Ask the Experts

If a spouse transfers shares to their partner how should they calculate the sale price? Is it an offence to sell too cheaply?

We aren't authorised to provide taxation advice (thankfully), but the best bet is to check with your accountant or give the Australian Tax Office or the Office of State Revenue in your state a call. Sorry we can't be more helpful.

To be eligible to receive a company dividend do I need to return a prospectus form or do I just need to buy shares through an online broker? If so, how long should I keep the share with the company?

If you want to earn dividends from listed company or security you just need to buy the stock through your online broker. A prospectus only pertains to a company or security that is about to list on the sharemarket. If you want to subscribe to the public offer, rather than wait to buy once it is listed, you will need to return the application form in the prospectus.

Warren Buffett says his favourite holding time for a stock is forever. As long as you are happy with the returns that the company is offering, you should hang on to your stock. Flipping between stocks is a sure way to make your broker rich, not you. There is a 45-day dividend rule in relation to franking credits, though, that you should bear in mind.

Since property companies such as centro and westfeild and others have gone down alot in the last year and i have heard of a property index i was wondering if it would better to invest in the index than in a individual stock because i am still learning about investing and am woried that if i invest in a property company it could suffer even more writedowns

This is a complex question, and you'd probably benefit from reading The Intelligent Investor's research on the subject of property trusts for example. In general, we've been negative on the property trust sector for some years, and rightly so. With prices down 80%, though, at some point value might appear (although perhaps not yet).

Index funds are suitable for investors who want or need diversification. If you own units in an index fund, though, then you effectively own units in all property trusts in the index. So with an index fund you own units in both the good ones and the bad ones, including plenty that might have more writedowns, capital raisings, and some that will go bust.

Investing in an index fund won't prevent you from losses if the sector is still in for more pain. But if you believe that the sector is, on balance, cheap, then it may be a good way to go if you're not confident about selecting the higher quality/best value plays in the sector.

Hi, When joining a managed fund, it is important to compare fees. Can you please let me know how the buy - sell spread works? Is it a fee that the customer pays on decisions made by the fund (hence no control), or is it something the customer pays when he intervenes and instructs the fund to buy or sell specific stocks. Thanks for your help.

My understanding is that you have no control over this in a regular managed fund. You pay the buy price (or entry price) when you apply for units, and then your units are redeemed at the sell price (or exit price) when you redeem.

This makes sense because there are costs for the manager in buying and selling the underlying investments. If the manager had to liquidate the whole portfolio, for example, then all investors would get back a lower amount than the net asset value of the fund because of transaction fees (ie brokerage the manager pays to its broker). The cost of these charges is reflected in the exit price.

Hi, I am considering investing in international shares. I would do this with australian dollars. What is the impact of the exchange rate recent plunge between AUD and USD? Judging by exchange rates, invsting now AUD in USD shares would see me paying a 30% ish premium compared to last year for the shares I buy. Am I reading this right? Thanks,

That's correct. International shares (such as US stocks) are now much more expensive in Australian dollar terms than they were in July last year, simply because the Australian dollar has fallen from around 95 cents US to 64 cents US. Whether international shares are a good buy now depends not only on whether the particular stocks you are looking at are cheap, but also where you think the Australian dollar is going to go over your investment period.

What do the terms "overweight", "indexweight" and "underweight" mean?

Interesting question. These are terms often used by fund managers to explain their portfolio positions. You've probably heard of the All Ordinaries index, which is an aggregate of stocks used to measure price movements that are representative of the market. A stock such as Commonwealth Bank (CBA), for example, might represent 3% of the All Ordinaries index (for example, because its market capitalisation is 3% of the entire Australian sharemarket).

If a fund manager is 'indexweight' in CBA, then they will hold 3% of their portfolio in that stock. But if they dislike the stock, they might only hold 1% of their portfolio in it. This is called being 'underweight'. Similarly, if they like the stock, then they might hold 5% of their portfolio in it, which means they have taken an 'overweight' position (compared to the index).

Most large fund managers think in these terms. They will rarely never own a large stock, but often go 'underweight' or 'overweight' in it depending on how they view its prospects.

Some people said that most of the stocks in the current global markets are looked likely unsecured for long-term investment due to credit crisis and fears of economic recession in USA. I am so worried and want to sell all stocks in my portfolio, but I can not do it because their prices have fallen from 10% to 80% of the purchase prices (bought last year). Please give me an advice. Very appreciated.

Unfortunately we can't provide personal advice. But you need to evaluate several things. First, does investing in the stockmarket suit your tolerance for risk in the first place? Buffett has said you should only ever invest in stocks if you could tolerate a 50% decline and not feel pain (hard for anyone!). Note that the best time to buy stocks is often the hardest pyschologically ie when you have lost a lot of money already.

Second, re-evaluate the stocks you have bought. Are you reasons for buying them still valid? Are they high quality businesses with low or reasonable debt levels that you'd want to hold for the long term? Would you buy more of them at current prices? Once you've asked yourself these questions, you should have a better idea of how to proceed.

What is the best way to research a company before buying shares in it?

Read the annual reports - it's that simple. To understand how a company works and makes its money, the annual reports over a number of years should provide you with a fair bit of information to make a decision about whether you want to buy its stock. But often you should do other research as well, such as reading trade publications or industry journals and the like. Oh, and you can always subscribe to The Intelligent Investor if you're looking for advice on stocks!

When a stock goes ex dividend is it better to sell the stock before ex-dividend date so as to retain the higher profit rather than wait till dividend date to sell because of the possibility of the stock moving down to cover the dividend payout ( i realise that i need to hold on to stock up until exdividend date to receive the dividend) Many Thanks

In theory, it shouldn't make a difference. The stock will drop by approximately the amount of the dividend on the day it 'goes ex' (ie on the ex dividend date). In practice, people who prefer franking credits over capital gains (or losses!) might prefer to hold until after the ex dividend date so that they get the benefit of any franking credits, but it's really not going to make much difference either way.

There's more in our Investors' College article Dazzled by dividend dates, if you are interested.

Dear Sir or Madam, If I do not use broker, how do I start to buy stocks? What are the steps to follow? I may need a bank account that I can use on the Internet. Is any bank OK? Where can I buy it and sell it? Thanks for answer.

Unless you buy shares in an initial public offering (also called a 'float'), you have to use a broker to buy and sell shares. The ASX has a page that provides further information on how to find and use a broker. Each broker has their own requirements regarding account and bank account set up.