What Are Shares?
Shares represent ownership in a business.
If you own 1% of Kathmandu shares, it means you own 1% of the company.
This entitles you to 1% of the company's profits and assets.
Investing in shares is powerful because it allows you to share in the ownership of a business passively.
Without actively working for the company, you still get to benefit from its growth and profit.
Finding A Sharebroker
To buy shares, you will need a sharebroker.
For buying individual shares, your best option in New Zealand is Sharesies.
They have the lowest fees by far, especially for small amounts like $100.
Also, when you sign up using this link you will get $5 free to invest!
To sign up, all you need is your email and driver's license.
Once you've set up your Sharesies account, we can buy your first $100 in shares.
How To Buy Your First $100 Of Shares
Once your account is set up and you've deposited funds, buying shares is as simple as a few swipes on your phone.
In this example, I'm going to buy $100 of shares in Hallensteins.
Go to the "Invest" tab in Sharesies and search for Hallensteins.
It should come up as an NZX stock (New Zealand stock exchange):
When we click into the Hallensteins share page we get all the information.
We can see the current share price is $5.34.
If you scroll further down you will also see some basic stats on the company, such as the dividend yield and market cap.
Let's go ahead and click "Buy".
We will then get taken to an order page.
I'm going to place an order to buy $100 worth of shares at the market price:
You can see the amount of shares we are buying is $99.50, and the brokerage fee will be 50 cents.
Simply hit "Buy" and our order will go through to the market.
Congratulations!
You've just bought your first $100 in shares.
Why Would I Want To Own Shares?
Now that I own Hallensteins shares, I am technically an owner of the company.
This means I am entitled to share in the company's profits and growth.
Of course, I am only one of many owners in the company.
In fact, we can work out my ownership as all the company's details are public.
In the "Stats" section of the Hallensteins page on Sharesies, we can see the market cap is $318 million.
Market cap refers to how much the company is worth at current share prices.
So if I own $100 of shares, and all the shares are worth $318 million, that means I own 0.0000000314% of the company.
So how do we benefit from owning shares?
There are two main ways:
1. As the company grows, our investment has the potential to grow too. For example, if the company starts increasing their profits and performing well, the share price might go up. If the share price goes up 20%, it means our $100 also goes up 20% to $120. We will have made a 20% return on our money, compared to the 3% or 4% we might have gotten from the bank.
It's not uncommon for shares to double or triple in value in a few years, giving you 100% or 200% returns on your money in a short time.
2. Often companies will pay out profits to their owners. This is known as a dividend. In fact, I have a small holding of Hallensteins in the @moneybren porftfolio at the time of this writing, and you can see I receive regular dividend payments in the form of cash straight into my Sharesies account:
Even though these are not big amounts, you can imagine how powerful this is when you own a large amount of shares.
If I had $100,000 worth of shares, these amounts would be 100x larger.
Instead of getting $28, I would be getting $2,800.
When people retire early, it's common for them to simply live off dividends if they've invested regularly and smartly.
How Do I Know Which Shares To Buy?
Stock picking is not easy.
While they can make you extremely rich, if you select shares poorly, it's very likely you will lose money.
It's important you understand how to recognise a quality stock before investing any significant sum of money.
Quality stocks usually share certain traits. Some of the main ones are:
- An excellent CEO
- A good track record of earnings stability and growth
- A quality product in a resilient industry
- Good debt management
- Strong cash flow
- Promising future in its target markets
- A share price that offers good value
You can find all this information using basic tools online and reading the company's annual reports.
If you would like to learn more about this process, you might want to check out my course Simple Stocks.
It will teach you how to do all of the above and more, in easy step-by-step lessons that anyone can follow. If you're new to stocks and would like to learn how to manage and grow your own stock portfolio to six, seven figures and beyond, there's no better place to start. You can learn more about it here.
Congrats on your first $100 in stocks. You are now the proud owner of a stock portfolio!