|
Investing in Shares
Direct Investments
When you invest
directly into the market you become the full or part owner of a
particular business or investment product. With direct
ownership; you will receive a proportion of the profits
(dividends, rental returns), and you will benefit from any
growth in the capital value of that particular asset. The most
common forms of direct investment are listed shares registered
on a particular share market and residential real estate. The
advantages of direct investment are as follows:
Control
Direct investment
gives you greater control over what you buy and sell. Many
investors prefer to have a say over investment decisions that
affect them. This however means that you will need to research
and manage those shares yourself (unless, of course, this is
done for you by your financial adviser).
Timing
With direct
investments you as investor have the choice of timing in
realising capital gains or losses. Thus you can effectively time
your capital gains or losses to coincide with the sale of other
investments for tax effective purposes.
Dividends
Many listed
companies pay tax on their profits before dividends are
distributed to you. In other words, those dividends come to you
‘tax paid’. Your personal tax liability is then calculated after
taking into account the tax that has already been paid by the
company. The objective is to ensure that the dividends are not
over taxed. As a result, investors on the top marginal rate of
48.5% pay little tax on ‘fully franked’ dividends, while
investors on lower tax rates either pay no tax on the dividend
or are entitled to a refund.
Wide investment
choice
You may invest in
a wide range of investments that are generally not available
through a managed fund for example:
Cost
Generally the cost
of direct investment is considerable less then those of managed
investments that charge up front fees and ongoing management
fees.
|
