Sharemarket and Managed Fund Services
Your Hudson financial adviser can help you construct an investment portfolio that is most appropriate for your situation, your risk profile and your long-term goals.
A properly balanced and diversified portfolio should contain a mix of shares, managed funds and property to reduce the impact of market volatility.
The basics of investing in shares
Share markets enable people to invest in companies. Buying shares in a company means that you own a part of that company. You may receive part of the profits as dividends and share in the growth of the company's value.
Companies will list on the share market to raise capital to expand their business as an alternative to borrowing. Long-term investors anticipate that the share price of a company will appreciate, but should be aware that prices fluctuate.
Cyclical Stocks — Companies in industries or markets highly subject to macro-economic cycles (e.g. building and construction), or companies supplying to those industries. These stocks have an elastic price sensitivity.
Defensive Stocks — Opposite to cyclical, these are the suppliers of essential items (e.g. food and beverage, fuel) that are not subject to macro-economic cycles. As such these stocks have an in-elastic price sensitivity.
Banking and Financials
Technology, Media and Telecommunications
The benefits of investing in shares
- Growth prospects — through increases in share value.
- Income — through the payment of dividends.
- Tax effective — many Australian shares pay franked dividends providing imputation credits (tax rebates).
- Liquidity and flexibility — most shares can be quickly and easily sold, with funds available in a few days.
- Diversification — shares listed on the Australian Stock Exchange range from quality blue chip companies to speculative and developing companies.
- Small minimum investment — you can start with as little as $2,000 (recommended minimum investment).
The risks of investing in shares
- When buying shares in a company you buy into both the positive and negative financial experiences of that company.
- Listed companies may fall into financial difficulty and there is some risk that a company may be taken over (which is not always negative for shareholders) or placed into liquidation.
- Share prices can fluctuate subject to market forces and may experience a drop in value.
- If the share price falls and you sell, you will lose money. Although there can be tax rebates from investing in shares, investors may also be subject to paying Capital Gains Tax (CGT) on their investment returns.
What is a managed fund and how does it work?
In a managed fund, your money is pooled together with other investors. A third party manager then buys and sells shares or other assets on your behalf.
You are usually paid income or 'distributions' periodically. The value of your investment will rise or fall with the value of the underlying assets.
What are the positives of investing in a managed fund?
- Offer diversification
- Can access a broad range of assets or markets with a relatively small amount of cash
- Allow you to make regular contributions
- Reduce paperwork and make completing your tax return easier
Speak with your adviser about investing in shares and managed funds on freecall 1800 804 296 about this in more detail.
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- Financial Planning
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