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Interested to invest in the share market but not sure where to start?

It is important to note that investing in shares is not for everyone. The value of shares can fall as well as rise, and for many investors that is simply too risky. The cash flow from investing in shares can also be unpredictable, which means you cannot rely on dividends as these are not guaranteed. So the value of your investment as well as the cash flow are not predictable. It is also worth pointing out that shares cannot always easily be sold and converted to cash, and certainly the price for immediate sale is sometimes less than expected. For all these reasons investing in shares is not for everyone, and you should consider the risks carefully before investing. Kina Securities Limited strongly recommend that you consult your financial adviser before deciding to invest. Above all you should realize that the value of shares can fall to zero, and that occasionally happens.

Who do I get investment advice from?

Kina Securities Limited cannot advise you on whether or not investing in shares is right for you – you need to consult your financial adviser before deciding to invest. Kina Securities can however provide factual information such as the recent trend in share prices, or the historical dividend paid by a company. What we cannot do is tell you if an investment decision suits your personal circumstances – only someone with full knowledge of your personal needs can advise you. That personal advice will take into account your existing wealth, your short- and long-term cash needs, your ability to absorb losses and your personal dependence on dividends and share values to support your current income.

Investment

Investment simply means to put money to work for you.  Investment means an asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price. There are many ways you can invest and a multitude of investment options available. However, stocks or shares (equities) have proven to be the best investment vehicle over the long-term other forms of investment. Investing in the stock market is not a get-rich quick scheme but it provides an avenue where the investor can make rational and professional assessment before committing any capital. A “real” investor does not throw is or her money to any random investment; but performs though investment analysis and commits capital only when there is reasonable expectation of profit.

What are Shares?

Shares, sometimes referred to as equities, represent part ownership in a company. When you buy shares, you buy part ownership of the company’s business and become shareholder of that company. In return, you have a claim to the company’s earnings (through dividend payments) and assets as well as any voting rights attached to the stock. You can exercise your voting right at the company’s Annual General Meeting (AGM). Shares that have been issued to investors by a listed company can be sold to other investors on the Stock Exchange. In this way, shareholders can realise capital gains if the share price rises – in other words, make a profit by selling their shares for more than they paid for them. Shareholders can also make a loss if the stock price falls.

Investing In Stocks

In Papua New Guinea, investors can buy and sell shares on the PNG Stock Exchange (PNGX) or on the Australian Stock Exchange (ASX). There are 19 companies listed on the PNGX and more than 1000 companies on the ASX from inventors can purchase stocks. Like any other stock exchange around the globe their aim is to meet two fundamentals goals:

  • To provide an avenue for companies to raise funds for growth and expansion through the issue of shares to the public.
  • To provide an opportunity for investors to invest their surplus funds into productive areas of the economy through the investment in shares of publicly listed companies.

Some companies on the PNGX are dual listed, meaning they are listed on both the PNGX and the ASX. Investors may prefer to buy/sell on one exchange or another and it is important to note the share prices are not always equal.

Risk on Investing in Stocks

Just like any other investments, there are risks that you have to consider when investing in stocks. Shares are not guaranteed in price, and prices can go up and down. Past performance is no indication of the future performance, and there is the risk of 100% loss on your investment. Share investing is not for everyone and you should seek advice from an expert before investing. The level of risk you might be willing to accept as an investor is an important consideration before taking any step forward. These risks are categorised as follows:  If you are to invest in shares, one of the most important principles in investment is that of Diversification. The age old say, investment wisdom, “do not put all your eggs in one basket” simply means to spread your risk in more than one investment. The companies listed on the stock exchange can be categorized into different groups according to the economic sector they operate in. The principle risk investors take in investing in shares is that of price uncertainty or the volatile nature of stocks, i.e., the sudden rise and fall of shares prices.

Low Risk: The investor trends to prefer investment with low or no risk. He or she is more interested in preserving the capital value of their investment than increasing its value.

Medium Risk: The investor is willing to place reasonable emphasis on growth investment whist being aware that these could go down in value as well as up. He or she can tolerate some fluctuations and volatility but tend to avoid investment that may drastically in their value (either increase or decrease).

High Risk: The investor is willing to accept a greater risk of decline in value in return for potentially higher growth returns. He or she is prepared for the possibility of losing a large portion or all the money invested.

Return on investing in Stocks

You can make money from shares through capital gains, where you sell a share for more than you paid for it, and from earning income which is called a dividend. When the company makes money, you’re sometimes paid a share of the profit, called a dividend. You can choose to receive this dividend in cash, or in some cases you can reinvest it to buy more shares in the company. Types of risk and investment vary, just as dividend needs differ. An investor may have risk and is capable of keeping of the following objectives:

  • Capital Gain – To achieve this objective, the investor is looking at companies, which are likely to experience growth in the medium to long term. This is not a million to one change of making a fortune but the rational assessment of selecting shares likely to experience an increase its share price. Generally, the investor seeking capital gain is prepared to take more risk and capable of keeping a watchful eye on the market.
  • Income – investor who want income from their investment are interested in securities which give one or combination of the following:
  • A high dividend yield, made on a regular basis
  • A relatively high interest with regular payment (e.g. debt securities)
  • Security – the stock market also provides an avenue where the investor who is interested in combination of both income and capital gain but wishes to take less risk. Investor who do not like risks can invest in companies that are stable and established (“Blue chips”) with gradual growth in their investment overtime. Kina Securities Limited can recommend companies listed both on the PNGX and the ASX that are considered relatively safe and has potential of capital gain over long term.

Kina Securities Limited

Kina Securities Limited is a registered Stockbroker acting as intermediary between you and your desired stock of Investment. Kina Securities Limited can assist you by recommending stocks that best suits your investment objective, financial situation and particular needs. Kina is constantly in touch with domestic and international financial institutions and markets and is aware of trends and changes which may influence the performance of various investments. As an established broker with over 25 years of stock broking in PNG, Kina has the experience and knowledge to provide professional investment advice. We are able to purchase and sell securities in company you nominate through both the PNGX, ASX and other international stock exchanges.

 

Disclaimer

 

General Disclosure

The information provided has been prepared as a private communication to clients and was not intended for public circulation or publication or for the use of any third party, without the approval of Kina Securities Limited. While this report is based on information from sources which Kina Securities Limited considers reliable, its accuracy and completeness cannot be guaranteed. Kina Securities Limited, its directors and employees do not accept any liability for the results of any actions taken or not taken on the basis of information is this report, or for any negligent misstatements, errors or omissions. This report is made without consideration of any specific client’s investment objectives, financial situation or needs. Those acting upon such information without first consulting one of Kina Securities Limited’s investment advisors do so entirely at their own risk. It is recommended that any persons who wish to act upon this report consult with a Kina Securities Limited investment advisor before doing so.

Disclosure of interest

The Directors of Kina Securities Limited advise that they and persons associated with them may have an interest in the above securities and that they may earn brokerage, commissions, fees and other benefits and advantages, whether pecuniary or not and whether direct or indirect, in connection with the making of a recommendation or a dealing by a client in these securities, and which may reasonably be expected to be capable of having an influence in the making of any recommendation, and that some or all of our staff be remunerated wholly or partly by way of commission.