The Wise Investor
a month's salary put away for a rainy day, but she never
imagined that she had enough money to be a serious
"You do not need any great skill, knowledge or effort to
invest in shares. If you simply spread your money into half a
dozen of the best-known companies, the household names
that you hear about every day, then you are likely to receive
a good return over the long term.
A little knowledge, however, may improve the returns
and make your investments more secure, so I will describe
the essentials shortly.
Many people have the view that the share market is a
gambling casino, where your chances of profit and loss are
based on luck.
This is completely false.
There are two causes for this misconception. First, the
prices of shares are subject to large rises and falls. At
certain times in history, the value of shares has fallen by half
in a single day. This is extremely rare, but it is possible.
The simple solution to this problem is to invest in shares
for the long term.
If you spread your money into different companies, and
are prepared to hold on to the investment for at least three to
five years, then the peaks and troughs should smooth
themselves out and you should make a consistent profit.
In the long term, the majority of companies make steady
profits and their shares increase in value.
The second cause of the misconception about risk relates
to the types of companies chosen.
I suggest that you invest in large companies, with a long
history of consistent profits. Large mining companies, banks
and large manufactures are examples of these types of
companies. Small companies have the potential for greater
expansion, but they are also more risky.
Choosing solid companies is a safer form of share
investment, in comparison to speculating in the shares of
small companies. For example, occasionally a small mining