So what is the ASX (Australian Stock Exchange) and how can it benefit me to become financially free through trading and investing on the Australian Stock Market?
History of the ASX or Australian Stock Exchange.
Lets begin by taking a magnified look at the Australian Stock market. From here down we will refer to it as the ASX. The Australian Stock Exchange actually began it’s life way back in 1861 as separate, independent state based exchanges. These separate state based exchanges existed in the following Australian states: Perth, Melbourne, Adelaide, Brisbane and Hobart. Each Exchange existed for it’s own states benefit and cross trading was not permitted. The first interstate conference was held in 1903 to discuss formal, financial information and this occurred right up until 1937. At this point in time a uniform body was formed to better represent each state which was called the “Australian Associated Stock Exchanges” or AASE. As time went on, this unit became closer to becoming a single entity and created a list of trading rules, rates, listing rules and brokerage rules to keep uniformity across all states.
As the Australian Stock Exchange was relatively small at this point in time, financial information and trades were placed by a call system whereby callers employed by the Stock Exchanges literally called out information such as company name and bid or offer prices for that company. This system of calling was then superseded in the 1960’s to a posting system. In this system employees of the Stock Exchange which were referred to as “chalkies” wrote bid and offer prices and company names on chalk boards on behalf of clients. This is obviously a fairly complicated system with many flaws and could not possibly last forever.
The ASX was formally and officially formed as a single entity in 1987 by the Parliament of Australia and now traders and investors from anywhere in Australia and in fact the world, were able to now place a trade through a certified broker through one single stock exchange. This made it much easier for everyone, including the companies listed on the Australian Stock Exchange who now only needed to list once. Another benefit now was that there was a uniform set of guidelines and rules for everyone including investors, brokers and company’s looking to list on the Stock Exchange. The Australian Securities Exchange is now, itself, listed on the Australian Stock Exchange under the stock code ASX. Although the Exchange regulates other companies it obviously cannot regulate itself as this would be seen as a conflict of interest. For this reason a government body was formed called ASIC which stands for Australian Securities And Investments Commission. Since it’s inception ASIC has successfully prosecuted many fraudulent companies and individuals.
Trading on the ASX which was handled by the “chalkies” was then transferred to an all electronic system call SEATS which stands for Stock Exchange Automated Trading System. This system is all electronic and much more efficient and is capable of placing hundreds of thousands of stock trades every day. The SEATS system however has now been made redundant for the exchanges current system which is much more powerful and can place even more trades than SEARS could. The new system is called ITS, which stands for Integrated Trading System. This system is in place today and has been hailed a total success.
Australian Stock Exchange Quick Facts
The ASX is today believed to be the eighth largest stock exchange in the world by market capitalisation and is the primary stock exchange in Australia. Although other Australian exchanges exist and mirror the ASX, the Australian Stock Exchange is considered the main hub for investing in Australia. The ASX is currently believed to have a market capitalisation of approximately 1.1 trillion Australian dollars with over 2,200 publicly listed companies. The ASX has made great historical returns for shareholders who performed in line with the benchmark index (the All ordinaries).
The benefits of listing on the ASX
While there are many benefits of listing on the ASX we will discuss some of the more important ones to consider here. So why list your company on the ASX and make it public?
Firstly this can be a great way to raise funds. This is basically the whole point of going public. If you have a company which you believe has the potential to move forward or has an excellent idea involved with it but you don’t have the working capital or funds to put your growth scenario into play then you would consider going public. Money would be raised through a share offering also known as an IPO (initial Public Offering). If all your shares in the company are sold and you meet all listing requirements you would be given all the funds in exchange for the shares in your company. this means that you no longer officially own your company but in fact it is owned by share holders.
Another benefit is of course that companies that are listed on the ASX, or public companies, get the attention of the public and more importantly the media. this can be great for brand recognition and you can easily have your company name or brand recognised all over the world.Lastly shares go up, or down in price depending on your companies profits and performance. So if you are able to make your company perform you can crate unlimited wealth beyond your wildest dreams.
There are also a number of downsides with making your company public which must first be considered. The first is that your company will now be owned by shareholders who now have rights such as voting, selling of shares and the calling of meetings. If you under perform shareholder expectations they will of ten dump share causing the share price of your company to dive, so effectively you are now working to keep shareholders happy. The other main disadvantage can be the media spotlight. Although this can also be an advantage as we discussed earlier, the media could look upon your company negatively which could cause shareholders to get rid of stock. To run a public company we would recommend that you don’t mind public speaking or being in the spotlight should you make a wrong move.
How to get started making money on the ASX
OK, well there is no definitive way to getting started in the stock market for beginners, however there are a few steps that can be taken to better the chance of a successful debut. First thing we recommend you do is familiarize yourself with the stock market, how the market works, how to pick winning stocks and the pitfalls to avoid. we say this over and over but still today one of the best ways of avoiding mistakes and creating wealth through stock market investing or trading is to read books. I mean come on it’s obvious isn’t it!? Knowledge is power and in this case knowledge will equal wealth. the people that have written these books for you to learn from have been where you are and have already made all the mistakes of the inexperienced investor. Why make the same mistakes that they did when you can avoid the expense altogether?
Once you have familiarized yourself with the stock market and how it works you are probably ready to start paper trading. This is simply just the practice of writing down stocks that you think will go up in value and watching the market without actually risking any of your hard earned money. Once you have paper traded for a few months and are confident enough it may be time to take that leap and start actually investing in shares on the Australian Stock Exchange.
The final step before investing is choosing a Stock Broker. There are literally hundreds of brokers out there to choose from with varying brokerage rates and option. We have used many stock market brokers in the past and if you are trading Australian shares you simply could not go past a broker called Minc Trading. They are a very professional stock broker with an excellent trading platform who offer free stock picks to members and are competitively priced.
They have also learnt how to be profitable in the stock market by picking winning stock picks and by following winning proven trading systems. For more information on stock market books and to purchase in a secure environment go to our books page after following our link in the resource box below. To sign up with Minc Trading or to just check them out go to our link in the resource box below. For heaps more information on trading the Australian Stock Exchange also check out the resource box below.