How to buy shares online
- Choose an online share trading platform
- Sign up for an account
- Choose the shares you want to buy
- Place your order
- Pay for the transaction
Share trading has become easier than ever thanks to online platforms, but for relative beginners, there are a few steps you need to know about.
When buying shares, the steps remain the same regardless of whether you are trying to buy Australian or international shares.
This sounds simple but choosing the right online share trading platform is an important first step.
There are dozens of platforms available to Australian investors – some of them are offered by the Big Four and other major banks, while others are provided by specialist sharebrokers.
While it might be more convenient to stick with your current bank, you could lose out in terms of brokerage fees. Instead, compare the features and fees of a number of platforms before choosing the right one for you.
Once you've chosen a platform, you'll need to register for an account. This step is usually free, but keep in mind that some providers may charge subscription fees or ongoing fees for features such as market research. You might be asked to deposit a certain amount when you sign up or after your first order.
Either way, the registration process takes place online. If you're a new customer, you'll need to provide your basic information, including the following:
You may have already decided what shares you want to buy, but if not, now is the time to start researching stocks that match your investment goals.
Some brokers will give you access to a wide range of market research, analyses and even trading recommendations through your platform, so use this information to help make an informed decision.
You’ll also need to consider the number of shares you want to buy.
This will depend on your budget and investment goals, but keep in mind that unless you already own shares in a company, the minimum amount of shares you can buy in Australia via the ASX is $500. So if company XYZ is valued at $2 a share, you’ll need to buy at least 250 shares. This is known as a parcel.
It’s also worth pointing out that larger purchases may incur higher fees or involve different fee structures depending on the trade.
If you're looking to get started, here are our best ASX stocks of 2023.
CIO, Montgomery Investment Management
Only invest in quality companies. To identify a quality company search for a sustainably high rate of return on equity. High rates of returns on equity drive better long-term returns for investors in those companies. A company that can sustain such returns usually has a sustainable competitive advantage.
This is where things can get a little confusing for beginner share traders. You have 2 main options when placing a trade to buy shares: "at market" or "at limit".
Depending on the platform you choose, you may also be able to take advantage of a range of conditional orders that allow you to take advantage of market opportunities.
For example, you can set a "trailing buy order" to purchase a stock if the price dips temporarily. For instance, you could set a trailing price trigger of $40 with a stop value of 5%. This means your purchase order only goes through once the stock falls to $40 and then rises by 5% to $42.
Once you’ve entered all the specifics of your transaction, you’ll get a chance to review all those details before placing your buy order.
Some brokers display the "bid", "offer" (or ask) and "last" price of stocks. Think of these as similar to auction prices, where buyers and sellers of stocks are offering their best prices.
A bid price is the highest price any trader is offering to buy a company’s stock at that moment and the ask or offer price is the lowest price any seller is willing to accept. The last price is the last price bidders agreed upon.
When you set a limit order to purchase or sell a stock, you're creating a new "bid" or "offer" price.
Although the last price is the stock’s most recent price, it’s not necessarily what you can expect to pay if you make a market order. Instead, you’ll be paying the latest bid price and you’ll get the ask price when you sell.
You'll need to have sufficient funds in your online share trading account to cover the cost of the transaction, including the brokerage fees that apply.
In most cases, you can fund your account using a bank transfer, BPAY, credit card or debit card.
The trade settlement period on the ASX and Chi-X is 2 business days (commonly referred to as T+2), which means your account will be charged 2 days after you've bought the shares.
If you don't have enough funds in your account by the time you're charged, you'll be hit with a hefty late fee – typically around $100.
After you've bought your shares, you'll need to monitor their performance in regard to your investment plan.
However, the frequency with which you monitor them will depend on your strategy.
For example, if you have a long-term investment strategy, you may only check in and see how your shares are performing every month. If you have a medium-term strategy, it may be a good idea to check each night or each week.
Whichever option you choose, you can review the performance of your investments by logging in to your trading account.
There are plenty of other factors you'll need to take into account, so check out our guide to choosing an online share trading platform for more details.
Share prices range from less than 1 cent to thousands of dollars per stock. However, there are some rules around how much you need to invest.
There are 2 share trading models: CHESS-sponsored or custodian. If you sign up with a CHESS-sponsored broker, you will have to pay more in fees and higher minimum deposits, but it has the advantage of the shares being in your name. This means in the unlikely case of the broker going under, it is easier for you to get your shares back.
The custodian model means that shares are in the name of the broker. This means the broker is the legal owner and you are the beneficial owner of the shares. On the plus side, under this model, you can trade for less and in some cases buy fractional shares. On the downside, if the broker runs, you have less direct control over your investments and holdings. It's worth pointing out that most of the US brokers run on a custodian model.
In Australia, there's generally a minimum $500 investment for every new ASX company you invest in if you choose a CHESS-sponsored model. So if BHP has a share price of $50, you'd need to buy at least 10 shares of BHP stock if it's your first time buying.
If you chose the custodian model, your minimum investment can be as low as 1 cent. For example, you can invest as little as a few cents into US stocks even if it's your first time buying. Some brokers also allow fractional investing where you can buy in fractions rather than whole stocks. So, say Facebook is priced at $200 a share – instead of investing $200, you could buy one-tenth of a share for $20.
The other main cost you need to think about is the brokerage or commission fee. This is the fee charged by your broker or share trading platform every time you buy or sell stocks. Brokerage fees are around $3–$30 on most share trading platforms under a CHESS model – sometimes called "discount brokers" – and anywhere from $50–$150 for full-service brokers. Some providers offer $0 brokerage under a custodian model.
However, watch out for other fees charged by brokers including the currency conversion fee (for foreign stocks), account fees, custody fees (for US stocks) and inactivity fees. These are important considerations since any fees you pay your broker will reduce your earnings and impact how much you invest per trade.
Say you invest $100 in Netflix stock with a broker fee of $10 a trade, a custody fee of 0.1% and an annual account fee of $50. If you bought no other stocks, you would need Netflix's stock price to rise by at least 71% in order to cover the fees you paid ($20 to buy and sell + $1 custody fee + $50 account fee). But if you'd invested $5,000, you'd only need its price to rise by 1.42%.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
If you want to get more out of your online share trading, try to keep the following tips in mind:
Before you start buying and selling stocks like you’re Gordon Gekko, make sure you’re aware of all the risks involved, including the following:
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