Homework is essential for new investors

Phil Kavanagh chose share investing as a long-term option rather than property investing. Photo / Paul Estcourt

When 30-year-old Phil Kavanagh decided to try his hand at share investing he got a bit of flak from older friends and family.

"It was always from people of my parents' age who said bricks and mortar are the way to go."

But Kavanagh, who didn't know anything about share investing when he began in March 2007, said most just didn't know anything about share investing.

"You always hear about the losses but never about the gains."

Kavanagh said he was put off property investing because of the amount of borrowing involved.

"I didn't want to have to borrow a large amount of money and then worry about tenants and fixing leaky taps.

"I can see why people are in property but it's not always going to be like that."

He also decided to get into share investing after reading that the long-term performance of shares is better than property and he was looking to invest for the long-term.

"I had always been interested in share investing. I had seen the lists in the paper and wondered; how does it work?"

He began by doing some research - reading up on local books and the investor information on broking website ASB Securities.

He also joined the New Zealand Shareholders Association of which he is now the Auckland chairman.

His first purchase of shares was in juice company Charlie's.

"I bought it because it was fairly simple to understand - I used to buy the juice, I still buy it. It was a company I knew."

He now has around $25,000 invested in about 10 to 12 different companies and he regularly buys more in about $2000 lots.

March 2007 wasn't the easiest time to begin share investing - it was just a few months ahead of the global financial crisis.

But Kavanagh says he hasn't let the financial crisis worry him. "My plan from the start was I was only going to put in as much money as I could afford to lose. I didn't need the money I put in so I haven't really worried about the financial crisis. Some of the shares did go down but I have also made some good gains as well."

His advice to others thinking about dipping their toe into the market is to do their homework first. "Watch the company for a while to see what its shares are doing. Read the papers. It's nothing too hard."

He also says having a plan is important.

"Decide whether you want to be an investor or a trader. If you are a trader you might have to face some short-term losses. Don't expect to be able to whip your money out. Don't just put your money in willy- nilly."

He doesn't plan to cash his shares up unless he really needs the money and says he has learned a lot from the process.

"It's a bit addictive, learning about new companies, who is running them and watching how they go. It's sort of a hobby for me to increase my knowledge of companies."

He is also trying to encourage others to learn about it. He has already bought some shares for his 6-year-old daughter.

"Rather than saving in the bank, hopefully they will grow a lot faster than money in the bank. Hopefully by the time she finishes school she will also have a bit of knowledge about share investing."