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World Stock Markets

26 Jul 2017(20 minutes delay)



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Buying shares

 

Selecting shares may be difficult, knowing when to buy even more so. Books have been written on the subject.  

 

When to buy shares

Far too many investors are attracted only by a bull market and often after its run is almost over. They exit later after the market turns and when they can’t bear the market going any lower.

 

Here are some pointers:

  1. Look for confirming signals like directors buying, companies buying back their shares, institutional shareholders topping up.
  2. If you can’t pick the highs and lows (and nobody can, at least not consistently), one view is there is no better time to buy than now; and ride out the corrections and short term dips. Another view is to buy when the general market is in an uptrend; but there again watch for signs of overheating.
  3. Be particularly wary of the old adage, “buy low, sell high”. Don’t buy just because a share is down a lot from its peak. Often what seems to be cheap goes lower (even to zero!) and what seems to be expensive, goes higher (into the stratosphere). 
  4.   Of the market as a whole, Warren Buffett says be fearful when others are greedy and be greedy when others are fearful. Reading widely about the international economy and markets will help. 

 

Even the experts get it badly wrong:

On 1 July 2008, when the All Ords had closed the previous day on 5333, the chief equities economist at one of Australia’s most prominent brokers picked the index to reach 6100 by end year 2008 (actual 3659) and the Aussie dollar to be at US 96 cents (actual 69 cents). (The writer vividly remembers both forecasts because he placed some reliance on them!!)

If the experts can be so far out only six months in advance, how can us lesser mortals pick the market? Forget it. Trying to pick the bottom will probably lead to missing it altogether. Focus rather on selecting the right investment. While shares are obviously cheaper when the NZ50 is 2500 rather than 4000, don’t take any less care in selecting the right companies. In tough times concentrate on healthy cash reserves and strong balance sheets.

While we are on the subject of forecasts, here is a book that reveals why "experts" are so often wrong with their predictions and why our need to have certainty in our lives means we will go on believing them despite consistent failures.

 

How to buy shares

Fortunately the actual act of buying shares is relatively simple these days.

One approach is to utilise the services of your bank. Some of the banks have broking arms or alliances. One advantage here is that you may be able to link existing savings accounts for use in the buying or selling of shares. Here are the links for some bank customers:

ANZ NATIONAL BANK LIMITED

ASB BANK LIMITED

(neither BNZ nor WESTPAC appear to have such alliances)

 

Consider a full service broker

If you are not sure what to buy, then at least consider using a full-service broker. (you can find someone close to you here), But first satisfy yourself in relation to the following questions before committing:

  •   How much you are going to pay to buy and to sell shares? 
  •   Do they make recommendations, if so how often? 
  •   Will they send a newsletter, if so how often? Ask for a sample. 
  •   Will they review your portfolio, if so how often? 
  •   Will they need an account opened? 
    1. (If so how much is needed and what interest is paid?)
  •  

Internet based non-advisory brokers

This is the best way to buy shares if you have decided what to buy and you are happy to use the internet. See our list of brokers here together with their brokerage rates. Most of them also offer the facility to place orders by telephone.

 

 

nzforex_burnt


Thank you for the wonderful service you provide through your website. I've had the pleasure of selling a parcel of shares: easy, efficient, and very cost-effective. And I especially like the super-easy way your site allows me to chase up companies' various name changes, and so remain up-to-date.
I Brandli, Coffs Harbour NSW


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