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Australian Stock Exchange


What you need to know before you start

A share is simply part ownership of a business.

A company can raise money to finance its business by ‘going public.’ Going public means being listed on a stock exchange and issuing shares to investors. By paying for the shares, each investor buys part ownership of the company’s business and becomes a shareholder in the company.

The money that a company raises in this way is called equity capital. Unlike debt capital which is borrowed money, equity capital does not need to be repaid as it represents continuous ownership of the company. In return for investing in the company, shareholders can receive dividends and other benefits.

Shares that have been issued to investors by a listed company can be sold to other investors on the sharemarket. In this way, shareholders can realise capital gains if the share price has risen – in other words, make a profit by selling their shares for more than they paid for them.

Australian Stock Exchange (ASX) operates a sharemarket in Australia, providing a transparent and regulated environment where companies and investors can come together. Approximately 1700 Australian companies and 76 overseas companies are listed on ASX.* The market value of the shares for companies listed on ASX is approximately $1,032 billion. This makes Australia the eighth largest capital market in the world according to the Morgan Stanley Capital Index, larger than the capital markets in countries such as Hong Kong, Italy and Sweden.

ASX share prices
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Why do investors buy shares?

Diversification

One of the most famous sayings about successful investing is ‘don’t put all your eggs in one basket’. Markets in shares and property move in cycles. Some investors fall into the trap of putting all their money into one asset class – usually at its peak, and then watch as another asset class takes off without them. It is better to diversify, spreading your risk, and enjoy the upturns in markets because you are already in them, rather than trying to ‘time the market’.

Better returns over the long-term

History demonstrates that shares, as a long-term investment have the potential to provide better returns after tax than any other major investment. However, past performance is no guarantee of future returns. Although share values have risen over the long-term, this has been punctuated with periods of short-term volatility, where prices can go up or down very quickly. For this reason, it is usually important to adopt a medium to long-term investment view of five years or more. The graph opposite demonstrates the return delivered by the major investment classes over a ten-year period.

The above is an excerpt from the pdf document below, which is available for you to download - "Getting started in shares".

Getting started:
Getting started in shares (584kb)
What is a Derivative (1mb)

Options:

Understanding Options Trading (248kb)
Explanatory Guide for Options Adjustments (358kb)
Understanding Options Strategies (231kb)
Understanding Margin Obligations (323kb)
Low Exercise Price Options (435kb)

Warrants:

Warrants - A simple guide (163kb)
Understanding Trading and Investment Warrants (856kb)

Futures:

Futures - Introducing ASX Mini Index Futures (203kb)

Interest Rate Market:

Bonds and Hybrids  (215kb)

Exchange Traded Funds:

Exchange Traded Funds (ETFs) - invest like a professional (149kb)