Share ownership in Australia is one of the highest in the world with the number of Australians investing in shares steadily increasing. Gone are the days when share trading was closed to the masses. Almost everyone holds or has held shares at some time in their life. With such a high level of share ownership, it’s not surprising that many investors look to set up their own discounted online trading accounts.
Historically, investors have used full service brokers who add value in giving you advice as to the current price as well as affirmation as to whether you should buy or sell.
Why give money away in using a full service stockbroker if all they are doing is processing your orders
However, with the large incidence of share ownership and the improvements in technology, many full service stockbrokers saw an opportunity to market a low cost alternative for those that did not need to speak directly to a stockbroker and have online discount broking alternatives available. After all, if all you want to do is buy or sell a stock, why pay 3-4 times the amount to trade through a full service broker.
On the other hand, if you want someone to hold your hand through the process, then a full service broker is ideal for you. They should keep you informed of new investment opportunities as they arise and give you an opinion as to whether the stock you’re looking to buy/sell is a value stock or the proverbial dog in your portfolio.
However, if you’re not sure that you will be able to keep up to date with the current investment opportunities, changes in the stocks you hold or don’t have a large enough portfolio to get a good spread of investments a managed fund or SMA may be a good alternative for you.
Remember there are many benefits to buying and selling your own shares:
1. Owning your own shares that you choose
This is by far the biggest attraction to investing directly in shares. There is nothing that compares to the feeling of reading up and choosing your own stocks to invest into. However, be careful not to get hooked and emotional with the shares you hold, almost “gambling” on the highs and lows of investment. Don’t go in with your eyes closed, if you’re just using the weekend papers and investment magazine recommendations to make your decisions, you’re likely to fall behind in the game. Whilst mainstream sources could be one factor in your investment decisions, remember thousands of others are reading the same information; a truly good investment opportunity will have been priced out on release of this “news/article”.
2. Access to dividends and franking credits
On achieving profitability, many companies pay their shareholders a dividend (distribution of some of their cash in the bank/profits). As such, you can hold a high proportion of shares that pay out larger dividends or shares that have a higher potential for growth and lower dividends.
Additionally you may be entitled to franking credits which are a tax offset for Australian residents who receive dividend income from an Australian-based company.
3. Liquid investment
Shares can generally be bought and sold quickly. When you sell shares via an online broker you receive the benefits of the sale almost immediately.