Direct Share Advice

Sterling Advice, Sunshine Coast are experts in direct share advice. A share is when you buy into a publicly listed company and become a part owner of that corporation. It allows you to share in the company’s performance via profits which can be given to you as dividends and / or capital growth (through the value of your shares increasing). Shares can be purchased domestically or internationally although sometimes the latter is harder due to country regulation. Domestic shares can be purchased in different areas or sectors of the economy such as the Financial Sector (Financials) which includes bank shares such as ANZ, CBA, NAB, and Westpac, Diversified Metals such as BHP Billiton and RIO Tinto there are many other sectors such as Medical, Engineering, Energy etc. There are two major risks when investing in direct shares:

  1. Business Risk – This is the risk associated with the business for example investing in BHP the risk may be poor management or sector specific. This risk can usually be minimised by investing across a broad range of shares in different sectors.
  2. Market Risk – This is the risk associated with the economy and this risk cannot be reduced.

The benefit of investing directly in shares in comparison to that of managed funds is that you are entitled to receive the full dividend and any imputation credits (see below for definition) attached to this share.

Imputation or Franking Credits

Imputation or Franking was introduced in Australia by the Keating government in the early 1990’s and remedies the problem paying tax on the shares twice, once by the company and once by you. For example if you were currently taxed at the marginal tax rate of 30% and the dividends were 100% fully franked (tax already paid by the company at the rate of 30%) then you would not have to pay any further tax. If however, your marginal tax rate was less than 30% then you will be entitled to a rebate, and this is the reason why it may be a good strategy for low income earners such as pensioners to invest in shares that pay full franked dividends. Managed funds receive some franking credits but not the full credit paid by the company.

Investing in managed funds or in shares directly may not only impact on the growth of your portfolio but the tax you pay. It is important that we work with you to ensure the most optimal way in starting your wealth accumulation process.

Contact us today to speak with one of our experts on 07 5446 3186 or email info@sterlingadvice.com.au.