Its been a while since the first Stock Market Basics article, so welcome back to the spotlight on Business and Markets. Lets talk about the importance of investing. I am sure you can agree that we have career/casual/part time jobs where we work hard to earn our money. So I ask you, why not in turn make our money work hard for us too?
I feel young adults view the the stock market/shares as a faraway and complex thing, opting to save money in a bank savings account. In the past week the Reserve Bank of Australia (RBA) once again cut the official interest rate to 1.50% (a record low). Bank borrowing rates are lower, however also, savings account interest rates are low. Therefore the rate of return on savings deposits in the current economic climate are reduced.
I have chat with a few of my best friends this week on this topic of investing, and realise that each individual has a different appetite for risk. One prefers the security and liquidity of cash in a bank savings account, knowing that it is readily available when needed for an expenditure/emergency. Another doesn't mind a bit of informed exposure in the share market to gain some passive income.
There are some common misconceptions surrounding the share market:
- that it is high risk
- you need to keep up with the financial news everyday
- you need to keep up with the price action everyday
- your money is tied up (shares are quite liquid too, as they can be sold and returned to cash)
It is really about taking calculated risks, picking a basket of good businesses and purchasing under value for good investment growth.
1] You just need to start at one point, so initially take time to research and make decisions on which sector/businesses you understand well. In this day there are a lot of aids that can assist you in gathering knowledge;
Reading - Australian Financial Review / ABC Business News
TV - ABC The Business
Apps - Stocks (iOS) or JStock (Android) to watch price action
2] Then the best way to learn is through experience, so for starters small change robo investment softwares such as Acorns will give you an idea and slightly passive exposure to markets. There are investment portfolio types from conservative to aggressive with differing investment breakdowns. As you start to gain more confidence, you will then be able to move onto investing in individual shares.
This article is intended to encourage you to start looking and engaging into better investment options you may take to make your money work hard for you. Not just to aggresively build wealth, rather for a sense of financial freedom.
You can take it as insight, or you can take it as Just BS!