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This week on Money and Investing, Mitch Olarenshaw and I break down stock market basics for beginners. From understanding key terms to building your first portfolio, this episode is your starting point for smart investing.
1. Start with the Right Mindset
The stock market reflects human optimism about the future. Despite short-term noise, markets rise over time because businesses innovate and grow. Avoid negative talk and focus on opportunities rather than fear.
2. Understand the Australian vs. US Markets
Australia’s stock market is concentrated in banks and mining, offering stability but limited growth. The US market, especially sectors like tech, offers broader opportunities with companies like Apple, Microsoft, and Tesla driving innovation.
3. Begin with What You Know
New investors can start locally by buying shares in companies they use daily — like Woolworths or Commonwealth Bank. Familiarity builds confidence and helps remove friction when starting out.
4. Move Beyond Local Investments
Australia makes up less than 2% of the global economy. Once comfortable, consider investing internationally through US-listed companies or global funds to access stronger growth potential.
5. Get Started with ETFs
With as little as $1,000, beginners can invest through Exchange-Traded Funds (ETFs). ETFs track indexes like the ASX 200 or NASDAQ, providing instant diversification and low fees — a simple way to enter the market.
6. Learn Key Investing Terms
- Dividend: A company’s profit paid to shareholders, often twice a year in Australia.
- Market Cap: The total value of a company, calculated by share price × shares issued.
- Earnings Report: company’s financial update, usually released quarterly or semi-annually.
- P/E Ratio: Price divided by earnings per share, used to assess if a stock is expensive or cheap.
7. Build a Habit of Investing
Commit to adding funds regularly — weekly, monthly, or quarterly. Don’t wait for the “perfect time.” The power of compounding works best the earlier you start.
8. Reinvest Your Dividends
Use dividend reinvestment plans (DRPs) to automatically buy more shares instead of taking cash payouts. This strategy grows your holdings without additional effort.
9. Combine Action with Education
Open a brokerage account, buy an index fund, and begin learning as you go. Start small, gain confidence, and gradually expand your portfolio as your skills improve.
For more Info about Money and Investing, you can go to the podcast; The Wealth Playbook: Your Ultimate Guide to Financial Security; and The Wealth Playbook by Andrew Baxter – Audiobook, which is on Audible.
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The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
