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Scroll down to learn how we manage direct share portfolios for our clients.
DIRECT SHARES – How To Buy Shares on ASX
If you like holding shares in Australian companies directly or you already have a portfolio of Australian shares, or would like to start one, consider these important questions:
Q. Why am I investing in shares directly?
A. We believe you need to have one or more good reasons for this type of
investment. It can be very beneficial financially and satisfying but it can also
work against you if it’s not done correctly. We can review your reasons for
holding shares and advise you if direct shares should be part of your investment portfolio.
Q. What am I trying to achieve?
A. Ethical investment. You may want to be very selective about the companies
in which to invest e.g. you may not want to put your money into gambling
companies or companies that damage the environment. A direct share
portfolio will enable you to screen out any unsuitable companies, based on
your own criteria. Did you know that if gambling is not for you than you should
not be holding Woolworths! We can help you with selecting those companies
that meet your section criteria.
A. Better investment returns. You may want to improve the investment
performance of your portfolio. Depending on your circumstances a well-managed direct share portfolio can achieve this, but there are added risks. We know what works and what does not work and can manage your portfolio to achieve good, realistic returns.
A. Higher income. You may wish to generate higher income than what term deposits currently offer. This approach can work, but there are plenty of traps e.g. there is no point in selecting a high-yielding stock only to find its share price goes backwards. We can locate those companies that pay good dividends but also have reasonable growth prospects.
Q. Do I have what it takes to have a direct share portfolio?
A. You need to have a certain amount of patience. Too much patience is not good either because this may lead to holding on to a company whose fortunes may have changed. We monitor the market and selected companies’ activities and will tell you when we think “patience has run out”.
A. You need to understand how a direct share portfolio fits into your total portfolio. Australian shares should form one part of your total investment portfolio. This will help you to handle the ups and downs and other vagaries of the sharemarket.
A. You need to have some knowledge. You do not need a university degree in finance to invest in direct shares. However, the more knowledge you have in this area the better understanding you will have of what is going on in the economy, the sharemarket and the specific companies in which you have invested. We handle this critical issue in three ways:
- We have the experience and access to the right information. We access
several economic and investment research sources to help us select
the most appropriate companies in which you should invest. When we
believe a new investment opportunity has arisen or we need to reduce or
completely sell out of a holding we will advise you and then act on your
- We can help you increase your own knowledge. If you have the time and
inclination to learn more about direct share investing we can provide you
with as much information as you can handle. Depending on availability
we can hold investor seminars to enable topics of interest to be discussed.
However, you do not have to do any of this and just leave it to us.
- We keep you informed. We report to you regularly on how your direct
share portfolio is performing, including how every single company is
contributing to your portfolio.
HOW WE MANAGE DIRECT SHARE PORTFOLIOS
So how do we go about managing a direct share portfolio for you?
- Firstly and most importantly, it starts with you. We will explore the
important issues that will form the foundation of your direct share
portfolio, some of which we have touched on above such as ‘what do
you wish to achieve?’
- If you hold an existing direct share portfolio:
a. We will analyse your current holdings to determine the strengths
and weaknesses of your portfolio.
b. We will then provide a report on your current portfolio together
with our recommendations for changes and why.
c. If you have appointed InvestAstute to provide you with on-going
investment services, we will report to you regularly on the progress
of your portfolio, including performance analysis and provide you
with buy and sell recommendations as and when our investment
- If you want to start a new direct share portfolio:
a. We will provide you with a report outlining what companies we
believe you should commence buying.
b. We will then provide subsequent advice on further buy and sell
recommendations as and when our investment research indicates.
c. We will report to you regularly on the progress of your portfolio,
including performance analysis.
Key principles governing our direct share recommendations and management
- We are not traders. We will not be contacting you daily or weekly
with stocks to buy or sell based on some short-term expectation in
share price movements.
- We are long term investor advisers.
a. We select companies that we believe have good medium to long
b. However, the best research can sometimes turn out to be
wrong and a company’s fortunes may change. In this case we will be
recommending to exit the stock.
- We concentrate on minimising risk. Investment is all about risk
management. This does not mean you sit on your hands and do
nothing. We help you work out, as best you can, what the risks are
and where it is worthwhile to take acceptable investment risk.
- Diversification is important but it can also work against you. Effective
diversification in a portfolio reduces investment risk. Ineffective
diversification does not achieve anything. Over-diversification
robs you of the possibility of higher returns and can increase your
- We are advisers and managers, not stockbrokers. We advise you
on the companies to buy and sell and we manage your direct share
portfolio. We charge an agreed fee for our advice and management
work. InvestAstute does not charge any additional brokerage on buy
and sell transactions and does not receive any commission or other
payments in connection with transactions.
- Investment performance matters. The return you get on your
investments can make a very large difference to your retirement
lifestyle. The return from your direct share portfolio is just as
important. We carefully monitor and report your investment returns for each holding and the total portfolio
- We seek out the top performing companies to recommend to our
clients. The main characteristics we look for in “good companies” are:
a. Financial stability. This usually includes low or manageable debt.
b. Good profitability. The companies that generate the highest profit
are not necessarily the best performers. It’s a matter of how much
capital have they used to produce those profits.
c. Reasonable prospects of continued strong performance. Good
past performance does not automatically lead to good future
d. Good value – not too expensive to buy now.
• Ideally we try to buy great companies when they are relatively
inexpensive, but these situations are hard to find.
• We often find that the best companies are also the most
expensive. Sometimes we take the view that you have to “pay for
quality”. Other times we exercise patience. Each case is different
and is finally determined by the many other factors we examine in
making final stock selection decisions.
- Income vs growth
Some investors say they are investing for income while others say
they are investing for capital growth. Our view is that it is the total
return in the medium term should be the primary focus when
deciding which companies to buy. Long term returns are driven by a company’s growth in earnings.