Dividends

If the company in which you own shares makes a profit, as a part owner you are entitled to a share of those profits - these are called Dividends.

Your Dividends are paid to you every 6 or 12 months. The amount of dividends you receive depends on:

• The number of shares you own
• The dividend paid per share

The yearly dividend paid by a company listed on the ASX can vary from 0% to 15% of the share's market price. This percentage is called the Dividend Yield.

Capital Gain

Capital gain occurs when the market price of your shares is higher than the price at which you originally bought the shares.

The market price may increase due to :

• Positive company performance,
• Favourable economic conditions,
• A positive performance outlook.

NB: Similarly, a capital loss occurs when the market price of your shares is lower than the price at which you originally bought the shares. It should be noted that a capital gain/loss will not be realised until you actually sell your shares.

Company Bankruptcy

Companies experiencing severe financial difficulties may have no option but to declare bankruptcy. Sometimes even rumours of bankruptcy will cause the share price to fall dramatically, and may result in a complete loss of your investment.

These situations are relatively rare and investors obviously try their best to avoid investing in companies at risk to this.

Volatility

There may be large fluctuations in the share price over the period you hold the stock. The causes of this volatility may include:

• Global economic climate
• Changing outlooks for the industry sector, or
• Company specific news.

A degree of volatility is likely to occur with any share investment. Some investors try to smooth the short-term volatility by holding their shares for a longer period; while others attempt to benefit by trading between the peaks and troughs in the share price.

What's the minimum to get started?

Investors typically need at least $2,000.00 to start investing. This will allow you to buy shares in one company. Any smaller amount and the investment will have difficulty earning back the brokerages fees let alone make a profit.

How much time will it take?

The time you spend on your share investments ultimately depends on your interest and enthusiasm for it. While some investors pour over news articles and broker reports in attempts to seek an advantage, others simply allow professionals to invest for them through Managed Funds.