Episode Details

If you catch a snippet of the radio in the morning on your way to work, you're likely to hear what happened to the Dow Jones overnight. If you read your news online or watch the news on TV it's likely you'll hear about the All Ords or maybe the ASX200. You might even come across acronyms like the NASDAQ and the FTSE. Probably, you know this is something to do with share markets. If you turn your mind to it a bit more, you probably know that the share market is where people buy and sell shares in companies like Telstra or BHP. Maybe you have in mind that the share market is risky and people lose their money sometimes. Well, if this is about the extent of your share market knowledge, you're not alone, and this episode's for you. I think it's fair to assume that you have an interest in achieving financial independence. That is what we're all about here. In working towards that goal, building wealth is likely to be an important feature. With wealth you can generate investment income with which you can then live on. Or perhaps you can use that wealth to buy a business, or invest in starting a new business if that's where your Financial Autonomy goal points you. Or perhaps Financial Autonomy for you means remaining as an employee in a business with a team of people that you enjoy being around, but with the financial resources to resign if ever management changed or something else happened that meant you no longer enjoyed coming in each day. The goal of this audio blog is to provide you with choice in life, and that sort of goal is a common one I see with many of my clients. Being in a position to say no. It's very empowering, and very liberating. One avenue towards financial independence is to build wealth via investment in the share market. I should make it clear here that what I'm talking about is investing, not trading. If you've listened to the common investment mistakes series you will recall I covered off on the dangers of trying to be a share market trader. In short, it's an almost guaranteed way to get poorer. So we're talking about investing. Buying shares that you intend to hold for at least a year, and profiting from both the dividend income, and growth in the value or price of the share over time. There are different ways you can gain exposure to the share market. Your super fund likely has at least some exposure right now. Later I'll look at a couple of options for your non-superannuation money, but let's start by explaining a few of the terms and elements you will come across when you take an interest in investing the share market. There a multiple markets We refer to the share market like it's one thing, but that's not true. All developed countries have their own share market, and some such as the US have multiple markets. There are 60 major stock markets around the world. There's a good infographic on world share markets here. Technology is gradually bringing these markets together in a practical sense for investors, but for the moment at least, as an Australian, if you want to buy shares in Apple let's say, it's not easy. Why? Because Apple isn't listed on the Australian share market, and it's not straight forward for an Australian investor to invest in the US share market (where Apple is listed) directly. Our local market is called the ASX. The Australian Stock Exchange. Should be ASE really shouldn't it, but presumably someone felt the X looked trendier. On the ASX you'll find lots of companies you're familiar with – the banks, the big miners, Woolworths, Telstra, etc. Of course there's also plenty there you've never heard of too. About 2,000 companies all up I believe. In the United States the main market is the New York Stock Exchange. This is the largest share market in the world. O