Advantages of Trading Shares with RockGlobal
MARGIN LENDING
Utilise margin lending and take advantage of low interest rates to leverage your investment (but be aware leverage increases your risk).
TRADE OR INVEST
Take advantage of low brokerage fees for short term trading and investing.
LOW COST TRADING
Some of the lowest brokerage fees in New Zealand for US, Australian and International Stocks.
STREAMING OR DELAYED
Free delayed data or streaming data. Low non-professional exchange fees available to keep costs down.
What is Share Trading?
When you buy shares in a company listed on a stock exchange you receive a partial ownership in the company you bought into. This gives you the ability to participate in the upside (or downside) of any share price movement and allows you to receive a dividend (if any). Owning shares also allows you to participate in voting around important decisions for the company so you can have a small influence on major decisions the company makes.
Shares in listed companies are for the most part purchased through a broker, who then places the order on the stock exchange on your behalf. With the advent of electronic trading this process is fully automated using online trading platforms provided by the broker. RockGlobal offers the Trader Workstation platform where you can buy and sell shares across many markets in the world at discounted brokerage rates.
- Trade Shares from over 14 countries around the world
- Low brokerage rates
- Margin lending
- Professional tools
- Real-time access to comprehensive fundamental research, news and live market data
What are Dividends?
When you own shares in a company it can give you an entitlement to receive a dividend. A dividend is a distribution made by the company at set interval, for example quarterly, semi annually or yearly and typically follows soon after an earnings announcement. The dividend you receive is typically paid out of the profits of the company and you can sometimes choose to reinvest the dividend into more shares or receive a cash distribution. Whilst buying shares that pay the highest dividend may seem like a good idea, it is not always advisable. Often shares paying out very high dividends have a high payout ratio, which refers to the portion of net profit the company is paying out as a dividend so sometimes it is better to buy dividend stocks that have a lower dividend and lower payout ratio but more capacity to grow their dividend over time. It depends on what your own investing objectives are.
Low Brokerage Rates
- Low Fees across most international exchanges.
- A wide range of online trading tools and research.
- Extremely low interest rates when using margin lending
| MARKET | BROKERAGE |
|---|---|
| Australian shares | AU$18.95 or 0.1895%, whichever is greater |
| US shares | US$9.95 or US$0.02 per share, whichever is greater |
*Fees are subject to change
1. INVESTING IN SHARES
LONG TERM INVESTMENT
Long term investment in shares involves buying and holding shares for several years or more. This typically involves researching shares and making a judgement call around either potential growth or value. There are many different investment approaches all coming with different risk profiles, but possibly the most common approach is to purchase a diversified portfolio of shares based on a combination of growth, value and dividend yield in order to gradually build up a passive income to live on at some stage in the future. The benefit of investing directly into shares yourself are the fee savings and the ability to outperform the average return through stock selection as compared with a fund manager along with having control of your own money and the decision making process. The downside obviously is that it is difficult to outperform an average benchmark for any length of time and requires a certain amount of time and effort to research the right shares.
INVESTMENT APPROACHES
Long term investors tend to ride out the short term fluctuations in the market place, but do take significant risk in that shares can lose significant value in short periods of time and even the overall market can go through periods of major losses. The upside is that long term investors are involved in the market when it is going up. In some respects it is dangerous to be out of the market because annual returns can be quite high and long term investors take full advantage as they are typically fully invested the entire time. A long term investment approach lends itself to a portfolio management style where the investor buys a diversified basket of shares (5-20) and then every so often either re-balances the portfolio, meaning they switch one share out for another that they think may offer a better return potential or re-weights the portfolio, meaning selling a portion of some shares, perhaps because they show good profits or might be overvalued and increasing the investment in other stocks in the portfolio that they think might offer better value.
2. TRADING SHARES
1. Go long or short
Share traders may not limit themselves to trading only to the long side, meaning betting on the market going higher and quite often share traders may target the short side of the market and target stocks they expect to fall in value. Traders targeting the short side of the market simply sell first and buy back the stock at a later date. RockGlobal allows share traders to go both long and short on a stock, but there are sometimes restrictions on short selling and also the stock has to be available for shorting purposes. In short if a share trader is bullish on the market they will take a long position, with the expectation the stock will go higher, and if the share trader is bearish on a stock they will take a short position, with the expectation the share will go lower.
2. Margin Lending
One of the advantages property investors often tout over share investing is that with property you can leverage you investment by borrowing money to buy a house. The return is then magnified as the investor receives the benefit of any capital appreciation not only on their own money, but on the borrowed money as well. If a tenant is paying rent on the property this might cover the full interest cost of the property an even produce a small profit for the landlord. What most people don’t realise is that you can do the same thing on companies listed on a stock exchange. Instead of buying a property you are buying into a company and potentially using dividends paid out by the company to cover the interest on the borrowed part of the investment. Margin Lending works like this: Let’s say you have $10,000 to invest into one share, perhaps as part of a wider portfolio or if not perhaps you’re buying into an exchange traded fund and the broker allows you to borrow up to 50% of the investment. This means that for your $10,000 investment you can purchase $20,000 worth of shares. If the share goes up you receive the gain on the borrowed portion of your investment as well as on your own funds. There are several advantages to a strategy using margin lending on shares compared with an investor who borrows to buy a rental property.
- Firstly if the company pays a dividend you don’t have to collect it yourself, unlike rental income on a property with either you or your property manager is reliant on the tenant paying on time.
- Secondly there is no cost to hold a share whereas with property you have rates, maintenance and perhaps even body corporate levies or ground rent to pay. With a company the management is all taken care of for you and is reflected in the share price.
- Thirdly dividends can often be greater than rental income on a property, however this comparison largely depends on the stock or the property.
- Fourthly over time the sharemarket, on a cash on cash basis has outperformed the property market in most developed countries.