Educational articles

5 misconceptions about the stock market

There are some inaccurate myths in the share market which can misinform the investor. Below are a list of five common myths which are false concepts about the share market. 1.You can’t go wrong with a fundamentally sound stock Stocks which are fundamentally strong can also fall in share price. Although the financial ratios may indicate there is nothing wrong with the company, the share market needs to believe that as well. If the sentiment of a stock in the …

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Income investors should invest in growth stocks, not income stocks

At Fairmont Equities, we conduct dozens of free portfolio reviews every year for investors looking to improve their returns. There are a range of reasons as to why a portfolio does not live up to an investor’s expectations. One of the common problems we see over again is an over reliance on shares with a high yield. Often an investor chooses high yielding stocks because they are investing via an SMSF, even though they are still in accumulation phase. They …

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What is a DRP?

The share market is full of jargon which may not be familiar to the new investor. A term which is used frequently is DRP. This acronym means “Dividend Reinvestment Plan”. In this article we discuss the reasons why investors may want to take it up, and the potential downsides. Definition of dividend reinvestment plan Companies can pay their dividends to entitled stock holders through stock as opposed to cash. Some companies may offer DRP shares at a discount to market …

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What is an arbitrage strategy?

Arbitrage is a strategy which traders and fund managers use to take advantage of price imbalances in different markets. In this article we discuss what this strategy involves and different types of arbitrage strategies. What is the definition of arbitrage? The simple explanation of arbitrage is buying an asset where the price is lower and selling the asset where the price is higher in a different market. Traders who want to exploit price discrepancies between two markets can use this …

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What are options?

Investors have a large array of financial products in the market to choose from. One of these products is options.  In this article we discuss what an option is, the uses of options and the pros and cons from using them. What is the definition of an option? The basic definition of an option is a contract between two parties where the buyer has the right but not the obligation to buy or sell an underlying asset at an agreed …

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