Si on the ASX Share Market

Aim

My aim is to create a portfolio of blue chip stocks of a million dollars, to bring me a tax free income of $50,000 per year. I'm working on it, very, very slowly.

How do I start ?

Start by joining up to your banks' online share trading platform.

NAB has the nabtrade
https://nabtrade.com.au/

Com Bank has CommSec
https://www.commsec.com.au/

Westpac has Online Investing
https://onlineinvesting.westpac.com.au/

ANZ has ANZ Wealth
http://www.wealth.anz.com/investments/online-share-trading

and so on...

Download any forms and sign them and post them in. This will give you a password and access to the site. You may also be asked to create a trading account. Transfer your money into this to buy shares.

You will also receive an HIN and a CHESS number which are unique to you. Read here on the ASX site about it.

http://www.asx.com.au/documents/research/chess_brochure.pdf

Then go and read a lot.

Read

Subscribe to an investor magazine for a good background education.
I subscribe to the 'AFR Smart Investor' and have done so for many years. I have found most of my good buys from them. It costs me about $75 for two years and is the best investment I have ever made.

http://www.afrsmartinvestor.com.au/

Read on the ASX site...

http://www.asx.com.au/education/shares-education.htm

Check out the Motley Fool

http://www.fool.com.au/

Read at the various free forums such as Hot Copper

http://hotcopper.com.au/

Or Top Stocks

http://www.topstocks.com.au/new_asx_stock_forum.php

Why does a Share cost what it does ? Who decides ?

A company that is privately owned may wish to pay off its debt and expand. It will float on the stock market at an IPO - Initial Public Offering.

It will offer a few million shares for sale at a price they think the company is worth per share - total assets plus cash in the bank plus goodwill, divided by the number of shares.

It will raise cash, pay off debt, maybe acquire another company and expand and grow.

Investors who think that this is worth it will apply and buy shares. Sooner or later they then want to sell again, so they offer them for sale on the ASX.

The current price on the ASX will then be once again the total number of shares divided by what buyers and sellers think that the company is worth - assets plus goodwill plus cash in the bank less debt etc. Most of this can be found in the company's annual report.

What is Franking / Fully Franked ?

Most dividends from companies in Australia have the tax on them already paid.
At tax time, if you have fully franked shares, you do not pay tax on this income. Lovely, isn't it ?!

Read on the ASX Education pages.

http://www.asx.com.au/education/investor-update-newsletter/201304-fabulous-franking-part-two.htm

Australian Investors Association

http://www.investors.asn.au/education/shares/understanding-shares/franking-credits/

... and I quote form them

" Dividends are treated by the tax office the same as other income and are grouped together with other earnings to determine an overall taxable income amount. When a company earns a profit it is required to pay tax on that money earned. This tax is set at the corporate rate of 30%.

Before the dividend imputation system was introduced in 1987 by the Hawke/Keating government the tax office would tax both the company and the investor who received the dividend, in effect a form of double taxation.

With the introduction of the dividend imputation system, investors who receive a dividend will only be taxed the difference between 30% and their own marginal tax rate as the company tax has already been paid at the 30% rate.

This means that if an investor’s tax rate is 30% then they will not have to pay tax on the dividends and if the marginal rate is 46.5% then an investor will only pay the difference which is 16.5%.
In addition to this, since the year 2000 imputation or franking credits have become fully refundable which makes franking credits a powerful strategy that can be used in your investment planning. "

Buyers and Sellers

When I first started buying and selling shares through a stock broker, I never understood why a share is worth what it is, and who sets the price when it is time to buy and sell.

Capital Gains Tax

If I sell my shares within one year, I pay Capital Gains Tax on all the profit. It just adds to my income.
If I sell my shares after one year, I pay Capital Gains Tax on half of the profit.
See my Excel sheet further down for how I record my buys and sells depending on how long I hold my shares.

Gold and The Exchange Rate

Know the current gold price. If the price is low and expected to go higher, it may be worth a speculative punt on a good gold miner.
Pick a gold miner, not explorer, that has cash in the bank, is pouring gold and is producing gold at a good rate (under $1000 per ounce if possible).

I go to Kitco.
http://www.kitco.com/charts/livegold.html

Know the exchange rate and hope that it stays at about 85 AUD to the USD, which is good for Australian exporters.

http://www.rba.gov.au/statistics/frequency/exchange-rates.html

Listed Investment Companies

Argo is a good example of a Listed Investment Companies.
http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=ARG
http://www.argoinvestments.com.au/

I quote

Argo Investments Limited is a listed investment company which manages a diversified portfolio of Australian investments with the objective of maximising long-term returns to its shareholders through a balance of capital and dividend growth.

Record your information in Excel

Create an Excel document to record your buys and dividends. You will need it at tax time.
I have at least three pages in mine.

First page is a general summary.