Beginners Guide to Share Trading

It is not all that difficult to buy and sell shares. You cannot actually do it yourself, but must have the services of a broker or financial advisor to do the actual buying and selling. But you can be the one to choose what to buy and sell and when each task should be done. The most difficult part is deciding which shares you should buy in the first place.

Firstly you must decide how much you want to spend. Since each trade - buy or sell - will cost you money, you need to have more than you intend to spend. Experts tell us that $10,000 or more is around what you need to start trading. To start a portfolio with much less than this you would need to invest in managed funds. They may not be as exciting, but at least you have access to a diverse range of investments that will make investing less of a risk.

Long term investing is the best and safest way to avoid all the volatility of short term rising and falling of the stock market. Two to five years or even longer will give a much better risk factor than trying to buy and sell quickly, because no one can really predict what shares will rise and fall in the short-term, especially a beginner.

Questions to ask yourself before you start trading are: -

• How long is the investment for?
• What is your risk level? In other words are you willing to forego safety for greater gains or vice versa.
• Would you rather have capital gains or dividend payments?

The answer to these questions will help you to choose what kinds of shares you should buy. Blue chip shares are considered the safest and give a steady dividend with good capital growth. Income shares pay a larger dividend but not much capital growth. Growth shares have no dividend but much higher capital growth. Cyclical shares mirror the economy, rising and falling with it. Defensive are the opposite to cyclical, staying steady despite any recession. But then, you don't make the bigger gains during the boom time.

Most people don't just buy one type of share, but a mix to help diversify, gain more and mitigate risk. When investing, it's possible to suffer from overload. You don't want too much information, as it will only confuse you. If you make a good plan, then sticking to it and ignoring the rest is the best way to go.