moving average t...
Chapter 10
Table 10.1: The combination of market and share price movements on buying and se...
Chapter 12
Table 12.1: Compound growth at 3% and 7% pa
Table 12.2: Effect of the DRP on number of shares owned after 10 years
Table 12.3: Total return on shares over the long term.
Table 12.4: Returns after one year from following a buy and hold strategy
Table 12.5: Returns after one year from limited losses and letting profits run....
List of Illustrations
Chapter 1
Figure 1.1: Increasing your possible reward usually means increased risk
Chapter 2
Figure 2.1: Possible price changes in one day's trading
Chapter 3
Figure 3.1: Brokerage is usually the only selling expense for shares
Figure 3.2: Selling shares for less than you paid for them, results in a los...
Figure 3.3: The share price usually falls on the ex‐dividend date
Figure 3.4: The time delay between the ex‐dividend date and the payment date...
Chapter 5
Figure 5.1: Fall and rise of the All Ordinaries index in 2020
Chapter 6
Figure 6.1: Industry sectors divide the market according to business type
Chapter 8
Figure 8.1: Total revenue minus expenses equals profit
Figure 8.2: Choosing a share with a higher or lower PE than the market avera...
Figure 8.3: Uncertainty increases as profit forecasts get further into the f...
Chapter 9
Figure 9.1: An example line chart
Figure 9.2: An example OHLC chart
Figure 9.3: An example candle chart
Figure 9.4: Different price scenarios produce different candles
Figure 9.5: Comparing relative price performance using a percent chart
Figure 9.6: The three basic trends: sidetrend, uptrend and downtrend
Figure 9.7: Combined trends form a longer term uptrend (dashed line)
Figure 9.8: ‘Eye method’ of spotting a trend
Figure 9.9: Spotting trend variations in OHLC or candle charts
Figure 9.10: Difference between short‐ and long‐term moving averages...
Figure 9.11: Using a moving average to identify buy and sell regions
Figure 9.12: Using moving average crossover signals to identify buy and sell...
Chapter 10
Figure 10.1: Spread is the difference between the highest bid and lowest off...
Figure 10.2: Sudden price drops can cause stop loss orders to be ineffective
Figure 10.3: The market is falling but the share price is rising
Figure 10.4: An example intra‐day chart
Chapter 11
Figure 11.1: The optimum level of trading
Chapter 12
Figure 12.1: The power of compound growth
Figure 12.2: Growth of $10 000 investment at different rates of return....
Figure 12.3: Overshoot due to momentum
Figure 12.4: Apparent recovery in a downtrend before it continues
Guide
Cover Page
Table of Contents
Title Page
Copyright
Introduction
Begin Reading
Go for it!
Appendix: Details of my portfolio spreadsheet
Index
Advert Page
End User License Agreement
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Starting with SHARES
A BEGINNER'S GUIDE TO SHAREMARKET SUCCESS
Roger Kinsky
First published in 2022 by John Wiley & Sons Australia, Ltd42 McDougall St, Milton Qld 4064Office also in Melbourne
Typeset in Liberation Serif 11pt/14pt
© John Wiley & Sons Australia, Ltd 2022
The moral rights of the author have been asserted
ISBN: 978‐0‐730‐39516‐4
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 WileyCover Image: © Miloje/Shutterstock
Illustration sketches and concepts by Roger KinskyIllustrations by Delia Sala/Wiley
DisclaimerThe 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.
Introduction
Australians have traditionally been interested in shares as a viable way of investing over the longer term and also making profits in the shorter term. Share ownership is ever growing and a recent study showed that about 6.6 million Australian adults, or 35 per cent of the population, own shares. In the past, share investing was often seen as the domain of males, but more recently there's been a growing trend for women to get involved and nowadays almost half our share investors are women. At the same time, there's been an emerging trend for younger people to get into shares. Investors today are also growing more interested in a wider diversity of shares in different asset classes, including international shares. In short, Australians from all walks of life are becoming more involved with a wider variety of shares.
The growing interest in shares is partly driven by low interest rates, which make holding cash in a bank account or term deposit a really unattractive proposition. At the same time, Australian property is increasingly more expensive and slipping out of the reach of many Australians. Shares are a viable investment alternative because you don't need a lot of money to get going. In fact, you can become a shareholder with as little as $500.
Unfortunately, many would‐be investors don't know a great deal about shares and so lack the confidence to plunge into the sharemarket. If you fall into this category, this book is definitely for you! To make the book as user‐friendly as possible, I try to avoid jargon unless the term is in common usage. In this case, I try to explain it in a straightforward manner that I hope will be readily understandable. I've minimised the complications of share investing by outlining only those strategies that I believe are really important for your success. In addition, I've provided heaps of tips that I hope you'll find useful. These are simply my suggestions, not as an infallible investment guru, but as someone who has learned about shares from my successes — and failures — over 50‐plus years of share investing.
You'll find the book contains many simple illustrations. These are often in a light‐hearted vein and are aimed to help reinforce your understanding of an important point. They may also help you to look at an issue affecting shares in a somewhat new (and hopefully useful) light. All illustrations were re‐drawn from my original sketches by illustrator, Delia Sala.
This book complements my other share investing books, also published by Wiley Australia:
Online Investing on the Australian Sharemarket
, 5th edition
Teach Yourself about Shares
, 3rd edition
Shares Made Simple
Charting Made Simple
.
The publishers and I have taken every precaution to make this book free of errors and typos but perfection is extremely difficult to attain. In a book of over 50 000 words, a few errors or typos will inevitably slip through. If you notice any of these, I would be most grateful to hear from you. I'm always happy to receive feedback or suggestions from readers so if you have any comments please contact me at: [email protected]. I'll make every effort to answer all emails within a day or two of receiving them.
You can also visit my website, rogerkinskyshares.com.au, for further discussion about shares and my books. The site features a weekly blog ‘Sharing shares’, where I discuss topical items of interest to share investors. I also offer a share mentoring and education service, where I can help you with any difficulties you may experience. Details on how to access this service are outlined on my website.
Finally, I wish you a profitable share investing experience and I trust that this book will play a significant role in guiding you on your path to success with shares.
Roger Kinsky
Woollamia, NSW
October 2021
Chapter 1What you need to know
In this chapter, I outline what you really need to know about investing in shares so you can get started, covering market unpredictability, the relationship between risk and reward, and what you're actually investing in when you buy shares. I also highlight some of the stuff you don't really need. Are you surprised at that? You might think that the more you know about shares, the greater the profit you'll make when you invest in them. Actually, no evidence indicates that ‘more’ information is necessarily better; in fact, ‘more’ can be worse because you can get bogged down in detail and miss the important stuff. And, as I explain, some great share investing strategies are based on very simple ideas that anyone can apply.
Before I go too much further, however, I'd like you to meet someone who you'll see a lot of through this book.
Meet Michelle
In most cases, when financial decisions are involved a bias exists toward the male gender. Company directors and top executives are still predominantly male. And most finance books still seem to assume that the reader is male. In this book, I try to avoid gender discrimination and, because of the current bias toward males, I have deliberately used a female named Michelle in my illustrations. She appears in most of the illustrations in this book, guiding you through your introduction to share investing.
‘Hi! I'm Michelle. I'll be accompanying you on your journey.’
Sorry fellas, I have nothing against the male gender but women are fast becoming a force in the financial arena. By the way, studies have shown that when it comes to share investing, women are more successful than men. I explain why in chapter 5.
Trust yourself
When it comes to share investing, I want you to trust yourself and not think you need to rely on others such as share investment advisors. Many people feel like ‘dunces’ when it comes to share investing — even those with a good education. This means people often rely on investment advisors or share advisors who they believe are experts in the field — and who usually charge a hefty fee for service.
However, from my own personal experience, acquired over 50‐odd years of share investing, I have found that the results don't always justify the cost. In fact, my most disastrous share investments occurred as a result of following recommendations. Now I no longer act on advice without first putting it through the ‘grist of the mill of my own mind’ and coming to my own conclusions.
I wrote this book so I could explain the basic principles of share investing in a way you can understand so you won't need to seek ‘expert’ advice. Believe me, most ordinary people have the necessary nous to be successful share investors once they grasp the basic principles. If you ignore the hype and jargon, ‘it really ain't that hard’. You won't always be right and not all your share investments will be profitable, but you can take heart in the fact that no person and no computer program can make profitable predictions about shares that are always right.
Knowledge level you'll need
I have written many non‐fiction books over the past 50 years, and taught many classes on subjects ranging from engineering theory to shares. When I start teaching a new class or writing a new book, I face the difficulty of determining the knowledge level of the students or readers who want to learn. If I pitch the starting point too high, those who don't have the pre‐requisite knowledge get lost at the start and have to try to catch up. But starting from behind isn't a good idea when learning a new skill or acquiring new knowledge because you have to learn the old stuff at the same time as you are trying to absorb the new.
‘How am I going to catch up?’
On the other hand, if I pitch the beginning point too low, those who already know a fair bit get bored and can easily lose interest. After all, if someone is going to learn something new they need to be interested.
My publishers and I decided to pitch this book about shares at the beginner level — which explains the title ‘Starting with Shares’. I've been faithful to the title and assumed you know very little about shares, and have made that my starting point. You can find plenty of books about shares and lots of info is available on the internet, but the problem with most of these sources is that they usually assume the reader already knows a fair bit about shares — certainly enough to understand the terminology. In this book, I explain everything in a way that you can understand even if you know virtually nothing about shares. As far as possible, I avoid the use of jargon — although I do have to use some of the terms commonly used with shares because you need to understand them to find your way. But before I use a term that might be unfamiliar to you, I explain it first in everyday, straightforward language.
If you already know a fair bit about shares, you may want to skim over some of the content in the early chapters. But there's an inherent danger in this that I now discuss.
Types of knowledge
Knowledge comes in several types. One type is the knowledge you know you don't know. For example, you may be aware that you don't know much about servicing or repairing a car. So when your car needs servicing or has some problem, you take it to a mechanic who has the required knowledge and can service or repair your car. But there may also be a whole mountain of knowledge out there that you don't know you don't know. This is called blissful ignorance, because you don't worry about things you don't know about. For example, your car could have a fault that you're not aware of and so you keep driving the car until the fault gets worse. One day you notice the problem and take your car to your mechanic. The mechanic may say something like, ‘Well, if you had brought the car in to me earlier I could have fixed the problem easily and cheaply, but now it's a big and expensive fix’. The reason you didn't bring the car in earlier was because you weren't aware of the problem.
When it comes to shares, you may be aware of your lack of knowledge in certain areas but you might also have a lack of knowledge in areas you're not even aware of and that might cause problems.
Finally, there is knowledge you think you know but really don't — and this can be very dangerous. For example, when I first bought a yacht and started cruising, the yacht once ran aground during the night. I'd thought I knew how to anchor a yacht safely but, in fact, I wasn't following the best procedure at all and when the wind changed unexpectedly while I was asleep I ended up in trouble.
That's why I suggest you don't fast‐forward through the early chapters without at least skim reading first to ensure you aren't skipping over something you really don't understand.
How long is the journey?
You're probably wondering how far we're going to go and what you really need to know so you'll be able to make a success of share investing. You can access a whole heap of info about shares — in fact, I reckon you could spend the rest of your life going through what's available and you still wouldn't have touched all of it.
‘How can I hope to compete?’
If you try to learn too much, you can easily become overwhelmed and reach the point where you do virtually nothing — known as paralysis by analysis. So I'm not going to try to take you to an advanced knowledge level about shares. If I tried to do this, the book would end up being a tome and you'd be deterred right from the start. So I'm going to take you only as far as you need to go to become a successful share investor. You can acquire the rest as you get into shares, or if you're sufficiently interested, you can obtain more advanced knowledge later on.
The really heartening news is that you don't actually need to be very savvy on all aspects of share investing to be a profitable share investor. Some really simple and successful strategies have been devised that focus on only a few key issues. If you are faced with a choice of strategies, I suggest you choose a simple one in preference to a complex one that requires heaps of information or the use of sophisticated computer algorithms.
Tip
If you get to the point where you want to expand your knowledge about shares, I can recommend the following books. Naturally I can recommend them because I wrote them!
Teach Yourself about Shares
, 3rd edition
Online Investing on the Australian Sharemarket
, 5th edition
Shares Made Simple
Charting Made Simple
Markets are unpredictable
You might think that the more you learn about shares, the better you'll be able to predict how the market or a particular share will perform. A friend of mine who's knowledgeable about shares recently told me he had sold all his shares because he was sure that after the market recovered from the downturns caused by the COVID‐19 pandemic, it would dive again. Guess what? The market kept rising and reached new heights.
The sharemarket is difficult to predict basically because people buy and sell shares and it's very difficult to predict how a person will react in a certain situation. So imagine the difficulty in trying to predict how thousands will react to situations on the sharemarket that change all the time. Another complicating factor is that people have an instinctive tendency towards ‘herd’ behaviour, ingrained over thousands of years of human evolution. This instinct tends to make them want to take safety in numbers and ‘follow the leader’ — so just a few people acting in a certain way can influence others to also act in the same way. Different strategies can work in different situations, and no one strategy works well in all situations. No ‘magic bullet’ exists with shares. Ignore anyone — including a respected share authority or advisor — who tells you they have a system with shares that succeeds in all situations. Especially walk away if they want you to part with a sizeable heap of your hard‐earned money to gain access to this super‐duper system.
You might argue that computers can be programmed to trade shares and computers don't make mistakes. That's true but the fact that computers don't make mistakes doesn't mean they can predict the future with any degree of certainty. Computers need programs and those programs have to be written by a person. They will reflect the programmer's preferences and experiences and, therefore, still operate with in‐built biases.
Tip
The uncertainty and unpredictability of shares actually works in your favour because they mean you can be as good as anyone else. You don't need to pay advisors and you don't need to buy an expensive computer program to make a success of share investing. All you really need is an understanding of how the sharemarket operates and how to access the info you need. After you've read through this book, you should have that knowledge — and then it's up to you to apply it to your best advantage.
Dealing with the uncertainty
I don't want to give you the impression that because of the uncertainty involved with shares, learning about them or applying strategies in different situations is pointless. When you're operating in an uncertain environment, the trick is to swing the probabilities in your favour. That's really what this book is about — helping you to adopt strategies that will improve your chance of success in the various situations you'll encounter with the sharemarket.
Because of the uncertainty with shares a certain strategy may work well in some cases, but the opposite strategy might also work! Let's look at an example. Consider the following two strategies:
Strategy 1:
Buy shares that are at the top of their 12‐month price range. The reasoning behind this strategy could be, ‘The share price has been rising and that's a good sign. If the price rise continues, I'll make a good profit by buying the shares now’.
Strategy 2:
Buy shares that are at around the bottom of their 12‐month price range. The reasoning here could be, ‘If the share price has bottomed and starts to rise again, I'll make good profits because I’m getting in at the ground floor’.
You can see that each strategy is different but each can be justified with a logical argument. And if you apply them, you might find that each one results in good profits! For example, you may buy some shares that are at the top of their 12‐month price range and find that their price continues to rise so you make a good profit. At the same time, you could buy some shares that are around the bottom of their price range and find that they stage a turnaround and the price rises and you also make a good profit on them.
This is because with different shares in different situations one strategy might be better than another. So no single strategy is necessarily best in every situation and able to produce good results every time.
Tip
The strategy of looking for shares trading at around their low price and that have a good chance of rising is known as bottom fishing.
Here's another example of two very different ways of choosing shares:
Strategy 1:
Choose an investment mix of 10 shares by careful analysis and research based on all the available information about them you can access.
Strategy 2:
Choose a share to invest in by pinning a share listing on a soft board and throwing a dart at it. Do this 10 times to get an investment mix of 10 different shares.
Tip
Throwing darts at a share listing pinned to a board isn't really practical, but choosing a mix of shares by random selection is certainly possible. Choosing shares by random selection is still known as a dart or dartboard approach.
Some time ago I tried each of these two strategies to see the result. I chose a mix of 10 shares based on my research and I chose another mix using a selection process based on random numbers. I wrote down the shares each strategy had indicated and their current price. Some time later I checked the share prices and worked out the profit or loss each strategy had produced.
Guess what? Each strategy resulted in a profitable investment and, in fact, the dart approach was slightly superior to the careful selection approach!
When I pointed this out in a share investing course, one student responded with a simple question: ‘If that's so, why am I wasting my time and money doing this course?’
I admit this question floored me for a while and I couldn't really think of a reasonable answer. As I pondered on it, I came to realise a fundamental truth about share investing that this question had highlighted. Despite what most people think, choosing shares in the first place is really not the most important consideration for successful share investing. What really matters is what you do with the shares after you've bought them — that is, your management plan. I'll expand on management plans in chapter 11 but for now I'd like you to remember that you need a management plan if you're going to be a successful share investor.
My experiment also showed that although the dart approach is based on random selection, it can result in a good mix of shares because it's likely to give you a varied selection of many different types of shares. Having a varied mix of different types of shares is known as diversification, and is a strategy I'll expand on in later chapters. The real benefit of a dart approach is that it overcomes personal prejudice. We all have in‐built preferences based on a combination of hereditary and environmental factors that we often aren't even aware of and which affect our decisions and actions. With share selection, they're likely to bias our selection process in one way or another. For example, you may have had your fingers burnt in the past with certain shares or certain types of shares and so may now have a ‘once bitten, twice shy’ bias toward these shares.
The main takeaway here is that it's important to build a selection of diversified shares and it's even more important to manage them successfully.
Tip
I expand on psychological factors relevant to share investing in later chapters.
Risk and reward are related
A really important principle of investing is that risk and reward are related. Reward with investing is the amount of profit you're likely to make. In most cases, as the potential reward increases, so too does the risk. Figure 1.1 shows shows the hypothetical relationship between risk and reward.
Figure 1.1: Increasing your possible reward usually means increased risk
The ‘safer’ an investment, the less risk is involved and so the less profit you can expect. I'm sure you already have a fundamental understanding of this relationship and that is why you want to get into shares. You realise that share investing involves more risk than a comparatively safe investment such as a bank deposit but the compensation for taking the higher risk is that the rewards can be greater. You also understand that you need to take the higher risk to reap the reward of a higher potential profit.
Shareholders are owners of a business
When you become a shareholder you're investing in a business. In fact, you become a part owner of that business. So what's a business? A business is a commercial enterprise that provides a product or service to consumers and usually aims to make a profit. (A non‐profit‐making business can be set up for charitable purposes but this is rare for Australian companies with listed shares.) You can't be a shareholder in businesses such as partnerships and private (or proprietary) companies unless invited to do so by the directors. The most common type of business in which you can be a shareholder is the public company.
As you might guess, a public company is a type of business where anyone can become a part‐owner. It follows that the company has no control over who the owners are. Larger companies are also known as corporations.
The company has a separate legal identity from the owners and is regarded as a separate entity at law. This is known as a body corporate and means that the company can act very much as a person can in business situations. For example, the company owns assets and has liabilities (debts). It can enter into contracts such as contracts for employment or for the purchase of goods or services. Because of the separate legal identity, the assets of the owners are immune from the assets of the company.
So if you're a shareholder in a company, no matter how much financial difficulty the company may get itself into, your personal assets can't be used to pay creditors or to help bail the company out. In extreme cases, you could lose the money you've invested in their shares but that's the limit of your liability. A public company often uses the abbreviation ‘Ltd’ at the end of the name to indicate the limited liability of the owners.
Tip
BHP (Broken Hill Proprietary) is a well‐known Australian public company with issued shares. The term proprietary is normally used to indicate a private company (that is, belonging to a proprietor or proprietors), as in ‘Pty Ltd’. When BHP changed from a private to a public company, it obtained special exemption to retain ‘proprietary’ in the name because ‘BHP’ was so widely recognised by Australians.
Key takeaways
I assume you don't have a good knowledge of shares and need to start from square one.
With share investment strategies, it's generally better to err on the side of simplicity rather than complexity and keep in mind that simple strategies often work as well as complex ones.
You don't have to know a heap about shares for them to be a profitable investment for you.
The sharemarket has an inherent element of unpredictability associated with it.
No share investing strategy works in every situation and there's certainly no magic bullet.
Risk and reward are closely related; if you want a higher profit, you need to accept that a higher risk will be involved.
Most companies aim to make a profit from the sale of a product or service.
While many types of legal business structures are possible in Australia, the main structure applicable to shares is the limited company. If the shares are listed on an exchange, they can be purchased by anyone so this type of company is also known as a
public company
.
Chapter 2Getting into shares
In this chapter, I discuss some of the basics about investing in shares, starting with some common terms you're likely to encounter. I then look at the different ways you can come to own shares and so become a share investor, and consider shares you can invest in as well as those you can't. I also explain why share prices change and the most commonly quoted prices. This will set the groundwork so you have a good foundation to work from as you get more into shares.
What are shares?
As discussed in chapter 1, shareholders are the owners of a company and, as the name suggests, a share is one unit of ownership. This means that someone with 10 000 shares owns a 10 times greater slice than someone with 1000 shares. As part‐owners, shareholders are entitled to a share of the assets and profits of the business. They're also entitled to other benefits of ownership in a business enterprise, including having a say in the management of the business by attending annual general meetings (AGMs), asking questions and voting. Because a shareholder has equity in the business, shares are also called equities.
‘Whoopee! I'm now a part owner of ACME LTD.’
Understanding some basics
The following are some common terms you're likely to encounter as you start investing in shares. Some of them are a bit ‘jargony’, but understanding them is necessary as you progress along your journey.
Common share investing terms include:
Bulls and bears:
These terms have been around for a long time and no‐one is exactly sure how they came about. Bulls are optimists who believe the market will rise and, therefore, they want to buy shares, whereas bears are pessimists who believe the market will fall and, therefore, want to sell shares.
Capital:
This is just a fancy word for money used in business.
