Book Review > Starting out in Shares the ASX Way

This book, which runs to 201 pages, is aimed at readers who are new to share investment. It is divided into two parts: the basics of the share market, and making informed decisions about strategies and approaches to investing. Part I covers:

• Getting ready to invest (looking closely at your current financial circumstances);
• Defining a share and the share market;
• The main investment areas;
• The benefits and risks of shares;
• How to buy and sell shares;
• The nuts and bolts of the share market; and
• Following the stock exchanges indices.

Part II discusses:

• Keys to investing success;
• The benefits of adopting a consistent share trading strategy;
• Share selection methods including fundamental and technical analysis;
• Examples of investment strategies;
• Managed funds versus direct investment;
• Negative gearing and margin lending; and
• Taxation.

This is an updated edition produced by specialists at the Australian Securities Exchange with a foreword by the Chief Executive Officer. Throughout the book, margin notes are provided to define common share market terms and refer readers to further information. This is a very useful tool. A glossary of share market terms is also provided at the back of the book.

The information contained in the book is general only. There are numerous recommendations that readers should consult their professional adviser before making any investment decisions.

The book takes a realistic approach to the vagaries of the share market and warns readers that ‘…the value of a share can fall to zero’. ‘It is important to know that not all companies will pay dividends to shareholders’.

The chapter on ‘Keys to Investing Success’ is a useful one as it provides some insights into the mindset required to follow the trading strategy that has been adopted. The key to adopting the right mindset lies in understanding how important time (especially a long term perspective), consistency and discipline, and patience are to successful investing. Such an understanding will help the investor maintain an appropriate disregard for short term volatility.

The chapter on ‘Fundamental Analysis’ is also useful as it introduces the reader to a number of important market ratios, such as, earnings per share and profitability ratios. The writers advise that not every ratio is covered as they are not preparing the reader to become a qualified analyst. They do not open the ratios up to interpretation, but encourage the reader to seek out more specialised texts.

The chapter on ‘Examples of Investment Strategies’ sets out in simple point form the basic mechanics of six share selection strategies that the reader may consider in constructing an investment portfolio. The objective is for the reader to use all of the material presented in the book and formulate their own ideas about what strategies might suit. The important message is to have a strategy and, once developed, apply it consistently.

Overall, the book provides readers with responsible, balanced and practical information on share market investment. The book is clearly written and should be a valuable addition to an investor’s tool kit.

John Russell is a member of the AIA.