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Buying shares

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  • Buying shares

    First time share buyer here. Just as there are different vehicles to buy property, Im assuming similar guidelines exist for buying shares. In the old days before I knew anything I would have just bought shares using my own cash. Now that I know more, I cant figure out what I should do!!!! Im only spending $5k but like any purchase I want to use the right vehicle - cash, LACQ or use the trust. Im in the top tax bracket.

    So, an appeal to the combined wisdom...

    Also, I was going to use a broker and then I found www.directbrokering.co.nz would there be any reason not to use an online company or any advantage using a broker.

    Thoughts appreciated.

  • #2
    Actually Sara the ownership issue for shares is a little different than property as it is much simpler to avoid tainting of buy and holds when trading.
    For simplicity I will make the assumption that we are only talking about NZ or top Australian shares.

    If you are going to trade shares just as in property you need to have a separate entity so that you can pay tax on the capital gains on traded shares or accept losses without tainting the capital appreciation of your buy and hold shares.

    Currently setting up a company to trade through is enough to avoid tainting your buy and hold shares in your own name or a separate company.

    I have our buy and hold shares in the name of my partner who is in a lower tax bracket. If you don't have a partner with a lower income I suppose that the idea would be just to buy through the lowest tax paying entity you have or set up if the costs of setting this up were less than the tax savings
    Last edited by Re@der; 22-08-2008, 11:11 AM.


    • #3
      As far as I am aware there is no need to separate trading and B&H for shares. For an evidential point of view it can help but two separate brokerage accounts should be sufficient. there is no tainting like land, you just have to prove one way or the other (a mixed account makes that difficult).

      I assume you have your B&H ins your partners name so dividends are taxed at the lower rate??

      personally, I would hold B&H in a trust. Capital growth in a separate vehicle and if you have a lower tax rate, distributions can be made to take advantage of. Tax rate is 33% which is lower than top rate. For $5k, I would just hold in your name. No point thinking of a trust till you have $54k work of shares (can be gifted in in 1 year and 1 day) unless you have a trust in place for other reasons (ie. to hold PPOR).

      For trading, either in a company or personally. You can do in a trust (which would be great) but the paper work could become a bit much (ie. getting all trustees to sign, fiduciary duties, etc)

      No issue with using an online broker. I use ASB Securities (for ease) but have used Direct before. Difference between an online and a full service is you pay lower commission, but you don't get any advise. All the NZ online brokers also have physical office, phone lines, and full service offerings as well (I think).

      Sara, what is your long term objective. Trader, B&H, small portfolio, portfolio to retire off?


      • #4
        Hi Guys

        I would have a chat to an accountant as the new rules recently bought in to allow for the PIE regime have made some changes to trading etc.


        • #5
          If you are only going to spend 5K then I suggest probably subscribing to a share recommendation service or newsletter and doing your own due diligence. Read a book on basic share investing.


          • #6
            Hi Sara
            you can also join etrade and comsec for free.
            These two sites provide quite a lot of research.
            The research on each site is slightly different and etrade has some great tools for filtering various ratios.
            I use etrade to filter and then comsec for more detailed research.


            • #7
              These days most people are prepared to do their own research, which, after all, half the fun of investing. If you are in this camp you need to look for an execution only stockbroker. Execution only means that the broker will simply take your order and execute it for you. These brokers cannot legally offer you any advice on your decisions and to keep costs down usually operate over the phone or the internet.