When you buy shares in a company on the Australian Securities Exchange (ASX), you become a shareholder and part owner of that company.
The main reason people buy and sell shares is to generate wealth through potential share price appreciation or additional income through dividend payments, or both. With your shareholding, you also gain rights such as the right to vote on executive pay and proposed mergers, and the right to participate in capital raisings.
As with any investment, there are risks associated with trading shares. These risks can result in capital losses on your investment.
Over the long-term, the Australian sharemarket as a whole has gained in value and outperformed other asset classes including cash and bonds as shown in the table. However, past performance is not indicative of future performance.
Trade size | $1,000 | $5,000 | $10,000 | $20,000 | Over $20,000 |
Brokerage | $9.95 | $14.95 | $19.95 | $19.95 | 0.11% of trade value |
If your shares increase in value you may be able to realise a capital gain.
Many companies pay regular dividends, allowing you to generate an income stream. Some companies also provide franking credits along with their dividends, which can help reduce the income tax payable.
You can generally transact in shares quickly and more cost-effectively than other investments such as property.
While shares offer the potential for relatively high returns, share prices can fluctuate due to market forces.
There may be instances where you’re unable to sell your shares due to very low trading volumes or if a company enters a trading halt.
Shares rank at the bottom of a company’s capital structure. This means that in the event of bankruptcy, shareholders are the last in line to be paid out.
There are two ways to fund your investment: