Before you jump in, ask yourself why you want to get in to Australian shares. Make sure you are prepared to go in for the long haul. If you want to invest to grow your deposit for home you wish to purchase in 12 months then the share market is probably not the place for you.
There are likely to be periods of negative growth so you need to be prepared for this.
Opening an account
Open a trading account with your bank. Some common trading platforms include:
Buy the big companies
Start with some blue chip shares and try to spread your investments over several sectors. It is generally better to hold different stocks of smaller value than to place all of your funds in to just a single stock. Just make sure the brokerage fee does not start eating all of your potential profits.
The simple strategy for starters is to buy good valued blue chip stocks and be prepared to hang on to them for 10 or more years. This allows you to ride out any downturns in the market and give you the best chance of a solid return. Avoid buying small companies based on a tip at a BBQ.
Review your portfolio
Share investment should not be a set and forget. While you should do well by holding shares for 10+ years, you still need to keep an eye on your portfolio and re-balance it regularly to make sure you are not getting to "heavy" in one particular stock or sector.
Be prepared to ride out any temporary downturns. It is very easy to get caught up in the hysteria and do some panic selling. The professional investors are often buying during a downturn, not selling, since this is often where value can be found.
Invest small amounts regularly
The concept is called dollar-cost-averaging, and is a term to describe the approach of investing the same dollar amount at regular intervals. If the markets are down then you will end up buying more units and if the markets are up then you will buy less.
Get professional help
If you find stock selection a little over-whelming, but still want to get in to the market then consider engaging a financial adviser or broker to help you with selecting companies to include in your portfolio. Also ensure you get regular reviews of your portfolio to make sure your weightings and company choices are still valid.
Consider a managed fund
If keeping a regular watch on the market and economy is really not your thing, consider a managed fund instead. The advantages of a managed fund is that it is run by a fund manager and they make the investment decisions for you. The disadvantage is that they charge a management fee to provide this service and this fee will reduce your net returns on the investment.
Mark Sinclair is the principal adviser at Sinclair Wealth Services. The information provided is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate to your needs and seek professional advice from a financial planner before making any investment decisions.