It can be difficult to own a money-generating asset – historically speaking, too. You can’t drive past a successful business and just go in and buy part of it. On the flipside, you can buy a part of some very big companies online – in fact, you can simply get on the internet and buy a share in companies like NAB and Amazon at the push of a button. And the best bit about having these shares is that you can own part of the biggest companies around the world without having to know what they are or how they operate. To buy an asset and sell it later at a profit is the best way to make money – and this is often what happens with shares.
We are incredulous at the fact that it is so easy these days to simply go online, push a button and buy a share in a company. When you buy into a publicly owned company, you don’t have to deal with the same problems as you would in a privately owned one. You don’t need to worry about how it will generate money, or how you will sell it at a later date. If you own shares in a publicly listed company, you have a guaranteed buyer. And, as a bonus, you have liquidity if you need the money quickly.
One downfall is that because it’s so easy to own shares, people often want to get in and out of the market quickly. They want to buy shares and sell them shortly afterwards, hoping to make a profit. But companies need time to grow and accumulate value. Look at the example of Woolworths, who had only 5 stores back in 1925, and compare it to the entity it is today. It took time – but it has done extremely well. Investing in the sharemarket is a long-term game.
We aren’t saying the sharemarket is problem-free – but we think it’s incredible that literally anybody can own part of these big companies and take a share of the profits. You can own your part of the largest 500 companies of the world and not even know who they are or what they do.
Think of it in this way: you could retire and go on holiday while the CEOs of those big companies go to work and make the money for you. Whereas if you owned 3 investment properties, it’d be you in charge of ensuring those properties remain profitable assets – not to mention potentially worrying about what the tenants are doing or whether they’re about to move out.
Owning shares is easy and tax-effective, yet many people take the opportunity for granted. Some think it seems too good to be true. But the fact is that all companies need money to grow; hence the constant need for shareholders.
Even in your superannuation, you can direct where your money is invested – again at the push of a button. And it’s incredible thinking about what happens to that money without you lifting a finger. It is invested, reinvested, moved around, changed currencies – all while you sit at home (or go on that holiday)!
While it all seems quite simple, there are still strategies you need to have in order to get the best outcome when investing money. Remember to diversify and spread your money across different companies.
Dallas Davison, Michael Hogue and Ali Hogue.