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Is a Share Purchase Plan Always a Good Bet?

March 16th, 2009 | No Comments | Posted in Share Purchase Plan

Planet Wealth Share Purchase Plans

Ever since the ASIC (Australian Securities & Investment Commission) increased the limit of the share plans to about $5000 from the previous cap of $2400, share purchase plans have steadily become more attractive to share holders. The fact that there is no brokerage and the shares are floated out at a discount makes the shares of the company in question even more attractive. But not everything that smells nice is well…..nice!

What’s a share purchase plan?

For the uninitiated, a share purchase plan is an easy and inexpensive way to raise capital by allowing existing shareholders to purchase shares at a discount to the present value of the share (up to the stipulated cap of $5000 currently). The companies can float this plan to the investors without issuing a prospectus and also that the investors don’t have to pay a brokerage at the time of purchasing through these share purchase plan. Added to this is the fact the fact that risk is minimized and limited to that small amount of $ 5000 for each individual investor.

Do your homework!

It pays to do your homework. Now, no one is suggesting that a share purchase plan isn’t good, but then, due diligence is a must even in this case — as it is in most other cases. Check out the great access to these Share Purchase Plans by visiting Planet Wealth to learn more. The first thing to do would be to ask yourself if you really want to own more shares in that company. The next thing you’ve got to look at is whether the discount being offered is sufficiently enticing. Also don’t forget to look for better investments available at that point and any adverse tax repercussions that you might be overlooking.

Investing is a very personal plan; it is unique for each individual. For this reason, it is important that you view any share purchase plan with hawk’s eyes and ask the above mentioned questions to yourself before you park your funds.