Most investors today go ecstatic when the company they have been investing in comes out with share purchase plans.

What Are Share Purchase Plans?

For the uninitiated, Share Purchase Plans are nothing but issue of new shares to existing share holders that are capped to a particular amount of money, which is presently about $5000 according to the ASIC.

These shares come at a deep discount and without too much of paperwork and even disclosure requirements that share buying normally mandates.

Although it might seem to be a rosy picture at the outset, it might not always be the best bet for you as an investor? Each time you are presented with a scenario like this one, it is best to do a quick introspective analysis and try to compare the apparent costs and benefits using cost-benefit analysis.

Do Your Homework Before Investing

For starters, is the discounted share price worth it in the first place? The company will stand to gain from the Share Purchase Plan it had floated out, but will you stand to gain too? Has the share been doing well in the market? The share purchase plan has been floated by the company for an obvious reason and that is to raise easy cash, but do you have just as obvious a benefit?

Discounts on share prices and increased ownership in a company doesn’t equate to getting wealthy. Instead of grabbing every Share Purchase Plan that comes your way, a discerning investor must always keep their eyes open for anything that doesn’t fetch you good returns, by scrutinizing the company, its management and the reasons for the share purchase plan being floated out at this juncture.

Andrew Dimitri from Planet Wealth explains Share Purchase Plan Investing…

Post by
Scotty Smith
Planet Wealth