If you are planning to invest in the Share Market, you need to have a strategy to ensure you make money RATHER than lose it, like most investing beginners. Here's Jon Lynch's top 4 tips for making money in the Share Market. Increased Share Value vs. Regular Dividends These differing circumstances highlight one of the main questions you should ask yourself when considering which shares to buy. Are you seeking increased share value (capital gains) or regular dividends? That is, do you want your shares to increase in value so that you can sell them and make a profit, or would you prefer to be paid regular dividends that are greater than the cost of living? Need for Liquid Assets Another thing to think about is whether you will require some of your funds in the near future. You may want to buy a house or travel overseas. If that is the case, you should carefully consider the shares you choose, as well as how much you wish to invest in the share market in the first place. Although the market has proven to return higher profits over time than most other secure forms of investment, the market does experience peaks and troughs. If you enter the market at the wrong time and wish to sell within a short period, it is conceivable that you could lose money. If you are using the share market just to house your funds and realise a small profit, security is the key. Attitude to Risk Taking Some people like taking risks. They jump out of airplanes and parachute to the ground or they bungee jump from cliff tops and bridges. Others prefer to keep their feet on the ground. A quiet walk in the bush is more their style. The same applies to buying shares. You have to feel comfortable with your decision. Think about your attitude to risk before choosing stock. If you're not comfortable with the highflying approach, steer clear of shares that offer potentially large returns but with a greater degree of risk. Make sure you'll be able to sleep well at night. Remember that all types of investments are a form of gambling, though some are obviously a higher risk than others. Taxation Situation As with anything to do with money, earnings and investing, taxation is also an issue. The way that you purchase shares and the type of return you get will affect the amount of tax that you'll pay. Some dividends you receive may incur a tax; others will come to you tax-free. Selling shares will possibly make you liable for capital gains tax. Again, it depends on your individual circumstances and the types of investment decisions you have made. It is recommended that you sit down with an accountant or financial adviser before committing yourself to a large investment in the share market. They will be able to go through your situation and work out the best way for you to invest. |
