When you invest in stocks and shares you are virtually buying a piece of the company. This saves them the cost of borrowing the money they need and it gives you the right to participate in their success by being paid a dividend at the end of each year, or by the value of your stocks increasing, so that when you sell them you make a profit.

There are two more ways you can benefit financially by investing in stock. Firstly, when you are paid a dividend, it is with money that has already been taxed. Therefore, you receive what is called franking credits that you can use to offset tax you may have to pay on other income. And secondly, if you hold those stocks for more than twelve months, you will receive a 50% reduction on the capital gains tax that you must pay.

Stocks and shares usually have good liquidity - meaning that if you need to, you can get your money out of that investment in as little as three days. When you compare this with the time it takes to get your money when selling real estate for example, you will see that investing in stock is a good way to put your money to work

Share trading is when you buy and sell shares on the stock market. The whole idea of buying shares is to make money, but when you buy and sell you are charged a fee, so this will eat into your profit if you do it too much. Many investors simply buy the shares and keep them for several years. They can make money in two ways; by selling the shares after they have increased in value and/or by getting a dividend from the company they have invested in.

Ideally they would have invested in many more than one company. If an investor only buys shares in one company and it goes bust, then he has lost his entire investment. But if he has invested in a number of companies then he will lose only a part of his investment. Of course, the reverse is true too. If one of his investments does extremely well he won’t get as much out of it as if all his money had been with that one company.

Some investors who know a lot about Share trading - and many others who simply think they do - like to trade shares quickly. That is, they buy shares while they are at a low price, and then sell them once they start to rise. The trick is to pick the right time to sell. Shares can rise and fall at the drop of a hat. If you leave it too long to sell, they might tumble overnight and you will sell at a loss.

But if you sell too quickly the value may keep on rising and you have denied yourself the chance to make quite a bit more profit. This kind of share trading is quite risky. Very few people can accurately predict the market to the correct extent. They risk losing everything they’ve invested and maybe even more. Of course it is also possible to make a great deal of money too.

The best thing to do is think about what sort of risk you are comfortable with and how much money you can afford to lose. This may depend on a number of factors. A person who is quite young will have time to recover his losses in share trading, while an older person may not have that amount of time to spare.

Or you might be lucky enough to have a large disposable income, so you are comfortable with a large risk. You may know quite a bit about investing and so are more likely to make the right decisions at the right time. It really depends on the individual.

There are several different types of investment products on the market and to choose one to suit you, your needs and goals must be thought through carefully. Most stable investments should be for the long term, that is 5 years or more - more is better.
Perhaps the most popular investment product would be superannuation. This is because of the tax savings that are significant and also the fact that the government will add more money for free if you salary sacrifice up to a certain amount. There is a limit, of course, but it is certainly worth the effort. Superannuation can be DIY (do-it-yourself) or done for you. The latter option is the easiest, though many people like the idea of DIY.
Other investment products that are easy to get into are those such as managed funds offered by banks or other financial institutions. All you need to do is create the account and have a minimum deposit in it. Because the money is pooled with that of other investors, these let you diversify your investments a great deal more than if you were investing on your own. Diversification is another word for safety, in investing. But since banks need to make money out of these investments too, your share may not be as significant as if you were doing your own investing. It will, however be safer - so long as you choose the safe option.
A term deposit is an investment product of a simpler kind. Here you simply park your money for your chosen time and then get paid a good interest rate on it when the maturity date rolls around. Even a savings account could be considered an investment product, though the rate of return on most is usually not significant.
A more complex investment product is sometimes quite difficult to understand. All investment products should come with a disclosure statement that tells you how your money will be invested, what returns will be generated and in what way they will be paid to you. If you cannot understand anything that is in the statement, you should seek the advice of a professional or else don’t go ahead with it.
You need to know if you can get your money back early if necessary and if so, what fees apply. If you want to sell your investment, is there a ready market that enables you to do so? And it is wise to choose a product that is issued by a person or company that holds an Australian Financial Services license.
Remember that the better the expected return on your investment is, the higher the risk is likely to be.

Retirement planning is something that many of us put off until it’s almost too late. We don’t like to think about getting old - and certainly not old enough to retire. We want our life to go on forever just they way it is, if not better. And we talk ourselves into believing that it will. But the years pass more quickly than we expected. We get put off our job for someone younger; the promotion we expected simply doesn’t materialise, or we are offered a redundancy package.

Or before we know it, retirement has crept up on us and we are still unprepared. We may have to sell our house because we cannot afford those last payments on it. But we still have to pay rent for somewhere to live. If we are lucky we only have to downsize, but we may end up living in a caravan. All this could have been avoided if only we had planned for our retirement when we were younger.

Retirement planning need not be complicated. It can be as simple as deciding how much money is needed to live comfortably in retirement - and maybe do a few of the things we have dreamed of over the years. Then finding out much you need to save per fortnight to accomplish that. If you are not good at maths, then get a professional to help you.

There has been so much said about the credit crunch lately that casual listeners could be forgiven for thinking that it was some new kind of cereal being advertised. Unfortunately, this is not the case. The credit crunch is well and truly here and looks like staying for some time to come. How will it affect the ordinary man in the street? To find out we first need to know exactly what the credit crunch is.

The credit crunch, credit squeeze or whatever other name you care to give it simply means that it is now much harder to get a loan. This is because banks and other lending institutions have tightened the conditions of lending. When money is loaned, the lender needs to be reasonably sure of getting his money back, plus interest. Therefore, he will certainly not lend to anyone who does not have a steady and reliable source of income. Further, the lender will also be very likely to require a deposit on the loan and will probably not offer the buyer a very good interest rate.

This will affect not only homebuyers, but also those who need a loan to start a business, or they may have started a business but need a loan to expand it. The flow-on effect to the nation’s economy can be felt in every sector.