ASX the Ordinary Shares I Essay

Open, View, and/or
Download this Document

Total Length: 2191 words ( 7 double-spaced pages)

Total Sources: 6

Page 1 of 7

For example, two exploration companies in a portfolio of four securities is poor diversification. It is also important to consider that convertibles and rights will eventually turn to ordinaries, meaning that those forms of equity do not diversify the risk away from ordinary shares.

Time horizon is another consideration to take into account (No author, 2010). The time horizon of an investment is in part related to the risk of that investment, as some risk is related to time. Also, the investor should be wary of investing in securities with a long time horizon for returns if the investor may have a need for that money in the short-term. The time horizon of the investment should match the time horizon of the investor's needs (Ibid).

Finally, the investor should consider the nature of the investment itself and whether they have a full understanding of how that investment works. The ASX and the two mining companies selected are a perfect example of this. While the ASX is home to many sophisticated exploration and mining investors who can understand adequately understand the risks inherent in investing in these companies, not all investors can. These types of companies in particular produce reports heavy on geological analysis that cannot be understood without a background in geology or extensive experience with mining and exploration stocks. Investing in these companies without understanding the nature of the company's business and the risk factors inherent in this business is a poor investing strategy. Diversification across industries can offset some of this risk, but the individual investment in an unfamiliar industry is little more than a trip to the casino.

If I had 5000 Australian dollars and wanted to resell in a month, I would invest in the ANZ preference convertibles. The reason for this is that the short time horizon is inappropriate for investments in risky securities.

Stuck Writing Your "ASX the Ordinary Shares I" Essay?

View All Our Example ASX the Ordinary Shares I Essay

Have A Custom Example Essay Written

Both of the mining exploration investments are risky -- the payoff for these investments could be months or years later. Short-term movements are speculative at best. Telstra, unfortunately, is also a risky investment. It has declined steadily in value and with the government efforts to undermine its business at every turn there is little reason to believe that Telstra shares will bounce back in the next month. This leaves the ANZ preference convertibles, by default. However, preference shares are not good short-term investments either. There is unlikely to be significant movement in the price of these shares in the short-term, because the short-term price of preference shares is tied to the dividends that are paid out. Those dividends are known, and therefore are included in the price of the shares. Thus, even this investment is inappropriate for a short-term purchase. While the risk is very low, the potential return over a one-month time frame is also very low.

Thus, given the choice, I would not invest in any of these securities over the one-month time frame. If a choice had to be made, it would be to invest in the ANZ preference shares in order to reduce the risk associated with the purchase, on the principle that making short-term investments in risky securities is tantamount to gambling, in which case a trip to Macau might be a better use of my $5,000. Even Telstra, which is less of a gamble, remains a speculative investment whose value is largely to be viewed over the long run, as it finds ways to rebuild its business or to influence the government for a more favorable regulatory regime. If Telstra's fortunes were dependent on short-term considerations, it would be a good short-term investment, but this is not the case today.

Works.....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"ASX The Ordinary Shares I" (2010, September 01) Retrieved June 5, 2026, from
https://www.aceyourpaper.com/essays/asx-ordinary-shares-8730

Latest MLA Format (8th edition)

Copy Reference
"ASX The Ordinary Shares I" 01 September 2010. Web.5 June. 2026. <
https://www.aceyourpaper.com/essays/asx-ordinary-shares-8730>

Latest Chicago Format (16th edition)

Copy Reference
"ASX The Ordinary Shares I", 01 September 2010, Accessed.5 June. 2026,
https://www.aceyourpaper.com/essays/asx-ordinary-shares-8730
   

Open, View, and/or
Download this Document
order custom essay example