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Risks and benefits

Investing in shares can help you achieve your investment goals. Like any investment, shares have risks you need to understand before trading. You should obtain independent advice from a professional adviser before making a decision

Benefits of investing in shares

Shares can be a sound long term investment, are easy to trade and require only a small amount of money to invest.

Strategies to suit you

Shares allow investors with different goals to develop tailored investment strategies. Two main strategies are, one, to invest for growth – where you benefit from any increase in value of the shares you own – or two, to invest for income, where any dividends you receive provide an income stream.

Liquidity

ASX's top 200 companies are among the most liquid in the world. Liquidity is where investors and buyers can quickly buy and sell shares. Not all companies are equally liquid. The potential to sell your shares, or sell them for the price that you want, depends on the availability of a willing buyer.

Cost-effective

The process of buying and selling shares through a broker can cost less than $20. You may need to pay more if you would like to receive advice and/or access to research on a company. You can invest in shares with as little as A$500 (plus brokerage costs).

Tax benefits

Depending on your circumstances, there may be tax benefits available to you if you invest in listed shares. For some investors, capital gains tax discounts may be available on shares held for more than 12 months. In addition, some investors may benefit from franking credits paid on dividends. You should obtain your own independent taxation advice prior to investing.

Potential risks of investing in shares

To receive a return on the money you are investing, you need to be prepared to place that money 'at risk'. Generally the greater the risk associated with an investment the greater the rate of return investors will expect.

How are dividends released?

As a shareholder you are entitled to a share in the company's profits or earnings. For many investors, share selection depends on whether a company pays dividends and the size of those dividends.

Many ASX listed companies pay dividends twice each year, usually as an 'interim' dividend and a 'final' dividend. Companies are not limited to paying twice a year and may pay more or less frequently. A company may also pay a 'special' dividend, related to a particular event. There is no requirement for the company to pay a dividend from earnings, some companies might elect to reinvest the earnings back into the business.