Managers can invest shares listed on the stock exchanges of the world, i.e.: a public company divides its ownership into portions called shares. The primary objective with share investment is capital growth through the value of the share, but they also can pay income in the form of dividends. Dividends are the company’s distribution of a portion of its profits that are payable to shareholders and can also have significant tax benefits attached under the Dividend Imputation System.
Shares are generally medium to high-risk investments in that you rely on the company to perform well and grow over time. Given the level of risk associated with share investments, it is recommended that most investors invest for the medium to long term in order to smooth out returns.
Different managers may invest principally in all or specific market areas:
- Australian Shares
- Australian Industrial Shares
- Australian Resource Shares
- Australian Imputation Shares
- Australian Emerging Companies
- International Shares
- Specific International Regions
- Specific Countries
Additionally the portfolio may be weighted towards more or less speculative stocks, or may be designed for income rather than capital growth or vice versa. The use of Australian Imputation stocks is the aim of some managers in order to produce tax effective income coupled with reasonable growth. International managers may hedge the currency risk or may not. They may also invest around the globe or only in specific countries or regions.
It is important to note that shares can be held via a managed fund and also directly. They are essentially 2 different products.
Advantages of Share Investments:
- They provide for a good long-term capital growth and performance through careful selection and consideration.
- Most Australian Shares have some form of imputation attached, i.e.: the company has already paid tax on the income, thus potentially enabling the investor to a tax credit.
- Anyone can own shares, as there is no minimum and can be accessed via a Managed Fund.
Disadvantages of Share Investments:
- Value of shares may fluctuate at a high rate in the short-term.
- Dividends are not guaranteed in that the company is not obliged to declare dividend payment.
- Ordinary shareholders are usually towards the bottom of the list for repayment of capital when a company winds up or liquidates.
For more information on shares, contact us to arrange a free initial interview.