(Powerpoint Display: Why invest? + picture of 3 main investment choices.)

Every person that has had anything to do with shares, dreams of making millions of dollars on the Sharemarket.

But what's so special about shares?

Why should you invest your hard earned money in them?

Well, despite the sharemarket's famous ups and downs, such as the famous crash of 1929 which led to the Great Depression, and the crash of 1987, in which share values dropped by more than half a trillion dollars, shares over the last 100 years have averaged an annual return of 10%.

(Powerpoint display: World's sharemarket's success over the last 100 years)

Also, over the long term, shares have outperformed every other type of investment there is. Shares are also very tax effective, and the risk can be spread around, instead of having your money all tied up in one company.

On average though, Sharemarkets fall one year out of every four years. In 1929, Wall Street fell by 84.8%, and in 1987, The Australian Sharemarket fell by 44.7%. In the well known recent Asian crash, Thailand fell by 57.8%, and Malaysia by 51.8%.

Although most Australians stick with their home Sharemarkets, Australia isn't the only place you can invest. As you can see, other world Sharemarkets had very good returns in 1997:

(Powerpoint display: Overseas market stats)

Switzerland 54%

United States 32%

United Kingdom 24%

Australia 12%

In Australia, more than 21% of the population now own shares. This figure has increased by 11% in just seven years. The sharemarket is now definitely one of the most popular investment choices for Australians. Your decision whether or not to invest in the Sharemarket will be influenced by many factors, including: Your financial resources, your age,your tax status, and your attitude to risk.

If you decide to invest in the sharemarket, you have to be prepared to lose money to an extent, because of the sharemarket's unstable conditions. Because of the Sharemarket's high risk, it is also very possible to make a lot of money. As you can probably see by now, it is very important that you research individual companies very carefully before investing a lot of money in them. Also, it would be very foolish to invest all of your money in one company, it is wise to invest in a wide range of companies so that you can spread the risk around.

Sharemarket vs Other Investment Choices

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The main three investments that most people choose from are: shares, property and fixed interest. The Sharemarket offers good returns, but at a very high risk. If you invest your money in fixed interest, you are guaranteed a certain return, but usually not a very substantial one. If you invest your money in property, you are really putting all of your eggs in one basket, and you don't have the option of spreading the risk, like you do with the sharemarket.

( Powerpoint Display: ASX Investments Report prepared by Towers Perrin [graph])

As you can see, on the graph the gross returns are all very similar, but the equities are in front when it comes to the after tax amount.

If you want to have a well managed successful portfolio, it is best to have about 10 different share investments. This means the risk will be well spread, and the portfolio will also be easy to manage. Usually, the people that are patient, and take time to build up their portfolio, by researching their companies will outperform the sharemarket's average returns. The people who are quick in setting up a portfolio, and impatient, sometimes outperform the average, but usually fall way below, because they hadn't used time to plan.

Now, the main thing to remember, is that: your chance in selecting high performing shares will be greatened by your research and the number of shares in your portfolio.

(Powerpoint display: Game update)

The Money Show / Australia: producer? / 27 May, 1998.

Greg Cathro / The australian Sharemarket Explained Simply / pg 6-7