Know your end goal
It helps to know where you’re going before you plan how to get there, right? So, it’s important to know your end goal before diving into the sharemarket.
Do you want your investments to generate a regular income or are you more interested in the value of your investments growing over time? Maybe you want both.
Investing in companies that pay regular dividends is one way to earn regular income from your investment.
What is a dividend?
A dividend is part of a company’s profit that it pays to shareholders. Companies on the Australian sharemarket that pay dividends generally elect to pay dividends twice a year. But that’s not a hard rule – they can choose to pay more or less often. Companies sometimes don’t pay dividends at all if they’ve made a loss or choose to reinvest profit back into the business.
What type of investor are you?
Before you go down a research rabbit hole, ask yourself why you want to invest. The answer may seem obvious – to make money, of course – but ask yourself, are you after a quick profit or are you in it for the long haul? In other words, are you an investor or trader?
An investor is usually someone who’s happy for their nest egg to grow in value over time, usually five years or more.
Traders are a different breed, buying and selling shares quickly over days or months to try and profit from small price changes. Traders will often check their shares daily and are usually more comfortable with riskier investments.
Risk analysis: investor v trader
Investing:
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Trading:
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How to find investment ideas
Without a clear direction, finding the right investment can feel a bit like looking for a needle in a haystack. Should you listen to Uncle Joe’s hot stock tip or what your friend’s friend told you to buy? Probably not.
The type of investor you are and your end goals are important things to consider when looking for ideas. For example, if you consider yourself more of a passive investor (someone who prefers to buy and hold for the long-term, often seeking to match the market’s performance rather than trying to beat it), investing in an Exchange-Traded Fund (ETF) might be the way to go.
What you’re into, or the industry you work in, are other sources of investing inspiration. Say you’re a nurse and you want to support companies in the health sector. Then you’d look for listed health care companies on the sharemarket. Considering investments in an industry you understand could also simplify the research process.
Reputable independent research providers, like Morningstar and Goldman Sachs, are other good sources of inspiration. They regularly publish market reports and share trading ideas. CommSec customers can view the latest recommendations direct from their account by selecting ‘Quotes and Research’ and ‘Trading Ideas’. They can even filter by sector to use as a starting point for their research, and to see whether a particular company is considered to be undervalued, overvalued or fairly valued by analysts.
Investment Themes
CommSec’s Investment Themes is the perfect place to start for investing inspiration, with themed stock collections covering things like property exposure, index ETFs and income generating stocks. You can sort the stocks in each collection according to performance, size, value and more, and add them to your Watchlist to see how they fare. Start exploring now
Ready to read up on the top companies on the ASX? Let's go.
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