The share market is a place where people can buy and sell shares, and where companies can raise capital by issuing shares to investors.
Why should you invest in shares?
The main reason people invest in the share market is because well chosen shares have historically outperformed the other asset classes (ie property, cash, and fixed interest) over the long-term.
As you can see in the graph below a $100,000 investment in the All Ordinaries Accumulation Index 16 years ago would have grown to more than $730,000, assuming dividends were reinvested. This means if you had invested in shares, you may have had a better return on your investment compared with most other asset classes.
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How to invest in shares
There are a number of ways to invest in shares, although most Australians hold shares through their super account. Outside super, most people either invest directly or through a managed fund.
With a managed fund, your investment manager will research the shares and buy or sell on your behalf depending on performance and risk tolerance (as well as for all the other investors in that fund) and charge you a fee for this service.
If you choose to research and buy and sell shares yourself, you may have more control over your money and what you buy and sell, only paying for the actual trades that you make. However, this means you'll need to do all the work yourself and understand the various companies strategies, their performance and how the environment is impacting future growth and profitability.
Should you hold, buy more of their stock or sell? Your Bernie Lewis financial adviser can assist you with either strategy, it's your choice, just make it an informed one.
Investor emotions
When markets are roaring ahead, the appeal of share market investment is obvious. But, when markets hit uncertain times investors quickly develop concern about the effects of short term fluctuations on their investments. This is often referred to as the lifecycle of investor emotions.
It is natural to go through various emotions when market conditions change, particularly in times of volatility. By understanding these cycles you could be better prepared to understand what you are experiencing and how to handle your investment approach during these times.
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Your Bernie Lewis financial adviser will discuss the investing lifecycle with you in relation to your goals, timeframe and risk tolerance.
