Fast Money: Succeed with Shares
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About this ebook
Do your finances control you? Frustrate you? Limit you? Well take control of your money today and get more of what you want from life.
Bestselling author, Jimmy B. Prince guides you through the ins and out of investing in and profiting from shares. Fast Money: Succeed with Shares is a jargon-free, practical guide that will get you confidently investing in the share market and on the road to financial freedom, fast!
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Book preview
Fast Money - Jimmy B. Prince
Succeed with Shares
Table of Contents
Chapter 1: Making money on the sharemarket
Cashing in your chips: highly liquid
Adding to the pile: investing small amounts
Counting your money: prices published daily
Rolling in dough: receiving a dividend
Making easy money: capital growth
No annoying charges: no holding costs
The risks you need to take
Investing in derivatives
Exchange-traded options
Warrants
Contracts for difference: playing two-up
Chapter 2: How to buy and sell shares
Back to basics
Contacting a stockbroker
Buying and selling your shares
Buying shares
Selling shares
Chapter 3: Taxing your share transactions
Taxing your dividends
Dividend reinvestment plan
Capital gains tax: the rules you had to have
How to calculate a capital gain
How to calculate a capital loss
Selling different parcels in same company
Claiming a tax deduction
Borrowing to buy shares
Chapter 4: Building a quality share portfolio
The rules you need to follow
Narrowing down your choices
Analysing a company
Core business
Competition
Management team
Company profits
Dividend policy
Major shareholders
Stockbroker recommendations
Chapter 5: Doing your sums: understanding share ratios
Company’s dividend policy
Dividend yield
Grossed-up dividend yield
Dividend cover
Dividend payout
Company’s financial stability
Earnings per share (EPS)
Price/earnings ratio (P/E ratio)
Return on shareholder’s equity (ROE)
Net tangible assets (NTA)
Price to net tangible assets (P/NTA)
Interest cover
Debt-to-equity ratio
About the Author
Further Reading
Chapter 1: Making money on the sharemarket
As share prices can fluctuate daily the anxiety that you could lose money is a constant feeling you may experience. Sure you can drop a bundle if share prices plunge. But you can also make heaps if they rise. Provided you do your homework and invest sensibly, owning shares can be a very rewarding and lucrative way of building up your wealth. In this chapter I chat about the basics, and explain that investing in the sharemarket is not all doom and gloom. I also chat about the different ways you can invest in shares.
To gain confidence dealing with this type of wealth-creating asset, it’s important that you understand the fundamentals — both good and bad. The following information explains the nuts and bolts of investing in the sharemarket.
Cashing in your chips: highly liquid
During one of my sharemarket courses a woman casually said to me, ‘I own a $50 000 share portfolio but I have no cash that I can quickly access’. When the first aid officer helped me recover from the sudden shock of hearing such a statement, I had to remind her that shares are effectively a substitute for cash. In chapter 2 I emphasise it normally takes no more than a few seconds to buy and sell them (especially if it’s done online). And you’ll normally get your money back within a few days. Alternative investments like managed investment schemes, real estate and collectables could take an eternity to sell. So what does all this mean? Shares allow you to quickly get in and out at minimal cost. And you’ll be able to take advantage of any good buying opportunities in other asset classes that may pop up from time to time.
Shares also give you the opportunity to sell small parcels at short notice. For example, you own 1000 BHP Billiton shares and you need to sell 500 shares to access some cash quickly. Unfortunately, you can’t do this with alternative investments such as real estate and collectables: you can’t rock up to an auctioneer and try to sell your front bedroom or the left-hand corner of an expensive painting by a famous artist! Although there is no minimum number of shares you can sell, the brokerages fees payable to sell minute parcels could make the transaction uneconomical.
Adding to the pile: investing small amounts
One of the great things about shares is you don’t need a truckload of money to start the ball rolling (as is the case with wealth creation assets like real estate). There are simply no set minimums. With as little as $1000 you can start a small share portfolio and build from there. And you can buy more shares as you become more affluent. Further, when you become a shareholder, you may be given the opportunity to participate in rights issues and dividend reinvestment plans, where you can buy more shares direct from the company. These offers to buy additional shares are normally at a discount to the current market price, and no brokerage fees are payable! A great example that comes to mind is the National Australia Bank share purchase plan. In August 2009 shareholders were given the opportunity to buy shares direct from the company at $21.50 per share. When the shares were allotted to the shareholders a few weeks later, they were trading at around the $28 mark (you little ripper!).
Counting your money: prices published daily
I love counting my money, especially when share prices are