Stocks
Stocks can be a valuable part of your investment portfolio enabling you to generate returns on your money and help you reach your finacial goals. A stock simply represents a share in the ownership of a company. These shares can be bought and sold on different exchanges for example New Zealand companies shares are listed on the NZX (New Zealand Exchange).
In order to purchase shares in the stocks market you can buy stocks through stockbrokers, investment companies and these days most commonly use online share trading platforms such as Sharesies and Hatch where you can buy stocks in minutes.
How to make money with stocks?
Investing in the stock market can offer great returns for investors including the potiential to earn capital appreciation on your investment as well as earning dividends paid by some companies. For example, when the company you own shares in does well, essentially becoming more valuable your shares will increase in price because of the limited demand. If they increase above the price you paid for them, this will allow you to make money if you decide to sell your shares. Additionally, the company may decide to distribute its profits by paying a dividend to its shareholders.
How does investing in stocks work?
Essentially when companies are scaling up and getting bigger, in order to grow they need money to fund operating procedures. The company will sell shares of the business to investors allowing them to raise capital.
Comapnies in New Zealand such as Sharesies and Hatch have provided investors with the opportunity to buy fractionalised shares of a company allowing investors to buy less than a whole share of large comapnies. Although owning these
What is diversification
Investing in individual stocks can often be very risk and although taking on more risk with shares generally means higher returns. However, investors use a technique called diversification to help lower your portfolios risk by purchasing multiple stocks but from different industries. For example, you might decide to purchase from uncorrelated stock market sectors such as manufacturing, energy, technology, financials, healthcare, consumer staples, and utilities companies. This will help you to lower your risk in case one industry underperforms you have diversified your exposure by purchasing numerous stocks.
Is investing in stocks risky
The question should really be are you a good stock investor. Investing in shares have . Although you can make money in the stock market it can be also be a very risky asset class for investors.
Before you invest in shares it is important to consider if your . Ultimately shares for the long term
If you are more risk averse and you don't have the time to research stocks choosing a mutual fund or exchange traded fund might also be a good option.
What to look for when analysing different companies
- The companies annual report
- The companies net profit and revenue
- Analysing the price-to-earnings ratio
- Understand the business sector there involved in
- Looking at the comapnies dividend history and yield
- If the business has the ability to grow
- The risks involved with the company
- How investors feel about the investment
How to invest in stocks
In todays age, New Zealand share investors can buy shares on NZX-approved share trading websites where you can buy individual shares or invest in funds which holds multiple shares saving you from incuring fees from purchasing multiple individual stocks. After doing some research into which provider you want to choose and determining your goals with investing I would suggest creating an account with the service and just putting a very small amount of money into your account to start with. It is extremely important to do your own research as I am not a licensed financial adviser. If you are uncertain of how to get started maybe getting in contact with a fiancial adviser might be a suitable option before investing because you can loose money.
Investing in shares is a rollercoaster
Although you can make money in the sharemarket, you need to be comfortable with the market moving up and down. If your goals are long term around atleast a decade shares can be a great investment. This is because if the economy is underperforming and the markets are down you want to be forced to sell your shares if your savings get low.
Which service is the best
It is important to do your own research and choose a company that offers the best service which aligns with how you want to purcahse shares whether that US shares, NZ shares or just investing in funds. I'm not going to say what investing platform is the best because each company offer different things that might not align with your investing goals.
There are plenty of great websites and youtube channels that compare the different fees and offerings of services in New Zealand much better than I could explain, so make sure to have at the links below.
- Sharesies pricing comparison
- Moneyhub investing platforms comparison
- PassiveincomeNZ investing platforms comparison
How to track your portfolio effectively
It is important to keep track of how your investments are performing so by using something like excel and manually creating a template to track your investments or by using portfolio tracking company such as sharesight, this will allow you to keep on top of your finanical position. Depending on how your portfolio is structured if you hold more funds checking on your portfolio once a month is sufficient, however if you obtain more individual shares checking your portfolio weekly might be more beneficial.