Equity or its ownership through shares is one of the key investment choices for paper assets. While you face loss of capital in investing, you may also enjoy price appreciation and dividends with stocks you own. Learn all about the basics of shares investing.

Why Shares?

  1. Highest returns among asset classes in the last 50 years (12.35% in the US market)
  2. Warren Buffett arguably the greatest shares investor average is 21.6% in the last 50 years (or a total of 1,826,163%)
  3. Compounding returns

 

Profiting from Shares Investing

Profiting from Shares Investing

Gains from shares investing primarily comes from dividends (realised profits) and share price appreciation (unrealised profits until sold).

  1. Dividend payments (note: not all companies pay out dividends)
  2. Share price appreciation (realized when you sell the share)

Shares Investing Categories

Investing into shares itself can be broadly divided into 3 categories of investing with rather different goals & methods.

1. Day trading

Buying & selling shares in the same day (intraday) to make quick profits based on small price fluctuations & involves arguably a high degree of risk. Many day traders advise others to stay away unless you are willing to pay the price to learn. A key feature as well is being able to step away & cut losses. Typically not holding any shares at the end of each trading day.

2. Swing trading

Short term trading typically lasting from 2 days up to 1-2 weeks. Traders are interested in short term price trends & momentum.

3. Long term value investing

A long term trading strategy (above 1 year & often longer) looking for companies with strong fundamentals & that the market has undervalued. Or as Warren Buffett puts it buying stocks at less than their intrinsic value.

 

Common Shares Categorization

Exchange Traded Funds (ETFs)

Exchange traded funds are index funds that are listed on a stock exchange. ETFs allow investors to buy a portfolio of stocks under a single share listing. Buffett has famously outlined his investment strategy upon his demise for 10% into short-term government bonds & 90% into one single ETF – the S&P500.

ETF advantages

  • Immediate diversification with a single share that outperforms most managed funds in the world
  • Lower expense ratios (especially compared with UTs in Malaysia)