Young people priced out of the property market are turning to share trading in growing numbers.



Angela Busby, general manager of ASB Securities, one of the country's main online share trading platforms, said there had been a noticeable growth in the number of young investors. One in three using ASB's service is now aged under 39.



"One of the things contributing to people looking for other ways to invest is that owning a home is harder," Busby said.



"When I bought a house I didn't need a 20 per cent deposit – or more - and house prices in Auckland were significantly lower. People coming out of university are looking for other ways to invest because they can't buy a house."

But how do you take your first steps into the share market?

READ MORE: Why the NZ sharemarket is going strong while others flail

PETR MALINAK/23RF Young people are trying to make money out of investing in shares, because the housing market is out of reach.

How to start

To buy shares, you will need the help of a stock broker. There are many operators offering a phone service, and ASB and ANZ have online trading platforms.



All you need to set one up is some identification, and some money to transfer into your trading account.



Douglas Morris, chief executive of portfolio tracker provider Sharesight, said it made sense for smaller scale investors to take a DIY approach.



"If you can get an 8 per cent return on shares that's pretty good," he said.



"But if you're paying an adviser 1 per cent to 2 per cent of that, that's a quarter of the return going to someone else. I would advocate that young people do research independently and then find the lowest-cost platform available."



You can also buy shares in companies through equity crowdfunding platforms, but because these companies are not yet listed on the stock exchange you may find it harder to sell out, should you need to.

Another option is to switch to a KiwiSaver fund that allows you to choose your investments – Craigs Investment Partners offers this. But you will not be able to access the gains you make until you are 65.

SUPPLIED If you're interested in beauty products, buy shares in companies that make them.

Before you buy

Financial adviser Liz Koh urged would-be investors to read about how share markets work and the factors that might influence the direction of prices.

"The NZX has some good information on their website," she said. "Decide on an investment strategy - are you investing for high growth, high dividend or good value?"

JOHN SELKIRK/STUFF New Zealand's share market has had a very strong run over recent years.

Morris agreed it was important that investors understood their motivations and expectations. "When do you possibly need that money again and what are your expectations around having that investment decrease in value in the short to medium term?"

That would help people understand how much risk they were prepared to take, he said.

What to look for

Daniel Kieser, managing director of investment analysis firm ShareClarity, recommended people look for shares in companies operating in industries they understood.

"If you do it with your eyes closed, it's gambling," he said.

"You don't buy a car without looking under the hood or a top without trying it on, so I don't know why people don't apply the same discipline to shares.

"They often don't know anything about what they've bought, that is the frustrating part. Find an industry and company that you understand more easily and start with them. Do you really like your cars, or beauty products, or retail products?

"If you've shopped at Kathmandu many times in your life, start there. You know what Kathmandu is, if someone explained to you what Pacific Edge is, it might be very difficult to get your head around. If you start with something you know and you are interested in, that's helpful because otherwise you could fall asleep on this stuff."

Kieser said people could get inspiration through their daily lives - products that were selling quickly, or shops that were particularly busy might offer investment opportunities if they were listed companies.

He said some of the best investing decisions were made because parents saw their kids latching on to something and were told it was the next big thing.

But he said investors should also do enough research to know what they considered fair value for a particular share, and be prepared to sell when it went above that.

"Selling is not a lifetime decision, you can do it many times. We have this thing where people think if you sell shares you're never going to come back to it but that's not true. This is a fiscal product. You should say 'I see value to that level and once it's exceeded, I'm prepared to get out'."

Once the share price dropped again, investors could buy back in, he said.

Koh said newbie investors should learn how to read annual reports, understand the companies' business and the markets they were operating in, learn about their key people, look at trends in their share price and how the trends compared with their competitors.

"A really good tip is to do some notional investing for a while first as a learning experience," she said. "Pick a portfolio on paper and see how well it does as a way of learning about shares. You can track shares for a while to get a feel for them so you know when to buy."

Morris said younger investors should steer clear of dividend stocks, which offer solid, regular payments to their shareholders. These are the type of share that has been pushed higher over recent years by older investors looking for income.

If they were prepared to put time into research they should be able to identify companies that were high quality but trading at a discount to what they were actually worth, he said.

If you do not want to pick shares, you can buy units in an exchange-traded fund that tracks an index, such as the SmartShares New Zealand Top 50.

How much you need

ASB said $500 was the typical minimum investment required by retail brokers.

But Koh said it was important to remember that transaction costs affected return. You will have to pay per trade - more on that later.

"There is a balance between reducing risk through buying shares in several different companies and keeping transaction costs down by investing larger amounts in fewer companies," she said.

Kieser said it would make sense to have exposure to at least three different companies. "You don't want to go in and buy one company and then for right or wrong it goes south and you spook yourself out of the market and never go back."

He said that would probably mean starting with at least $2000.

What it will cost

Online platforms are the cheapest way to buy and sell individual shares. ASB charges a minimum $30 per trade, or 0.3 per cent of the transaction, whichever is higher for internet trades. ANZ charges $29.90 for trades up to $15,000.

Other brokerages charge varying percentages of a transaction.

What to watch out for

Kieser said it was common to be nervous about early investments, but people should try to remain focused on what they were trying to achieve, and not get scared by initial wobbles.

"Everyone, when they buy their first shares, has a butterfly in their stomachs and that is absolutely normal. You're going to want to check the share price every minute of every day and that's why it's so important to find something you're interested in. It can be scary but it is so much fun."