9 Things To Know Before You Start Investing, According To An Expert

If you feel like you woke up one day and suddenly all of your friends had become experts in the stock market, you’re not alone. The investing space has become increasingly democratised over the last few years, bringing a new crop of investors into the market. According to the ASX 2020 Investor Survey, close to a quarter of Australia’s nine million investors only started investing in the past two years. 

There are plenty of reasons why investing has transcended beyond the confines of the already wealthy Wall Streeters in recent years. Between COVID, stagnating wages and the housing market's grim prospects, millennials and Gen Zs have actively been seeking out alternative means of building wealth. On top of that, everything from Reddit threads to micro-investing apps have unlocked what used to be heavily guarded information.

However, even though there is so much information available, it’s still difficult to know where to start. So, to nail the basics, we spoke to Brooke Roberts, co-director and founder of investing business Sharesies. Roberts gave us some insight into the essentials, from what beginners should invest in, to investment trends, industry jargon and when to sell stocks. Here’s what she had to say. 

Roberts says that there are multiple ways to invest. These include buying shares, property, bonds, or newer innovations like cryptocurrency and NFTs. Investors can choose to invest long-term, which involves looking for options that can be bought, held and topped up incrementally; or short-term, which is also known as trading.

According to Roberts, the best way to start investing is to learn as you go. Like most things in life, it can be difficult to dive in headfirst, but with a bit of knowledge up your sleeve, getting stuck into investing is the best way to understand the process. 

She notes that many of the traditional barriers like being "priced out, jargoned out, or generally feeling excluded from the investing space" have mostly been removed. This is thanks to the wealth of information available that makes it easier for beginners to get started. 

According to Roberts, setting an intention or goal for what you want to get out of investing will help inform what you start investing in. She notes that current beginner investors are gravitating towards exchange-traded funds (ETFs), as these invest your money across lots of different investments, helping to diversify your portfolio (which is a fancy way of saying, you're reducing your risk by not putting all your eggs in one basket). Some new investors, she shares, like to choose established public companies (which are called blue-chip companies), that have a history of steady growth. 

“Others like to think about what companies or industries they like and believe in, aligning their investing with their values,” Roberts adds. For example, analysts expect the movies and entertainment industry's per-share earnings to rise 57.5% from last year, according to S&P Global data, as reported by the Wall Street Journal — great news for any film buffs.

"I like to align my investing with what I believe in. I tend to look at companies, industries or funds that I want to see more of, and I back them by choosing to invest in them," Roberts says of her own investing philosophy.

Roberts gives a rundown of the following terms every beginner investor should know the meaning of:

Capital gains: When shareholders sell their shares for more than what they paid for them. It's one of the ways you can make money from investing.

Due diligence: The research you do to determine if an investment option is right for you.

Diversification: When a portfolio has more than one type of investment. For example, the different types of investments could include shares, property or bonds. It also refers to when a portfolio has investments in a range of industries and markets.

Dividends: When companies give shareholders a portion of the profits — another way to make money off investments.

Exchange-traded fund (ETF): A type of investment fund that includes lots of different investments within it that are often themed around things like industry or company size.

Roberts noted that there isn't exactly a 'prime time' to start investing. Rather, she has encountered many investors that have said they wished they'd started investing earlier. So, the moral of the story is — start sooner rather than later. "Investing is a journey, and you can learn and grow as you go," she says.

While this may have been true in the past, the short answer is no. "Investing platforms have made investing more accessible than ever," Roberts says. There are a lot of options for beginner investors, including the Sharesies platform where you can start investing from just one cent.

According to Roberts, there are two ways to look at the benefits of investing, the first being the long-term, positive financial impact it can have. "That depends on so many different factors, like what you invested in, what the markets are doing, how you are investing, and your investing strategy," she explains.

The other benefit, she says, is the impact it can have on self-esteem, as investing is one way of creating financial empowerment and literacy. She says, "I love hearing from investors about their journeys and what it means to them to learn about this space and work toward their financial wellbeing."

"When to sell your shares all depends on your individual circumstances," explained Roberts. She says that it's important to consider your investing goals to guide you on when to sell your shares. "You might think about when you want to sell your shares in relation to that, like when you are getting ready to retire or if you have invested money for a specific purpose, like saving up for a home deposit," she says.

"You also will want to keep an eye on how your investments are performing, and if you feel like it’s not going the way you want, or the business makes a change you don’t like, that could factor into your decision." Either way, it's important not to make an emotional decision.

"There are a lot of good, informative podcasts out there, like 'She’s on the Money', 'Equity Mates', and our ongoing podcast series with PEDESTRIAN.TV and the guys from Funny Business called 'Unlikely Investors'," shares Roberts. She also suggests reading books like The Barefoot Investor and Get Started Investing.