Investing with shares has many advantages over many other forms of investment, this is because shares carry a high degree of liquidity that surpasses that of properties and also offers fast and ready access to your money whenever you need it. There are currently over 1200 companies listed on the stock market, with substantial stocks up for sale. These companies represent diverse sectors, providing you with sufficient match for your investment needs.

Investing with shares in a company gives you an opportunity to own part of it, which means you become a partial owner together with other shareholders. Many public listed companies issue shares to the investing public for various reasons, some of which are to raise funds for growth, expansion or a merger.

Almost 40 percent of Aussies hold shareholders certificates, most of these shareholders own stocks in companies such as Telstra and more. When you become a company’s shareholder, you’re granted the rights of say in how the company is run and can exercise this right in the company’s annual general meetings, you’re also entitle to a share in it’s profits.

You can purchase and alternatively sell shares in listed companies. Such companies are found on the Stock exchange. Share trading is done in the stock exchange via stock brokers. To trade your shares, you can either phone in your order to your stockbroker or trade with them via the internet. Floating is a term used when a company is listing for the first time. In such a case, you can submit your application to purchase shares by filling the share purchase form in the listing company’s brochures.  The new shares are sold to the public at a set price. Once the company lists, its shares can only be traded through a broker.

Shares come in various types, some of which are: ordinary shares, preference shares, partly paid shares and options. Investors with more experience can go for derivatives like options and warrants to further diversify their investment portfolio. Payments made to shareholders by companies from accrued profits are referred to as dividends. Dividends are paid biannually. Some companies prefer to plow back larger portions of their profits into creating more business than paying it out to investors as dividends.

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Share trading presents a very unique opportunity to make money within a short timeframe. Making money from shares requires that a trader keeps in mind the following essential points.

1.    Research on the target company.
You’re advised to thoroughly research the company you intend to purchase shares from. Research should be done some time before you purchase the shares. Your background research should be founded on factors such as the target company reputation, market capitalization, Market share, and financial results. This information can be easily obtained from the company audited financial results either straight from their website or from financial magazines and newspapers.

2.    External factors that may directly affect the share price.
Making money from shares involves keenness in identifying those factors that have a direct effect on the share price of your target company(s). Share prices are usually depended on a number of external factors and which cause prices to fluctuate on a daily basis. These factors play a huge role is determining the demand for particular shares. External factors like political instability, financial results, scams, and more, can have a big influence in share prices thus warrant attention when investing in shares. Company mergers, management change and acquisitions are also factors to be closely observed.

3.    Timely decisions.
Making the right decisions at the right time is the secret to success in the stock market. Avoid impulse trading and instead focus on objective trading based on empirical data obtained from your research of the market. Impulsive trading could adversely affect your success as a share trader. Impulsive trading always results to losses. Be patient until the time is right to purchase the share at a price you deem appropriate.

4.    Learn the risks.
Shares like any other form of investment presents some risks that any serious trader has to be aware of. Risks associated with share trading are especially high in appreciated markets. Most shares maybe overvalued, hence a decision to purchase shares of a particular company should involve comprehensive study of the said company’s background.  Some of the things worth study are the company’s future plans, products potential etc.

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The cost of trading is one aspect of investing that investors complain the loudest about. Whenever a person decides to go to the market to either purchase or sell securities - which could be stocks or debentures, they will most likely suffer certain costs like stamp duty or brokerage fees.

These are referred to by economists as transaction costs or trading costs. Such costs are the equivalent of tax to trading, whenever you decide to trade and whether you earn a profit or make a loss; you have to have to pay these costs. In case you have a bullish outlook that the price of a certain stock is going to rise, then you suffer double costs namely: entry costs and exit costs. For trading to be lucrative, then your forecasted price differential has to be larger than this roundtrip transaction costs.

The following are five parts of a transaction costs.

a)    First is the commission paid to the broker.
b)    The second is the “spread” in the case of currency trading.
c)    The third is the counterparty risk. This can happen at the broker level or in rare cases where the entire exchange fails in a payment crisis.
d)    Fourth is the administrative cost involved in transfer form signing, courier and more.
e)     Lastly, the risk of scam, stolen or forged certificates.

Counterparty risks are usually the hardest to quantify in the basket of trading costs. As of 2009, the other costs of trading have summed up to nearly 6%. In speculative investments like FOREX, if you estimated a price to go up, then it would have to climb up by at least 10 per cent for your trade to be deemed profitable.

Trading costs have dropped sharply and counterparty risks have been eliminated in the NSE, this is because trading agencies are required by law to give investors guarantee on every trade, this means that incase a counterparty to a trade fails or defaults, then the clearing firm has to step in and honor his obligations.

Brokerage fees and spreads have also dropped significantly; the only problem that needs more attention is that of forged certificates which has actually doubled.  With better market efficiency, more people will be attracted to investing; hence increase the country growth, the ultimate reason why reducing transactions costs is a matter of high importance.

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