What are the ways to invest in shares?

There are a number of ways to buy shares and various platforms through which to do it.

You can buy shares either directly, by investing in individual companies, or indirectly by investing in a fund.

Investing directly gives you complete control of which companies to invest in and when you buy and sell them.

However, there is always a risk that individual companies will not perform as well as you hoped and you could lose money.

It’s important to have a diversified portfolio of investments to reduce that level of risk.

 

Investment funds

Investing in funds is a way to reduce the concentration of risk because each fund holds a selection of different assets, although good returns are never guaranteed.

When you invest directly you have to pay a brokerage fee every time you buy or sell shares but those costs are lower through a fund because they trade in bulk.

Investment funds do carry various other costs, however, which you should be aware of because they can eat into your investment returns over time.

Exchange traded funds (ETFs) are generally cheaper than other managed funds, because they aim to replicate rather than beat the performance of share indexes or other groups of assets.

 

Can I buy shares myself?

There are several different ways that you can buy shares or invest in funds, the easiest of which is through an online broker such as CommSec.

Both offer execution-only services, which means they make trades based on your instructions, without giving you any advice.

For example, you make an order online to buy a certain amount of shares in a company and they place that order into the market according to your instructions and let you know when the deal is done.

Some brokers, including CommSec, also offer advisory services to help you decide which shares to buy and sell, according to your personal circumstances and needs. This service comes at a higher cost.

You can also find brokers that offer discretionary services, which means they can buy and sell shares on your behalf, without consulting you each time.

This means the brokers can carry out deals quickly if they spot an opportunity but you are effectively handing over control of your portfolio and it’s possible they will make more or less trades than you deem necessary.

Discretionary services come at a higher cost so you would typically need to have at least $50,000 available to make it worth your while.

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Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. This information is not advice and has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives, financial or taxation situation and needs, and, if necessary, seek appropriate professional advice. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.

 

Disclaimer

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