in this video I'm going to show you the easiest way to invest in the Australian stock market if you're a beginner I'll also explain how the Australian stock market Works in an easy to understand format and some of the most frequently asked questions and spoiler alert it's not that complicated you don't have to be rich or wear a fancy suit to start investing these days anyone with a smartph phone can start investing in just a few minutes so if you want to start your investing Journey this year then this video is definitely for you let's get straight into it so what is the stock market the stock market is a place where people buy and sell shares of a company a share represents a part ownership of a company for example say this pizza represents the shares of a company each slice equals 12.5% of the company so purchasing a single slice means owning 12.5% of the entire pizza or company take wwor a well-known Australian company listed on the Australian stock market as an example to find out the number of shares available check their shares outstanding currently it's at 1.22 billion indicating that W has 1.22 billion shares already issued and held by investors so that's the total amount of shares that wwor has out there if you purchase even one share of wwor you become a part owner of the company now this does not mean you can simply walk into woolies and help yourself to some free vegim mut but it does mean if Wars performs well you will directly benefit because the value of your shares usually increases as more people buy them however if warw underperforms the Share value May decrease as more investors are likely to sell the good news is as a warw shareholder you do not have to manage anything you are simply a part owner and you can let War's management team work hard to ensure they are profitable year over-ear to invest in a company's shares it must be publicly listed many countries have their own stock market that contains all the public companies from that country this video is focused on Australia so all the Australian publicly listed companies are available for purchase on the Australian Securities Exchange or ASX for short this is the official name of the Australian stock market let's quickly have a look at the top 50 companies on the ASX by market cap a market cap represents the total dollar market value of a company's outstanding shares of stock so essentially it's a measure of how much a company is worth from their shares So currently the top company in Australia is BHP followed closely by CBA and CSL then you have a bunch of familiar looking Banks and mining companies you probably recognize a lot of these names and you can choose to invest in any of these companies if you wish how to make money from stocks there are typically two main ways to make money from stocks the first is when the share price increases for example if you purchase 10 shares of vas at $90 per share totaling $900 and a year later the price per share increased to $100 your total investment will be worth $1,000 selling all 10 shares at this point will yield a profit of $100 the share price increases when there are more people trying to buy the stock versus people trying to sell the stock so it's basically supply and demand several factors can contribute to this such as the company reporting good profits or the economy doing well as a whole the second way to make money from stocks is through dividends some stocks or company pay a dividend as a reward for investing in them when you invest in a company you become a small part owner and may receive a portion of the company's profits as dividends for example vas which tracks the top 300 Australian companies receives dividends from many of these companies these Dividends are then passed on to the investor which is you in Australia companies usually pay dividend dividends twice or four times a year however it's important to note that not all stocks pay dividends even if a company is profitable there is no law that says they must pay dividends it's entirely at the company's discretion so why should you invest one word inflation inflation refers to the rate at which the general cost of goods and services increases over time in other words the same amount of money today will buy fewer goods and services in the future for example I remember when I first came to Australia as a child 30 years ago back then a Big Mac cost around $2 today that same Big Mac cost nearly $8 that's a Forex increase over 30 years now think about how much a Big Mac will cost in another 30 years many people who do not invest usually leave their money in a bank account earning minimal interest however over time that money gradually loses value because the interest you receive from the bank will never exceed the inflation rate inflation diminishes the purchasing power of your money over time like we found out from that Big Mac example investing your money offers the potential to earn returns that outpace inflation thereby preserving and even enhancing your purchasing power in the long run I want a quote somewhere when I was young that stated cash is safe in the short term but cash is risky in the long term this really resonated with me when I was young because it transformed my perception of money in the short term cash is King because it provides immediate financial security however if you hold on to it for too long the value would depreciate you can also apply the same logic to this quote investing is risky in the short term but investing is safe in the long term this quote is saying the stock market is unpredictable in the short term due to a number of variables outside our control making the price go up and down however hisor hisorical data shows the Australian and US Stock markets have both consistently gone up in the long term this article from Vanguard states that the Australian stock market has averaged a 9.2% annual return over the last 30 years and the US market averaged 10% per year over the same period while future performance is not guaranteed at least these historical Trends offer a degree of assurance what to do before investing before you start investing please make sure you do these two things firstly pay off all high interest debts these include things like credit card and personal loans and essentially any loan that is in a home loan these debts often carry interest rates of 10% or more some credit cards charge up to 20% Which I find absolutely insane so please make it a priority to pay them off paying off debt offers a tax-free guaranteed return unlike the stock market for example paying off a credit card debt with 15% interest means you actually save that entire 15% however if you invest in stocks even if you earn 10% annually you'll still need to pay taxes on those gains when you sell and that 10% per year is not guaranteed and the second thing you need to do before investing is set up an emergency fund this fund is a dedicated savings account for unexpected expenses or financial emergencies such as losing your job your car breaking down or getting a large medical bill it should cover at least 3 to 6 months of living expenses including housing costs groceries and utilities basically everything you need to survive I like to refer to an emergency fund as an insurance against bad luck when life hits you in the face and trust me it will at some point at least then you'll have something to protect you you may not think it will happen to you until it does and then what imagine you suddenly lost your job today and had zero money in the bank to pay for your expenses it would make a sucky situation even suckier so just trust me on this one guys please go build an emergency fund if you haven't done so already individual companies versus ETFs as a beginner there are two types of stocks that you should know about individual stocks and ETFs individual stocks represent publicly listed companies like CBA war war apple or Tesla when you buy shares in these companies you essentially become a part owner individual stocks can be broken down into different subcategories please refer to the onscreen table summarizing some popular stock types investing in individual stocks require a good deal of research and practical experience it is usually suited for more experienced investors and involves more risk if the company goes bankrupt then the stock will usually go to zero and you'll likely lose all your money in the stock so beginners should usually avoid individual stocks at first until they develop a sound knowledge of how the stock market works and how to research a stock exchange traded funds or ETFs for short are also very popular especially among beginners in Australia an ETF represents a collection of companies under one stock they function like any other stock you can buy or sell on the stock market by purchasing a single share of an ETF you become a part owner of many companies let's revisit our pizza analogy to help illustrate this concept better imagine this pizza that has been sliced into eight equal pieces each slice of this pizza represents a company in the market you could choose to buy just one slice of the pizza which would equate to investing and owning a steak in just one company or you could instead by the entire Pizza in doing this you would essentially be investing in all eight companies represented by each slice it's like expanding your portfolio to include a more diverse range of companies rather than putting all your eggs or in this case your investment in one basket typically an ETF tracks an index measuring the performance of a stock market or a portion of it you may have heard of the term index funds in Australia the simplest way to invest in an index fund is through an ETF that mirrors the index for example vas is a popular ETF that tracks the ASX 300 index which contains the top 300 Australian companies listed on the ASX this ETF represents around 97% of the Australian stock market so instead of selecting individual Australian companies to invest in you could just invest in an ETF that tracks nearly all of Australia another Super popular ETF is ivv which tracks the famous S&P 500 index investing in this ETF gives you exposure to the top 500 us companies including Apple Amazon and Tesla there are many other ETFs out there that you can research if you're interested I'll link a video Down Below on some of the most popular ETFs on the ASX quick disclaimer I am not a financial advisor and this is not Financial advice none of the stocks or ETFs I mentioned in this video are by recommendations I'm just using them as an example for educational purposes please do your own research or go see a professional if You' like Financial advice having said that let's move on what should you invest in although I'm not a financial advisor and I can't tell you exactly where to put your money most beginners typically start with ETFs that track a particular index such as the sx300 or S&P 500 you could also look at diversifying across different markets like Australia us Europe and Emerging Markets like China India and Brazil there are many ETFs on the ASX that tracks many types of markets as mentioned before investing in individual stocks is riskier it requires experience in researching and identifying stocks with the potential for a high return even then you can't account for internal or external factors beyond your control if you invest all your money in a single stock and the company fails you could lose all your money to mitigate this risk you could consider investing in ETFs and diversifying across several different stocks instead of just one you could also look to other asset classes like real estate to help you spread your risk investing strategies there are a number of investing strategies you can adopt however there are two methods that are the most popular the first method is dollar cost averaging this is a strategy that allows investors to build up their Investments over time by investing a fixed dollar amount at regular intervals regardless of the share price for example you might choose to invest $500 into an ETF on the first of each month you would continue to do this indefinitely regardless of the share price at the time this way more shares are purchased when prices are low and fewer Shares are bought when prices are high hence over the long term the average cost per share tends to be lower this is a stress-free investment approach for beginners as it eliminates the need to time the market instead you aim to achieve an average return over the long term so if you're a beginner this is probably a good strategy to start off with the second method is known as lumpsum investing this strategy involves investing all your money all at once in a single lump sum this form of investing is based on the principle that the longer your money is in the market the more time it has to grow there is a famous saying in the investing World timing the market beats timing the market so in that spirit this method can potentially lead to higher returns given the market does tend to go up over the long term the investor buys at the current market price and hopes to benefit from any increase in the price over time this approach is more popular amongst intermediate to advanc investors since it requires a fair amount of confidence and willingness to take on risk imagine you invest all your money in the market and the next day the market goes down and your Shares are already in the red you need to be mentally comfortable looking at a red screen it's a strategy best suited to those who have a good understanding of the market and are comfortable with taking on higher risk according to the study by Vanguard interestingly lumsum investing normally outperforms dollar cost averaging most of the time although both methods outperform sitting on cash most of the time Australian stocks versus US Stocks so should you invest in the Australian Market or the US market look I'm a proud Aussie but our stock market only makes up 2% of the entire Global stock market whereas the US stock market makes up around 60% that does not mean you have to invest in the US a the investors have done just fine investing in Australia for the last 30 years however it is something to consider because as I mentioned earlier this Vanguard article shows that the US market has returned 10% per year on average which slightly outperformed Australia who average 99.2% per year in that same time period And since I don't have a crystal ball I have no idea which Market will outperform the other in the long term what I do know is I believe in Australian market and I also believe in the US market so personally I invest in both markets for the long term picking an online broker to invest in the Australian stock market you need to sign up to an online brokerage account there are many online brokers in Australia all offering reasonable Services however not all Brokers were made equal with some offering better features than others I currently use Mumu because it takes off three key requirements I look for in a good Aussie online broker one chest sponsorship this means I directly own the shares I purchased under my own name this provides additional Security in the unlikely event that the broker goes out of business in the future not saying it's going to happen but it lets me sleep better at night two Lo no brokage fees Mumu charges only $3 per trade which is one of the lowest rates available in Australia three ability to invest in US shares the convenience of investing in the US market from the same app is a great feature to have Mumu also offers one of the lowest fees in Australia for trading US Stocks making it a good all-in-one investing app and the good news is since Mumu is relatively new to Australia they still offer a juicy sign up bonus currently if you sign up using the link in the description you'll receive up to 10 random free stocks $2,000 brokerage free cards for both Aussie and US stocks for 30 days which basically gives you free brokerage fees during your first month you also get 6.8% annualized interest on your uninvested cash up to $100,000 for 180 days this offer is a great deal for beginners looking to start investing without incurring fees in the first month please note terms and conditions do apply so please go check it out before deciding I can't guarantee how long this offer will last so if you're interested use the link down below to sign up and claim the free rewards on screen the sign up process only takes a few minutes how to buy your first stock I will now quickly show you how to buy your first stock on the mumu app just to demonstrate how easy it is I have a more detailed Video available which I'll link in the description but for now let's dive right into the mumu app here's what the mumu app looks like let's say you want to buy 10 shares of vas you'll need to search for VAs under the markets tab so here it is let's open it up now don't get intimidated by all these numbers and charts it will all make sense once you take the time to learn it for now let's click on trade and then buy change the order type to Market this is the easiest method to buy as it automatically buys at the current market price which is roughly $98 per share let's enter 10 for the quantity you'll then see the approximate amount you'll need to pay click on this dollar symbol to check the brokage fee which in this case is $3 click buy and you'll see an order detail confirm all the information is correct then hit the confirm button and that's it the buy order should be processed immediately and congratulations you just purchased your first stock of course there are many other ways to buy like setting a lower price you want to buy at and for a more detailed guide on buying stocks check out the video linked below let's now talk about tax on your stock there are two main types of tax you need to be aware of when investing in stocks in Australia the first is capital gains tax this is the tax you must pay on the profit you make when selling your shares for instance going back to the previous example if you bought 10 shares of vas for $90 per share and sold all 10 shares at $100 each in less than a year then you will pay capital gains tax on your $100 this $100 will be added to your taxable income and you'll be charged your marginal tax rate if you wait 12 months or more to sell your shares then you'll receive a 50% capital gains discount so in that scenario you only pay tax on $50 if you sell the shares for a loss so let's say at $80 each and make a $100 loss you can offset the loss with your capital gains for example you make a profit of $150 on the sale of stock a but make a $100 loss on the sale of Stock B you will then only pay tax on $50 since they net off however you cannot use the capital loss to reduce your taxable income you can only use it to offset any current or future capital gains if you don't have any capital gains for the year you can carry the losses into next year this is known as carry forward losses the second tax is a tax on dividends in Australia you must pay tax on any income you receive including dividends even if you set up a dividend reinvestment plan to automatically reinvest your dividends you will still pay tax on it your total dividends will be added to your taxable income and you'll be charged a marginal tax rate by the way if you're enjoying this video or found it useful comment the words down under down below so I know who you are and if you're new around here what are you waiting for mate hit that subscribe button and join this amazing Community also please consider signing up to my free newsletter Aussie money Club where once a week I'll send you some money tips any important news in the market or any life updates for me if you're interested to learn more about how to buy your first stock or ETF then check out this video on screen where I'll show you how to buy your first stock or ETF in Australia as a beginner and as always thank you for watching I appreciate you and I'll see you in the next video [Music]