An awful lot of Australians who consider themselves to be “investors” are in fact traders in disguise. They buy shares because they believe they are cheap and they think about selling them when they have increased significantly in value.

Large numbers of people who would call themselves investors (and the newspapers certainly call them investors in lurid stories ascribing all sorts of motives to them) have the greatest difficulty in articulating exactly why they have purchased shares, or at least will give three vague and conflicting reasons for having done so.

The newspapers perpetuate the attitudes of some members of the public who call themselves investors by referring to them as punters. The Stock Exchanges of the world are not racetracks but it is a fact that a very large number of their “customers” are in fact gamblers.

I have known professional punters who have actually made a living from betting on horse races. They would never have considered themselves to be gambling. In the same way there are professionals who operate on the stock market and they are definitely not investors. These professionals would definitely not consider themselves to be gambling.

There is no such thing as a short term investment.

Many amateur speculators are in fact gambling. One of the interesting things about them is that they will hang on to their shares when they have risen because they are terrified of paying the tax on the capital gain they are about to make.

If shares are bought with the intention of selling them at a profit when they rise in value then all gains made, in six months, thirteen months or five years, are fully taxable. The Government recognises the difficulty in assessing “intention” at the time of purchase and they have thus made alterations to the capital gains tax rules so that, if shares (or any other property) are sold after being held for 12 months only 50% of the gain is taxed.

The most important thing for them to keep in mind is that they will pay full tax on all the gain if they offload the shares within twelve months of buying them, no matter what the intention was at the time of purchase.

No one should enter into any commercial enterprise without getting basic advice on taxation strategies.