Pros and Cons of Investing in Shares

May 07, 2018

There are many options when it comes to growing your money. One of these options is investing in shares, which are also known as stocks or equities. Buying shares effectively means you will become a part-owner of a business.

As with any other type of investment product, investing in shares in Australia has benefits and disadvantages. If you want to learn how to buy and sell shares, you need to know the ins and outs of stock trading. To begin with, the stock market can be your best friend and your worst enemy. You can get good returns from your investment, but you can also experience huge losses.

In this article, let’s take a look at the pros and cons of investing in shares:

Pros of investing in Shares

Potential capital gains

Many consider investing in shares an excellent way to grow your money, since you can get a high return on investment when done the right way. It’s not as simple as choosing a company that you like but relies on doing research and taking factors such as market fluctuations and the economic situation into account.

Potential income from dividends

Aside from the possible increase in value, investing in shares can mean getting payouts or dividends regularly. Another great thing about this is that if your dividends are franked, you will be able to reduce your tax through tax credits.

Ease of transacting

Many people are attracted to investing in shares because of the easy transactions. Unlike investing in property where buying and selling can be hard and time-consuming, you can quickly buy and sell shares.

Cons of investing in Shares

Potential capital losses

It goes without saying that when investing, there’s a possibility to lose money. Stock prices rise and fall so you can lose whatever money you’ve gained. You can also lose money when a company collapses.

No dividends

Investing in shares doesn’t come with a guarantee that you will get payouts regularly. Bear in mind that dividends can go down or worse, you will not get any dividends at all for a certain period.

Investing in shares comes with a fee

It may be an easy process, but it also comes with a transaction fee, which means you’ll pay a fee every time you buy or sell shares.

Do you know other pros and cons of investing in shares in Australia? Share your ideas in the comments section.

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