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delve into the sharemarket. In the bottom 1,900 or so stocks, you may find some real dogs that should not be listed (and probably won’t be for very much longer), but you can also discover wonderful companies that are just about to flourish. This kind of investing is called bottom-fishing. You need to be wary and know how to back up your discoveries with solid research. At these depths of the market, you can make some very wrong moves.

      You have to own some of the 2,200 stocks in order to experience the ups and downs of the sharemarket. The tools that enable you to get into the market intelligently are right here in this book. The sharemarket should be an essential part of everybody’s investment strategy. Sharemarket participation in Australia is among the highest in the world, but too many people still don’t understand its benefits. As the nation’s population ages and superannuation grows in importance, the amount of Australians’ investment assets (and retirement nest eggs) going into Australian shares is set to rise dramatically. My aim in this book is to help you understand the sharemarket so that you can control your future financial security.

Foolish Assumptions

      I don’t assume a lot about you as a reader and budding share investor, but I do make these brief assumptions before I encourage you to get started:

      

You are interested in knowing more about the sharemarket.

      

You know some of the basics, but you’d like to flesh out this knowledge.

      

You know that even if people don’t think they’re involved in the sharemarket, a big chunk of their superannuation certainly is!

Icons Used in This Book

      Throughout this book you see friendly and useful icons to enhance your reading pleasure and highlight special kinds of information. The icons give added emphasis to the details that I think are extra important. Although the icons are self-explanatory, here are their basic messages.

      

Take extra special notice of this piece of information. I mean it, too – this detail is really something to store away for future use.

      

It’s not vital that you read this stuff as you’ll get a good understanding of the subject matter anyway. But it’s often interesting and sometimes an entertaining diversion.

      

This is information I think you can profit from, so I’ve pre-highlighted it for you (I’m trying to save you from getting highlighter ink on the opposite page when you close the book).

      

Uh-oh! Wealth hazard ahead! Manoeuvre carefully around this obstacle, and mark it down in the memory bank.

Beyond the Book

      This book also comes with a free access-anywhere Cheat Sheet that provides plenty of helpful share investing tips. To get this Cheat Sheet, simply go to www.dummies.com and search for ‘Getting Started in Shares For Dummies Cheat Sheet’ in the Search box.

Where to Go from Here

      You don’t need to read this book cover to cover, but if you’re a beginner in terms of the sharemarket, starting at Chapter 1 is a good way to go. In fact, I hope you do. If you’re not a beginner, then each chapter is written as a self-contained read, with plenty of cross-references to other chapters scattered throughout the book. If you want to know more about a particular topic, don’t hesitate to follow the cross-references and gain a broader, fuller understanding of that particular topic.

      I hope that after you go through this book – if you haven’t already dipped your toe in the sharemarket waters – you’ll want to take the steps to starting your first portfolio of shares. If you’re already an investor – great! Now you’ll want to become a better-informed and more effective investor. Work out for yourself what financial security means to you, sit down with a financial adviser (or not, if you prefer; but it is advisable) and decide how shares can help you achieve your goals. Then, get started. Today!

      Part I

      Putting the Share in Sharemarket

       In this part.

      

See how the sharemarket builds wealth.

      

Figure out the two functions of the sharemarket.

Chapter 1

      So, You Want to Invest in Shares

       In This Chapter

      

Timing your investments

      

Defining a share

      

Buying for profit

      

Discovering the five big pluses

      

Reducing risk

      I f you’ve been hearing about the sharemarket for a long time, but you’re only now taking the plunge, welcome aboard. There simply isn’t a better place to invest money.

      You’re probably already familiar with shares and how they generate long-term wealth. In that case, you may want to skim through Chapter 1 and Chapter 2 quickly and then move on to Chapter 3 for an in-depth view of investment strategies. If that isn’t the case, you’re in the right spot to get started.

      Investing Is All about Timing

      Australians are among the world’s most avid share investors, with 33 per cent of the adult population, or 5.9 million people, owning shares directly. This figure has fallen since 2004, when 55 per cent of Australians (or 8 million people) owned shares, but Australia is still equal-second in the world (with Hong Kong) when it comes to share-owning (the US is first with 52 per cent of Americans owning shares). The proportion of the Australian population owning international shares is also now 13 per cent, up from 10 per cent in 2012. Given that 19 per cent of Australian adults have owned shares in the past, chances are you’ve dipped your toes in the sharemarket pond before picking up this book.

      Figure 1-1: shows share investing trends in Australia from 2000 to 2014.

Figure 1-1: Share investing in Australia 2000 – 2014.

      Source: 2014 Australian Share Ownership Study, Australian Securities Exchange

      ‘Hang on,’ you say, ‘doesn’t the sharemarket crash and correct regularly? What about the headlines that talk of billions of dollars of investors’ savings being wiped off the value of the sharemarket in a day?’ (See the sidebars ‘What happened? The GFC at a glance’, ‘GFC economic recovery: Quick to lose, slow to come back’ and ‘Bouncing back from the GFC: Sharemarket recovery’, later in this chapter.)

      Occasionally, that happens. No one who goes into the sharemarket can afford to ignore the fact that, from time to time, share prices can suddenly move in an extreme fashion: Sometimes up, sometimes down. When share prices move down, they attract media headlines. However, what the headlines don’t tell you is that on most other days, the sharemarket is quietly adding billions – or even just millions – of dollars in value to investors’

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