Starting With Shares. Roger Kinsky
partly driven by low interest rates, which make holding cash in a bank account or term deposit a really unattractive proposition. At the same time, Australian property is increasingly more expensive and slipping out of the reach of many Australians. Shares are a viable investment alternative because you don't need a lot of money to get going. In fact, you can become a shareholder with as little as $500.
Unfortunately, many would‐be investors don't know a great deal about shares and so lack the confidence to plunge into the sharemarket. If you fall into this category, this book is definitely for you! To make the book as user‐friendly as possible, I try to avoid jargon unless the term is in common usage. In this case, I try to explain it in a straightforward manner that I hope will be readily understandable. I've minimised the complications of share investing by outlining only those strategies that I believe are really important for your success. In addition, I've provided heaps of tips that I hope you'll find useful. These are simply my suggestions, not as an infallible investment guru, but as someone who has learned about shares from my successes — and failures — over 50‐plus years of share investing.
You'll find the book contains many simple illustrations. These are often in a light‐hearted vein and are aimed to help reinforce your understanding of an important point. They may also help you to look at an issue affecting shares in a somewhat new (and hopefully useful) light. All illustrations were re‐drawn from my original sketches by illustrator, Delia Sala.
This book complements my other share investing books, also published by Wiley Australia:
Online Investing on the Australian Sharemarket, 5th edition
Teach Yourself about Shares, 3rd edition
Shares Made Simple
Charting Made Simple.
The publishers and I have taken every precaution to make this book free of errors and typos but perfection is extremely difficult to attain. In a book of over 50 000 words, a few errors or typos will inevitably slip through. If you notice any of these, I would be most grateful to hear from you. I'm always happy to receive feedback or suggestions from readers so if you have any comments please contact me at: [email protected]. I'll make every effort to answer all emails within a day or two of receiving them.
You can also visit my website, rogerkinskyshares.com.au, for further discussion about shares and my books. The site features a weekly blog ‘Sharing shares’, where I discuss topical items of interest to share investors. I also offer a share mentoring and education service, where I can help you with any difficulties you may experience. Details on how to access this service are outlined on my website.
Finally, I wish you a profitable share investing experience and I trust that this book will play a significant role in guiding you on your path to success with shares.
Roger Kinsky
Woollamia, NSW
October 2021
Chapter 1 What you need to know
In this chapter, I outline what you really need to know about investing in shares so you can get started, covering market unpredictability, the relationship between risk and reward, and what you're actually investing in when you buy shares. I also highlight some of the stuff you don't really need. Are you surprised at that? You might think that the more you know about shares, the greater the profit you'll make when you invest in them. Actually, no evidence indicates that ‘more’ information is necessarily better; in fact, ‘more’ can be worse because you can get bogged down in detail and miss the important stuff. And, as I explain, some great share investing strategies are based on very simple ideas that anyone can apply.
Before I go too much further, however, I'd like you to meet someone who you'll see a lot of through this book.
Meet Michelle
In most cases, when financial decisions are involved a bias exists toward the male gender. Company directors and top executives are still predominantly male. And most finance books still seem to assume that the reader is male. In this book, I try to avoid gender discrimination and, because of the current bias toward males, I have deliberately used a female named Michelle in my illustrations. She appears in most of the illustrations in this book, guiding you through your introduction to share investing.
‘Hi! I'm Michelle. I'll be accompanying you on your journey.’
Sorry fellas, I have nothing against the male gender but women are fast becoming a force in the financial arena. By the way, studies have shown that when it comes to share investing, women are more successful than men. I explain why in chapter 5.
Trust yourself
When it comes to share investing, I want you to trust yourself and not think you need to rely on others such as share investment advisors. Many people feel like ‘dunces’ when it comes to share investing — even those with a good education. This means people often rely on investment advisors or share advisors who they believe are experts in the field — and who usually charge a hefty fee for service.
However, from my own personal experience, acquired over 50‐odd years of share investing, I have found that the results don't always justify the cost. In fact, my most disastrous share investments occurred as a result of following recommendations. Now I no longer act on advice without first putting it through the ‘grist of the mill of my own mind’ and coming to my own conclusions.
I wrote this book so I could explain the basic principles of share investing in a way you can understand so you won't need to seek ‘expert’ advice. Believe me, most ordinary people have the necessary nous to be successful share investors once they grasp the basic principles. If you ignore the hype and jargon, ‘it really ain't that hard’. You won't always be right and not all your share investments will be profitable, but you can take heart in the fact that no person and no computer program can make profitable predictions about shares that are always right.
Knowledge level you'll need
I have written many non‐fiction books over the past 50 years, and taught many classes on subjects ranging from engineering theory to shares. When I start teaching a new class or writing a new book, I face the difficulty of determining the knowledge level of the students or readers who want to learn. If I pitch the starting point too high, those who don't have the pre‐requisite knowledge get lost at the start and have to try to catch up. But starting from behind isn't a good idea when learning a new skill or acquiring new knowledge because you have to learn the old stuff at the same time as you are trying to absorb the new.
‘How am I going to catch up?’
On the other hand, if I pitch the beginning point too low, those who already know a fair bit get bored and can easily lose interest. After all, if someone is going to learn something new they need to be interested.
My publishers and I decided to pitch this book about shares at the beginner level — which explains the title ‘Starting with Shares’. I've been faithful to the title and assumed you know very little about shares, and have made that my starting point. You can find plenty of books about shares and lots of info is available on the internet, but the problem with most of these sources is that they usually assume the reader already knows a fair bit about shares — certainly enough to understand