The purchase of shares can generate significant returns. The rate of return is contingent upon the type of company, the industry it is located within, and current market trends. Shares are considered as a riskier investment as there is the potential for substantial losses.
Brokerage fees apply for each time you purchase or sell shares, fees typically range from as low as $9.95 to 0.11% of trade value for transactions made over $20,000. As a general rule, the ASX advises that you should begin investing in shares with at least $2000. This is designed to prevent brokerage fees minimising your return. For example, a $14.95 brokerage fee on a $1000 investment amounts to 1.495%, whereas on a $2000 investment the fee would amount to 0.7475%. Thus by investing less, your shares will have to rise by a greater amount in order to break even. By investing more, your shares are required to do less work.
A share is indicative of ownership in a company. The ASX operates by matching buyers and sellers looking to exchange shares at a specified price. A third party broker is required to facilitate the transaction on your behalf. This can be done via CommSec, Nabtrade, SelfWealth, and others.
A crucial aspect of share purchasing is portfolio diversification through buying equities across different industries. This serves to minimise your risk by ensuring that not all of your equities will be impacted by economic trends.