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If You Can Shop For Shoes, You Can Shop For Shares

Women have all the skills necessary to invest in shares, assuming you know how to retail shop. What I do observe, however, is many women don’t believe they have a right to be in the share market. I get - this may be a challenge if you’re thinking … share investing has always been done by ‘smarter/richer/more significant’ people – and, let’s face it, mostly men. BUT it’s time for you to join this world. And I’m here to hand you your ticket.

November 23, 2020

Women have all the skills necessary to invest in shares, assuming you know how to retail shop.

What I do observe however, is many women don’t believe they have a right to be in the share market.  I get - this may be a challenge, if you’re thinking … share investing has always been done by ‘smarter/richer/more significant’ people – and, let’s face it, mostly men.

BUT it’s time for you to join this world.  And I’m here to hand you your ticket.

 

Let’s start.

“Stocks, equities, shares, what are they?” 

They’re actually all the same thing and mean you’ve bought a share of a company. You are a part-owner of it. You share the financial risks and the financial rewards.

 

Why invest in shares?

Shares have the ability to provide you a higher long-term return than leaving your money in a bank account.

You only need a small investment to get started, you can start with as little as $1,000 (although I recommend if you can, start with $3,000)

Very liquid - this means if you have to, you can sell (cash them out) quickly -like, within 3 days

Easy to get started – you can register with a stockbroker/adviser or open an online broking account, and is no more complicated that opening a bank account.

I’m not going to tell you they are safe and there’s no risk involved.

It’s not true.  

However, shares also aren’t as scary as the media and journalists would have you believe either.

 

The share market has 2 functions:

Allows companies to raise money (they call it capital)

Provide investors (us) a platform to buy & sell ownership if shares in these companies.

The share market reflects the attitudes of buyers and sellers, it’s just the messenger, it doesn’t set the prices – we do.  We (as investors) also include super funds, day traders and hedge funds (they’re businesses that invest and trade professionally).  

The share market has no emotions and we shouldn’t either.

An investor’s biggest challenge, is themselves and their behaviour.

When I talk about behaviour I mean -withdrawing when market falls; buying in at the peak or taking unnecessary risks.

 

The most important question you need to ask yourself before starting your share investing is – “what are my investment goals ie. why do I want to invest in shares?”

There are two main reasons:

I want to create a passive income

I’m looking to grow the value of my investment.

These are two quite different goals, the first is focused on income (which is the dividends) and the second is focused on share value movements (the price going up).

I’d encourage all of you to focus on#1 – dividend income.  Why?  If you are focused, and invest in shares for their dividends, you’ll get around a 3-5% dividend (return), regardless of what the share price is doing. This takes the risk out of the share price going up or down, as you’re not focused on it, your goal is to create dividends(income).  This income can then be re-invested until you need it.

 

How are you going? it’s a lot of thinking so far. But we can do it, because we are competent, empowered women.

And that’s the energy we need to bring to investing.

Here are the main two types of shares–it’s important to know the difference.

Income Shares

These are companies that reliably and consistently pay a high % of their profits as dividends to shareholders. They’re often in mature industries with relatively stable sources of income(think utility companies, banks, miners) but generally have moderate or slow growth in their operations.

Income companies are not likely to experience high rises in share price and so they aim to keep shareholders happy with reliable, regular and higher dividend payments.

In times where lots of investors are attracted to income stocks, (ie. when interest rates on cash deposits are low –like now), their share prices can rise faster, meaning they give investor’s capital growth as well.

 

Growth stocks

These are companies focused on expansion and growth, offering the potential for capital growth (increases in the share price) as share prices follow earnings and profit higher. Growth stocks share prices can be more volatile because earnings are less predictable– especially in the earlier growth days of the business.

Growth companies are more likely to reinvest earnings into research and development, entering new markets or acquiring other businesses or products in order to grow.

This leaves less money, if any, available for investors to be paid dividends.

It might take several years before these companies start using some of its earnings to pay a dividends.

A growth strategy might suit you if you’ve got a long-term investment horizon, don’t require passive income and want to take a higher-risk approach to share investing.

Oh, you also might have heard the term ‘bluechip’ – its not actually a technical term, but it’s used by people to describe big reliable companies like banks or mining.  Just because their big, doesn’t guarantee a smooth ride.

Think of it in terms of buying a pair of Jimmy Choo shoes.  You’ll be confident of the quality and style, but the heel could get stuck in the pavement and snap off.  Like Jimmy Choo shoes these shares are at the premium end of the market – you’ll pay more for them, because they’re less risky.

Me? I prefer to invest in Income and Blue-chip shares – to reduce my risks.

That’s all I’m going to ‘share’ withy ou for now – haa haa….  

For now, I recommend, like you would, if you were shopping for a dress for a special occasion, do a bit more research online, on the differences between Income and Growth companies, and share with me what you discover.  

And set a budget –how much do you think you’d like to invest in your first share purchase?

Warmest,

Karen Eley is a financial coach with more than 20 years’ experience as a financial adviser. Through her business, Women Talking Finance, she helps women to be confident and knowledgeable about all things finance. Karen translates complex financial concepts into simple digestible ideas.

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