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Investing in shares 101: Here's how to get started
- 30 May 2025
- by Adrian D'Mello | Financial Advisor
- 12-minute read
Do you want to invest in shares but don’t know where to start? You’ve come to the right place!
In our chat with BG Private Financial Advisor Adrian D’Mello he gives us a 101 on share investing including:
- How to buy shares
- How much money you need to get started
- How to choose which shares to buy
- When to buy in
- When to sell
- And more!
Prefer to listen? Listen to the original audio here.
Hi Adrian! OK, we’re talking in May 2025 amid Trump’s tariff wars, which are causing volatility in the stock market. You’re an experienced Financial Advisor, does this give you sleepless nights?
We couldn’t have timed this any better!
During periods of volatility – meaning the price of shares is unpredictably and sharply fluctuating – some clients call me, eager to discuss potential changes to their investments.
It’s natural to panic and want to sell before the share price falls further. But most, who are long-term investors, have been through similar cycles before and remain calm.
Part of my job as a financial advisor is educating our clients that the best thing to do is to stay the course – even during periods of volatility. That’s because share investing is about the long-term increase in the value of your shares.
If you keep cashing out when there’s a drop, you may end up not being invested when the share price recovers, which can happen rather quickly. I’ve seen plenty of investors miss out.
Conversely, I also have clients who have been waiting on the sidelines – eager to invest when the market is falling so they can buy when companies are trading cheaply.
So basically, no, Trump isn’t giving me sleepless nights because all investors should be looking to the long-term.
Keep calm and carry on.
Ok, so let’s start at the start. Do you recommend investing in shares?
Absolutely!
Let’s start with the price of entry. To start investing in shares, you could start with as little as $500. It’s easy to set up a brokerage account and the transaction fees are low.
Comparatively, to buy an investment property, you need a sizable deposit. The transaction costs, such as stamp duty and agent fees, are a lot higher.
That’s not all, shares in Australian companies pay a higher level of income in the form of dividends. Dividends are paid regularly to shareholders out of company profits. The average dividend yield for ASX 200 companies is 5%.
Investment properties, at best, provide rental income after costs of about 2-3%.
In addition, with shares you might also be entitled to franking credits – which is a tax refund on the tax the company has already paid on your behalf.
When you look at it, you can’t go past shares in terms of return.
And, of course, it doesn’t have to be an either or!
For example, while you’re looking to save up that elusive deposit, investing in shares can help you reach that goal faster.
Considering the volatility in the share market currently, when would you recommend someone get started?
Let’s say the market suddenly falls 10 to 15%, surely it could fall further, so you’re better off waiting to buy at the lowest price possible, right?
But what if you wait and it quickly rebounds, and you miss out?
It’s tricky to know what to do!
As an advisor, I encourage my clients to avoid trying to time the market and instead to just start.
At the same time, it’s smart to put some money aside in case the market does fall further so you can get the best of both worlds.
Let me give you an example: A long time ago I worked in retail and ASICS Kayano sneakers were the most expensive sneakers but boy did they feel amazing when you slipped on a pair.
Would I pay $250 for them? No! Too dear for me! But did others? They sure did and they left the shop happy.
I would buy them when the store had 30% off, and just before the new version came out, they would be further discounted, and I would pick up another pair or two.
Shares are similar.
Shares that are “expensive” to you or me still offer value to others. But equally, it’s great if you can buy them on sale or even when there are further markdowns.
If you only have a small amount to invest, it’s wise to be a lot more careful with your money, keeping your powder dry to capitalise on the big drops.
Not to confuse you but the financial metaphor “Don’t catch a falling knife” cautions against buying a stock that is experiencing a rapid and sharp decline in price because there’s no guarantee the price will stop falling, which can lead to significant losses.
In other words, it’s better to wait for the price to stabilize or show signs of recovery before investing.
As you can see there’s no perfect answer, but to put it all together:
- Don’t try to time the market – just start investing >
- If prices are falling, take advantage and buy >
- Because prices can keep falling ensure you keep some money in reserve so you can capitlise on further drops >
- Always do your research because some share price losses can’t be recovered if the value of the company itself doesn’t recover.
Ok, so for our listeners starting out, what is the first step?
Just like with anything you buy there is a marketplace where you can trade shares.
But, at this market, you can’t actually go and buy shares directly from a company, you have to use a licensed broker who acts on your behalf.
Back in my day, you’d be able to call them to discuss your trade, but nowadays we also have online brokers where you can buy and sell shares without actually speaking to anyone.
To find one of these, simply Google “online share trading broker” and you’ll find many options.
Literally within a few hours you could set up an account and be ready to go.
And what should you consider when choosing a broker?
Brokers charge a fee, known as brokerage, to facilitate your trades.
As investors, we naturally want to keep our transaction costs low. I pay $10 per trade, but I know some places where you can do a trade for as little as $3.
Generally, when you are paying a very low brokerage fee, the broker might be putting trades through in bulk meaning you may end up paying a higher price.
Additionally, a cheaper broker may hold the shares in trust for you, which means they hold the shares in their name on your behalf. Since you don’t directly own the shares, if anything were to happen to the brokerage company, there is a risk you may lose access to your shares.
In other words, cheaper is not always better, and you should try to ascertain how the broker operates and how the shares will be held.
You can also do this entire process via a qualified Financial Advisor, like me, who has the experience to ensure you are safe.
While the main purpose of the broker is to act as an agent to trade on your behalf, there are some other features to consider:
- Some brokers have an app that allows you to see your holdings and the real-time price of your portfolio
- Some apps have a 15-minute price delay in showing you share prices but, if you pay a subscription, it’s real time
- And some brokers provide consolidated tax reporting to make tax time easier while with others you need to keep your own records.
But, don’t worry too much about all this when you first start out. Over time it’s pretty easy to transfer your shares from one broker to another once you figure out what your personal preferences are.
OK, how much money do I need to start investing?
The ASX – the Australian Securities Exchange – mandates a minimum investment of $500 per first trade. So you need at least $500 to get started.
By the way, this doesn’t mean you buy the share for $500, it means you have a minimum spend of $500, which would translate to multiple shares depending on the share price.
Wow $500, that makes it pretty easy to start!
Yes, you can start with as little as $500 but, in my opinion, the notion of starting with just $500 can be a big trap.
You might have heard the term diversification. This is where you don’t put all your eggs in one basket and buy shares in just one company or have all your investments in one asset class, like property.
If you only have $500 to invest then your investment is only in one company and so your investment is not diversified – you have put all your eggs in one basket.
So, how many companies would be considered “diversified”?
You would want to have shares in about 10 to 20 companies each in different sectors like retail, healthcare, mining, telecommunications etc.
Diversifying across sectors is important because different sectors respond differently to different economic conditions.
Some sectors are generally stable regardless of what’s happening in the world i.e. no matter what, people will continue to shop at companies like Coles.
For other sectors, performance is subject to things like how the economy is performing. For example, during tough economic times people don’t go borrowing from banks or building homes so the share price of companies in these sectors may go down.
We describe these types of sectors as “cyclical” whereas stable sectors are “non-cyclical.”
By buying shares in companies in different sectors, at any point in time, you are likely to hold companies that are doing well while others struggle. Over the long term, though, all these companies would have gone through a market cycle and are likely to trade higher than what you bought them for originally.
Now, just to make things a bit more interesting, when the economy is booming, cyclical companies perform well and will likely be expensive. So, one way to make money is to be contrarian and buy cyclical companies when their prices are low.
It’s important to note that it’s almost impossible to get all your purchases right. There will be some companies that make you a huge profit while others make a loss. At the end of the day, as long as you have more winners than losers you will be ahead with your investments.
And finally, while diversification is important investing in any more than 25 companies typically negates the benefit of diversification. This is because you start getting an overlap i.e. you’d probably own shares in two companies within the banking sector – CBA and NAB – or two in the supermarkets sector – Woolies and Coles. Because similar companies tend to perform the same over time you’re no longer getting that benefit of diversification when there’s an overlap.
So, if I understand correctly, you’ll definitely need more than $500 to start out?
Yes, I think so. Let’s say you decide to start by buying shares in 10 companies to benefit from diversification, at a $500 minimum spend each you’d need $5000 to start out.
I’d also recommend keeping some cash in reserve in case the share price happens to fall so you’ll need another $5000 to capitalise on that. So, ideally, you would start share investing with at least $10,000.
What about on an ongoing basis? Let’s say you want to budget some money each pay to invest…
Yeah so the minimum spend is always $500, so let’s say you budget to invest $1000 each pay, then you can buy shares in two different companies with that.
If you can only budget $250 per pay, then just save it up over two pays until you’ve got the minimum of $500.
OK, we’ve got the broker account, we’ve saved up, we’re ready to go …. What are the investment approaches?
There are 2 types of investors: The Trader and The Investor.
A Trader buys and sells shares based on market trends and various charts. They might buy and sell their shares every couple of days or weeks hoping for short-term gains.
You need to be prepared to make a large number of trades and while most of them will be losing, you’ll make a ton on the winning trades if you follow the “system”.
While trading like this can be profitable, it’s risky, requires discipline, and a decent amount of savings. You need to really know what you’re doing.
I’d caution the budding investor against this route. There are lots of ads out there promising to reveal the secrets to trading so you can swap your day job for a few hours of trading but the reality is, very few people are focused enough to follow the rules. And even then, following the rules may not guarantee you the promised outcome.
On the other hand, an Investor is mostly looking to hold a company for a loooong time.
As companies grow over time their share price increases. Then they start paying out some of their profits to shareholders in the form of dividends.
As a long-term investor, you benefit from both share price increases over time AS WELL AS dividend payouts along the way.
Let’s look at how this works:
You buy shares in a company that you think will increase its revenue and profits over time. Then you sell it at a profit when the share price increases.
Generally, you will sell your shares once you reach your intended goal, for example, when you need the cash for a home deposit.
Along the way you might have used any dividend payouts for things like a car or holiday, or even reinvested those dividends in shares to reach your primary financial goal sooner.
Some even hold onto their shares for the super long-term, using the dividends to help cover their retirement, for example.
How do you pick which companies will increase their share value?
As an investor you are looking to buy into a company that can grow its profits year-on-year over the long haul as this will increase the price of your shares – and therefore increase your own profits.
What are the signals for this?
- Guzman Y Gomez, for example, would grow by continuing to open restaurants around Australia and overseas
- A biotech company, like CSL, would grow by offering new products and selling to new markets.
All of this activity means an increase in customers, higher revenue, greater company profits, and therefore more profits for shareholders.
CSL, for example, started with a share price of $2.50. It’s now trading at over $250 due to the company’s long-term success.
Selecting companies that will grow is the hard part but, as Peter Lynch the well-known fund manager says, you can find companies that will grow all around you using a commonsense approach.
Take Guzman Y Gomez. You can see new restaurants opening up all over. If you walk by there’s always a line, signaling high demand for their food. You might observe a mix of people ordering i.e. school kids and adults so this indicates a broad market. You might notice that it opens for breakfast with a different lunch menu, attracting a diverse set of customers.
All of this signals that the company will do well.
Obviously, everyday investors can observe retail shops more easily but there are all sorts of companies that don’t have this same kind of visibility. How do you go about finding them?
It’s all about doing research. There are various podcasts with investment professionals giving insights. Investment newsletters and information services like Lincoln Stock Doctor or Fat Prophets. You can read company financial reports and listen to CEO speeches. You can read books like One Up on Wall Street by Peter Lynch.
It’s a journey of learning about various companies and sectors. Sometimes it’s also luck but, as the saying goes, the more work you put in the luckier you get.
Let’s say you identify a company with good growth prospects, how do you know when it’s a good price to buy at?
Remember the ASICS sneakers example? Some people buy them full price because they believe it is a good price and that they will get good use out of it.
Alternatively, you might wait for the sneakers to go on sale – a market correction or dip – and pick up bargains then.
In any case, companies that have good prospects will most likely have already been identified by many people and so won’t be cheap.
You buy them nevertheless because, over time, their share price will continue to go up.
What if you don’t have time or inclination to do all this research on companies and share prices?
If you don’t want to do the legwork and invest in specific companies via a brokerage app, you can turn to a professional investment analyst.
They have a degree, sometimes more than one, where they learn about all this stuff. They spend their time researching, setting up financial models, looking at financial statements, and speaking to company leaders about their future plans.
With all this effort and expertise, they better understand which companies are likely to grow and go up in value.
Armed with all this knowledge, they manage money on behalf of their clients by pooling the savings of many investors into a managed fund. The pool of funds is then used to buy shares.
You own a proportion of the fund based on the size of your investment. The total pool is divided into units which gives you the price per unit. The unit price of the fund will rise and fall as share values increase or decrease.
Investment analysts charge a fee for this service.
Let’s say you feel more comfortable going down this route, how do you go about selecting which managed fund to join?
You’ll need to research fund managers. For example, there are podcasts where they’ll interview a fund manager and you can go to their website to learn more about them.
Or friends might refer you to a fund manager they trust.
In terms of what factors to consider,
- Generally, fees are at the top of the list
- Then you’d look at their experience and their past returns
- Look at how they did during different market types e.g. during COVID or the Global Financial Crisis
- Consider how their results compare to the market index – which is the general performance of the stock market
- Find out what their investment style is
- Do they buy large companies or small?
- Do they look for the next growth story or do they prefer stable blue-chip stocks?
- Do they invest in Australian companies only or do they invest globally?
- How big is their team and where are they located?
The big benefit of using a fund manager is that with only $500 you get exposure to the range of companies in their fund – diversification – as well as access to their expertise.
OK, I get it. I hear a lot about ETFs …. Where does that come into it?
An ETF is an exchange traded fund, a type of managed fund. They trade just like companies like Woolies or Coles do on the Australian Stock Exchange. While Guzman Y Gomez goes up in value when more people buy their food, ETFs go up in value when its share investments go up in value.
The good thing about buying shares in an ETF is that there are a number of extra rules for them, one of which is that at all times there must be a buyer and a seller.
This is important because for classic managed funds sometimes you might want to sell your shares, but the fund may not be well-known so there might not be a buyer for it at a fair price when you want to sell.
With an ETF, a buyer is guaranteed, which is an important benefit.
Also, traditionally ETFs were passive investors i.e. they mimicked an index like the ASX 200 holding a sample of the stocks on that index. Stock selection was automated without a human doing strategic stock picking. The goal was to mirror the performance of the index – not better it.
Nowadays, some newer ETFs are more active where they have experts research and pick stocks that are likely to do better than the index. Just like with a managed fund.
For all these reasons, ETFs have become popular and can be purchased with a minimum spend of $500 as well. A good option for beginners.
OK, now that we’ve covered the basics, what are some common mistakes first-time investors should avoid?
Number 1 is following a tip from a friend without doing more research. We all hear those stories about a company that traded for 5 cents and then someone sold it for $5. Naturally, we want some of that action. But, in my view that is luck and kind of akin to gambling. If you are going to buy shares directly – not via a managed fund or ETF – try to remove luck from the equation and research companies that will give you long-term results.
Number 2: Another common mistake is following the crowd and not actually researching the company’s actual prospects. Lithium stocks are a great example of this. They became highly popular due to lithium’s role in electric vehicles, but they underperformed due to various market dynamics and over-optimistic expectations. If you followed the crowd you might be disappointed.
Conversely, a lot of people followed the crowd and sold their Qantas shares during Covid, but smart investors might have guessed that the government would bail them out and that travel would pick up at the end of the pandemic.
Number 3: Trading too often. Remember how we spoke about how long-term investing is better than short-term trading – especially for beginners and those who don’t have the time to put in the research?
There is a general consensus that as humans we hold onto losers hoping to recover our losses, while we sell our winners too soon missing out on more growth.
For example, if a stock goes up 20% why can’t it go up another 20%?
To combat this urge to quickly sell at the first sign of a good profit, if a share does increase substantially, perhaps sell enough to pocket that profit but keep the rest invested to capture any further increases.
Conversely, with shares you are losing money on, consider why that is — based on your research. Is it a temporary loss that will soon rebound OR was it a bad investment that you need to get out of to stop hemorrhaging further?
If you are investing directly in companies, this is the kind of research, calculations and strategic thinking you’ll need to do.
Always keep in mind that investing in shares is for the long term. Research and try to make wise choices when you buy shares and then let them grow over the long-term – staying calm during any short-term dips.
If this isn’t for you – you’re better off going to a managed fund or an ETF.
Number 4: Another common mistake is letting emotions take over. If you are going to buy individual companies, research the company. Understand them. Keep track of the news. Not blogs but real news. Learn to understand financial statements. If the price falls, understand why. And, if you persevere with the stock, go the distance, remembering your initial reason for buying them and wait it out until you reach your goal.
Even with Trump’s tariffs, for example, keep calm and try to work out if his policies will impact the companies you’re invested in. Try to be logical and mechanical about it as opposed to emotional and reactive.
As I said, if you’re the type of person who would find this hard, take a more back seat approach and rely on the expertise of a professional.
Number 5: Having a “get rich quick” mentality is a big trap for many investors. Making money is hard work and slow, and there are often a lot of mistakes along the way. Time is what it takes. Don’t try to rush into fancy things like taking out loans in order to invest until you’re experienced in the world of basic share trading.
I’ve learned this the hard way. You name it, I’ve tried it because I wanted to reach my financial goals faster. In the end, I learned that regular investing with a few of my favourite fund managers would continue to compound my money over time. When the market falls, I try to squeeze a bit more out of my budget so I can invest in shares that are “on sale” and I get excited about the bargains.
Wow, it feels like we’ve gone through a whole journey here. So where do you sit in this process and how do you help your clients?
As you can see, investing in shares is both easy and complex.
A Financial Advisor, like myself, works with clients on the following types of things:
- We start off by establishing the client’s goals and timeframes. Is the goal buying a home in 5 years or is the goal having enough for retirement in 25 years?
- Then we look at the best tools to help you get there. Things like budgeting, saving, cashflow, superannuation, retirement planning and – of course – investing.
- When it comes to investing there are lots of options, and it’s not always shares. A client looking to buy a home in the next 6 months probably shouldn’t be investing in the share market as their focus should be on saving for their deposit.
- If it’s decided that investing in shares is the right thing to do, we can recommend a portfolio of various managed funds and/or direct shares that we expect will meet our clients’ goals.
- Throughout the journey, we continue to monitor their investments to make sure they’re on track and, more holistically, make sure the client is on track to reach their financial goals.
Overall, clients working with us end up making more informed decisions that lead to better outcomes in the long term.
Awesome – thanks so much for sharing all of that with us!! I definitely think our readers will feel more prepared to dip their toes into investing.
Definitely!!
I’m passionate about helping people reach their financial goals and more than happy to help anyone navigate the journey… and celebrating their success!
Contact us
If you’re ready to start investing in shares, contact our Financial Advisor Adrian D’Mello on +61 3 9810 0700 or
