By Allison Tait, ninemsn Finance
When you didn't buy your shares in the first place, it's difficult to know where to start when you want to offload them.
Particularly at a time when the share market has more ups and downs than a celebrity romance. Find out how to sell, sell, sell!
One moment you're sitting there facing a mountain of bills armed with a molehill of savings. The next you remember those NRMA or AMP or MBF shares you were "given" a few years ago. The ones you get paperwork about occasionally — and ignore, blowing your $50 (or thereabouts) dividends cheque on a night out.
Could they be worth something? Or could they be enough to get you out of trouble?
Or maybe one of your elderly relatives left you some share certificates in his or her will and you're wondering what you're supposed to do with them. Should you keep them to pass on to your own heirs?
Never fear. We asked Carl Daffy, senior investment adviser with Wilson HTM Investment Group in Melbourne, and Matthew Walker, certified financial planner and partner at Sydney's WLM Financial Services, for the lowdown on selling your shares.
Is it difficult to offload shares?
Carl Daffy: The process is straightforward. If all you want to do is sell, there's no investment decision to make so you'd look at doing it as cheaply as possible. Online brokers offer the lowest fees, and you simply follow the instructions and do it yourself.
Matthew Walker: E*Trade has a Visitor Trade Centre, designed to help people deal with issuer sponsored shares. You don't have to join up and do transfers, you just e-mail them the details and they do it for you and send you a cheque.
How and when do I get my money?
CD:Settlement takes place three days after you trade and funds can be directly credited to your bank account. It's worth noting, too, that if you're buying shares you have three days after the trade date to pay for them.
How do I find an online broker?
CD: Contact the Australian Stock Exchange and they'll give you details of four or five from which to choose. They also advertise, so you could do some research yourself. Word of mouth can also help, so ask around.
Is there another option?
CD:When people inherit shares, they're obviously those that the deceased person held. They may or may not be appropriate shares for the beneficiary to hold because their risk profile and financial goals and objects may be different. Sometimes people will hold on to them just for the sake of it, but this may not be right for you. And selling them off at first opportunity may not work either.
What you need is advice from a full-service broker, who can help you establish whether the shares are right for you, or whether you should sell them and perhaps establish your own share portfolio.
"Full service" sounds expensive. What does it cost?
CD: Fees can be charged as a percentage of the amount traded or, depending on the size of the portfolio, an annual fee. It depends on the level of service you need and want to undertake. Again, the Australian Securities Exchange can give you a list of advice-providing brokers.
Is it a good idea to sell on a whim? (As per our opening scenario.)
CD: No. I would always suggest that people take some time to watch the market and take note of what's happening with their particular shares. It may not be the best time to sell. It may be a stock in a cyclical sector and it may be at the bottom of that cycle! You need to observe and, perhaps, take some advice.
But if I'm short of cash now, am I really better off holding shares I didn't even buy in the first place?
MW: Demutualisation shares come about because of company structure changes — which will continue I think, so they'll continue to arrive. Most people don't know what to do with them. They either don't own many shares or are completely inexperienced, so they chuck in the bottom drawer.
You should review the shares like any other in your portfolio. Is it a good business or not? Treat them like any other investment."
What about those random "offer to buy shares" letters I get occasionally? That seems an easy way out.
MW: I think they're disgraceful. The offers are typically to buy shares at well below the market value. They're scams to take advantage of unsuspecting and uninformed shareholders. They're not illegal, because it's a free-market economy — you can offer to buy something from someone and if they accept then it's their choice. But it's highly immoral. If you receive an offer like that, bin it.
I don't seem to have any "share certificates" as such, but how do I know I have shares?
CD: You'll have a holding statement, which confirms all the details, from your name and address to the number of shares you hold and in which companies you hold them. It will also contain a shareholder reference mumber (SRN), which needs to be quoted to the broking firm that is transacting on your behalf.
Is there anything else I need to think about?
CD: You should be conscious of capital gains tax (CGT) [the tax you pay on the profits of selling your shares]. Generally speaking, if you inherit your shares, the price of the stock on the deceased's date of death is the CGT cost base — so if the person died on January 1, the price on that day. If you sell today at a different price, there may be CGT implications. Seek your own advice if this might apply to you.
With a demutualisation, the company will advise you of the CGT cost base, in writing. Again, seek advice regarding CGT if you're thinking of selling your shares. And don't forget dividends — you should consider them as part of any investment decision. Some stocks pay excellent dividends.
Should I reinvest any dividends I receive?
MW: You have two options. Either take the cash and then make the decision about what you want to do with that cash. Or you could take the dividend reinvestment course, where there may be a discount available on shares. If you choose the second, it's like an automatic savings plan and is good for people who are happy to be less involved. I personally like to get the cash and make the decision based on the circumstances at the time.
Need to know more? The Australian Stock Exchange runs free online courses for beginners from 'Getting Started in Shares' to 'Tracking your Sharemarket Investment' to 'Developing Your Investment Portfolio'. Visit www.asx.com.au and follow the links to the First-time Investors section.