Ask the Experts

How much do i need to get started?

You don't need very much at all to buy stocks on the sharemarket. However, given brokerage costs at least $20 per trade, and it's best to own a portfolio of stocks so that you don't risk having all your egss in one basket, at least a few thousand dollars would be a good starting point. If you buy a listed investment company, though, which is a listed, ready-made portfolio, then you could start with smaller amounts. Managed funds are also worth considering. Although you might need to make a relatively large initial investment, you can then add much smaller amounts over time; it's also a good way to get in the habit of saving and investing.

Hi there. I understand that when someone becomes a substantial holder, it means they've purchased a considerable amount of shares in a company. Can you explain the implications of this, what it could suggest and how you might use this info when it comes to deciding whether to purchase shares or not. For example, when researching Ansell Ltd, I see that CBA has recently become a substantial shareholder. Thanks, Bec.

Hi Bec. A substantial holder notice is issued for ownership stakes of over 5%. While insider buying can be a sign of a cheap stock, substantial holder notices might simply reflect the combined holding of shares desposited with a large bank holding company, like CBA. In other words, it might simply be the accumulated shares of numerous smaller investors or a group of managed funds, for example. However, if you see a manager or reputable fund manager taking a 5% stake in a company (usually this would be a smaller company given the enormous sums needed to take a 5% position in Australia's largest companies), then that would definitely be worth following up.

i want to buy shares but i dont know what to buy and i dont know how to find out what to buy. i also want to know business that are expanding and when i should buy. please help

If you haven't got the time or experience to research companies yourself, then you'll need to subscribe to a stock research service. However, you need to weigh the cost up against the size of your portfolio. For example, our service (where you can have a free trial) costs around $500 a year, so you probably need a portfolio of at least $30,000, but preferably closer to $50,000 to make it worth your while; if costs eat up 5% of your portfolio each year, you'll struggle to grow your portfolio.

The alternative is to invest your money in a low cost index fund, or a managed fund. If you google these terms you'll find a littany of options. If you're shopping around, a few things to consider include the cost, a fund's track record (the longer the better) and the stability of management and the strategy. Funds that flip flop on strategy and that turn over a lot of staff are best avoided.

A friend wants to invest in Australia and is currently living in Mauritius. How should he go about this what requirements must he fulfill to buy Shares from Australian companies.

Your friend will need to sign up with a foreign broker, which will request the necessary information to allow your friend to buy Aussie stocks from abroad. This blog discusses Interactive Brokers; it's not a recommendation, but it's the only international platform we're aware of.

I'd like to know about option tradings. More importantly, to understand how do you trade, when the shares falls, and you still gain. Is this something, when you own shares and rent shares? Would be so nice if you could tell me in some simple way, or a related article perhaps? Kind regards Elisabeth

Hi Elisabeth. I'm afraid options trading is not our area - we're long term investors, whereas options trading is short term and in our view speculative. There are plenty of courses and information on it, though - just do a google search. Just be aware that options are a good way to lose all of the capital you've invested if they expire, something that is unlikely when you invest in stocks.

I'd like to invest in shares for the long term. Is there a mechanism or strategy available to protect loss of capital or profits similar to trailing stops used by traders?

Long-term investors prefer to buy stocks when their prices are falling, because they're cheaper; like groceries, you get more for your dollar when items are on sale. So stop losses contradict the strategy of long term investing, which means buying and holding for the long term. If, however, you want to use a stop loss, and a brokerage account lets you submit a sell order at a lower price, consider that it doesn't make much sense; would you buy a house and then sell it if someone immediately offered you 20% less? The important thing is to buy the right business in the first place and hold it; trading stocks only makes your broker rich.

I'm new to investing and I've been told I need a cash mangement trust account (CMA) before I can select an online broker. Why, and what are the pros and cons?

My understanding is that you don't need a CMA, as you can have your brokerage account linked to any Australian deposit account. Cash management accounts do provide interest, though, so its best not to leave your cash idling in your brokerage account (though usually brokerage accounts have a facility whereby any surplus cash is directly moved into the interest earning account overnight). If you do open a CMA, though, watch out for high fees and uncompetitive interest rates, as well as any other nasties lurking in the fine print.

How do I buy NZ shares from Australia?

Several New Zealand companies have dual listings in New Zealand and Australia. However, where they don't, you'll need to open a foreign brokerage account. This blog entry provides a heap of information on the most popular choices.

I am looking at stock trading courses, to give me a better understanding of the stock market, they appear expensive, any suggestions?

Our focus is value investing and there aren't any courses we recommend. However, there are numerous books and investment sources that we do highly recommend. Reading Warren Buffett's letters to Berkshire Hathaway shareholders, One Up on Wall Street, Common Stocks and Uncommon Profits and The Intelligent Investor will give you a great start.

I used to live in NZ. I have some Cadbury shares (UK based listing). Now I live in WA. How can I sale those shares and invest the money in Australian companies. Thanks.

First you'll need to sell the Cadbury shares after registering the shares with a broker; this blog provides information on two online services, namely Pershing and Interactive Brokers, though there are others. Once you've banked your cash, you'll need to open an Australian online brokerage account. Investing magazines often provide a comprehensive review of discount online brokers, otherwise you can search Google for 'online brokers' and compare the various services and their costs.