Shares are riskier than other types of investments such as bonds and cash investments. If you own shares, you’re not guaranteed a return or capital gain, but they potentially offer a higher return, particularly over the long term.
Before you invest in shares, make sure you study our guide to choosing, buying, owning and selling shares.
When you buy shares, you're buying a small part of a company. You can buy shares directly or own them through a managed fund which pools many investors’ money.
Share can be highly volatile but you can earn returns by dividends and capital gains.
Information varies depending on the type of shares
Only some types of share offers will have a Product Disclosure Statement (PDS). Share this! explains the difference between buying shares on primary and secondary markets and the different levels of disclosure that apply to these markets.
Unlisted shares may be hard to sell
Unlisted shares aren’t on an exchange and there may not be an established market for their sales.
The value of your shares might fall
The company you’ve invested in could perform poorly, or fail. The share price could stay weak for a long time if the company consistently disappoints investors. Dividends may also fall if profits fall, or the company decides to keep more of its profits to reinvest in the business.
Your shareholding may be reduced
This can happen when the company you’ve invested in offers to sell you new shares to raise money but you don’t take up the offer. It can also happen when the company raises capital using complex investments that can cause your initial investment to be sharply reduced if you don’t know what to do with them.
The fees charged will vary depending on the type of share buying service you choose. You will pay a minimum brokerage fee for each order placed and may have to pay a percentage fee for any amount over the minimum.
What to do before you invest
Make sure you understand the company you’re buying shares in and the key risks it faces.
You should aim for a mix of different shares to smooth out the ups and downs in value that typically happen. Diversifying doesn’t guarantee you won’t make any losses but done properly, it will help you manage your risk.
Managing your investment
It's important to keep track of your shares' performance.
Holding shares for the long term enables you to smooth out price fluctuations. If you buy shares with money you’re going to need soon, you take the risk of being forced to sell at a low price.
Don’t try and time the market
No one can predict with certainty how a share will perform. Trying to pick a good time to buy or sell involves some luck, so make sure you’re fully informed about what you’re buying or selling, and why.
Keep up to date
The performance of your shares will change over time. The company annual report will help you stay up to date with the business you’re investing in. See our additional resources: