Things to think about before you start share investing

1. Handle the basics

First you’ll need to understand the sharemarket and how it operates. The market is affected by many forces, such as economics, government policies and exchange rates.

And each industry has specific factors that affect companies’ performance. If you’re buying shares in a retail group, for example, reading up on how the industry is performing means you’ll be better informed when making an investment decision. (This is where your ANZ Share Investing platform can come in handy. Explore the news, research and market data to build your knowledge.)

An alternative to investing in shares of a specific company are ‘pre-made’ investment options such as managed funds or exchange traded funds (ETFs). 

When you invest in a managed fund you generally buy “units” in a fund managed by a professional who decides what assets the fund buys and sells. An ETF is an investment that, like shares, can be traded on the sharemarket. ETF’s can invest in a wide range of asset classes such as equities or currencies. 

2. Start small

If you’re new to share investing you’ll want to familiarise yourself with how it works before you start investing your money. Once you feel ready we recommend you start small by putting a modest amount of money into shares .  You might not reap the bigger returns that can come with significant share investment, but at least you’ll get comfortable with trading and understand the risks involved. That way you can confidently make bigger investments later.

3. Start trading from your comfort zone

Investing in shares can deliver good returns but the market is volatile and the value of your investment can fall, which can stress those that feel uncomfortable with risk. 

Your attitude toward risk will affect how you invest. Knowing how much risk you are comfortable with should guide your trading decisions. 

4. Stay level-headed 

If you trade based on fear or overexcitement, chances are you won’t think as rationally as you should. When a stock is doing really well you might think it’s a good idea to sell or if a stock starts plummeting you could feel anxious to quickly get rid of it. This short-term thinking can lead to bad decisions because a market swing today might not be so significant in the long-term. 

Learning to stay level-headed and not make knee-jerk reactions will ensure you make informed decisions. 

5. Diversify your investments

One of the best ways of mitigating risk in the sharemarket is to diversify your investments. This means that if one investment doesn’t work out, you haven’t put all your eggs in one basket and you’ll be able to minimise the chance of losing money.

Some ways you can diversify are: 

• buying shares in several companies rather than just one
• putting your money into different industries or asset classes (effectively safeguarding against a downturn in one industry) 
• buying shares in Australia as well as overseas.

6. Be patient

Lastly, shares are a long-term investment and investing in them takes patience. If you’re looking to make quick returns you might be disappointed. A good investing timeframe to work to is around five to 10 years, as this allows for recovery from fluctuations that happen in the short-term. 

Get started with share investing

Feeling a little more assured about the world of share trading and ready to get started? We’ve got a range of resources to help:

• boost your knowledge about the sharemarket with our beginners guide to share investing 
• learn how to get started with $1000 
• read our answers to frequently asked questions
• understand what our ANZ share trading platform can offer you.