Share trading is one of the most popular forms of investments in Australia and many parts the world. When you trade shares, you're buying and selling a part ownership (or share) of a company over a stock exchange such as the Australian Securities Exchange (ASX) in order to earn a profit.
Today it's possible to buy and sell stocks from Australia and other parts of the world through online share trading platforms, making it cheaper and easier than ever before. Learn how these online brokers work, how you can make money from stocks, what kinds of fees you'll pay and what all that confusing terminology means in this guide.
Not what you're after? If you're looking for other kinds of investment options, you can find an extensive list on our Investment's Homepage, including term deposits, managed funds, superannuation and forex trading.
Share Trading Account Offer
Standard brokerage - Australian shares
Share Trading Account Offer
Special offer: Earn up to 10,000 Qantas Points on a new IG Share Trading account.
Competitive broker fees on Australian shares, international shares, forex and CFD trading.
- Brokerage - AU shares: From AUD 8
- Brokerage - US shares: From USD 10
- Sign-up process: Instant
- Support - After hours: Yes
Compare online share trading accounts
How does share trading work?
Shares or stocks represent partial ownership of a company and they're sold in order to raise funds for that company's expansion. Shareholders buy and sell shares through stock markets, such as the Australian Securities Exchange (the ASX).
A company's share price changes several times throughout the day as people buy and sell the shares, so most shareholders aim to buy shares when they're low in cost and sell when the price of the share increases to make a profit.
Where do I trade shares in Australia?
For Australian-listed companies, all trading is done through the ASX, which lists more than 2,000 companies. Overseas shares are traded on a variety of exchanges, including the New York Stock Exchange (NYSE), the NASDAQ and the London Stock Exchange (LSE). If you want to buy shares in companies based outside of Australia, you can read our comprehensive guide to international share trading.
How do I buy shares in a company?
In the pre-Internet era, the only way to buy or sell shares was by hiring a full-service stockbroker, which could be expensive and time consuming. Today, investors can buy and sell shares themselves through online trading platforms with the click of a button.
Using an online platform is far cheaper for individual investors than using full-service brokers. When you buy shares online, you'll pay a brokerage fee for each transaction, which typically ranges from $10 to $30 for ASX trades, as opposed to $50 to $150 for full-service brokers.
The standard ASX trading hours are 10am to 4pm AEST Monday to Friday, while other global exchanges keep similar hours. Along with shares, you can trade in index funds such as exchange traded funds (which track the performance of a range of stocks) and other products.
Keep in mind there's a minimum first order of $500 when buying shares in a company on the ASX, however some trading apps get around this by offering fractional investing, just as others choose to impose a higher minimum limit. To buy shares online, simply open an account with an online share trading platform such as those listed in the table above.
For a more detailed guide on the process of buying shares, take a look at our 7 step guide to buying shares online.
Compare brokerage fees on Australian share trading accounts
Brokerage fees are an important factor when comparing trading platforms, however there are other things to consider too. While share trading accounts tend to highlight their lowest available brokerage fee, this is usually impacted by how often you trade and how much you trade. Some accounts also have monthly inactivity fees if you don't place any trades for a specific period of time.
How can I make money from shares?
There are two main ways to make money from share trading:
- Capital growth. If you can sell your shares for a higher price than what you paid for them you'll make a profit. This is known as capital growth, given that your initial capital (your shares) has increased in value. This is possible both with short-term investments (where you sell the shares after a brief period of time) and over longer periods.
- Dividends. Some (but not all) companies pay regular dividends to their shareholders, based on the amount of profit they make, which can provide an ongoing income stream plus tax advantages for certain investors. Dividend payments are a great form of passive income and it means investors may never need to sell their shares in order to make a profit.
What is a blue chip share?
Blue chip shares are large companies that are financially strong and have a solid track record of producing good earnings to shareholders. Typically, they are industry leaders and household brands. Investing in blue chip shares could be a good strategy for beginners, as they are usually considered to be very stable and have been in the market for a long time. For example the Big Four banks, CBA, NAB, ANZ and Westpac, are considered blue chip shares.
How can I choose the best share trading platform for me?
When choosing an online share trading platform, consider the following factors:
- Broker fees. This is the fee that is charged every time you buy and sell shares. Brokers charge different fees depending on the product you're trading (e.g. global shares, local shares, options), how often you trade in a month and the size of the trade.
- Monthly fees. Some broker's charge ongoing subscription fees or additional inactivity fees if you don't make any trades within a certain period of time. This may or may not suit you depending on your trading requirements.
- Availability of advice and research options. Online brokers sometimes offer market news and updates, as well as other research tools that will let you investigate the trading history of individual stocks.
- Integration with bank accounts. Some services let you transfer money easily from your trading account to a transaction or savings account. Others offer linked debit cards to use with your accounts.
- Access to global markets. If you want to invest in offshore exchanges, such as the New York Stock Exchange (NYSE), check what options are available with each service.
- Foreign exchange fees. If you're interested in trading global stocks, you'll want to check what the foreign exchange (FX) fee is for converting your AUD to the foreign currency of choice.
- Other trading options. Other products offered by some online brokers include forex, CFDs, managed funds and options trading.
- Customer support. Check what level of customer support is available, what hours it's available and if the support team is based locally in Australia. This is particularly important for new traders.
Tips for online share trading
Here's some tips to help get you started:
- Read the news. It's important to stay up-to-date with the broader economy, and learn how major events such as national elections impact the share price of various companies.
- Research companies before buying. If you want to buy shares in a company, research as much as you can about the company before making your final decision. It's a good idea to read the company's annual reports and meeting minutes to learn what's in the pipe-line, and what changes will be made that could affect their share price.
- Consider blue chip companies. This is good strategy for people new to the share market, as blue-chip often have more stable returns, are less volatile and often pay dividends.
- Diversify. Say you had $5,000 to invest in the share market. Rather than invest it all in one company, consider spreading it out across a few companies from different industries. Diversification will help lower your risk, and ensure you don't have all your eggs in the one basket.
Share trading glossary - learn the key share trading terms and what they mean
- ASX: The abbreviation for the Australian Securities Exchange, Australia's primary stock exchange
- All Ordinaries: This is an index of the performance of the share prices of around 500 of Australia’s biggest companies. Also referred to as the All Ords
- Bear market: This term refers to when prices on the market are falling and further falls are expected to occur
- Blue chip stock: A blue chip stock is a large company with a steady history of turning a profit
- Brokerage fee: This is the fee you must pay to a share trading platform when you use the platform to buy or sell shares
- Bull market: Opposite to a bear market. This term applies when share market prices are rising and expected to continue to rise
- CHESS (Clearing house electronic sub register system): This ASX system settles share trades and acts as the central registry for the electronic transfer of share ownership
- Contract note: This confirms a buy or sell transaction and includes details such as the type of share, the price paid and the quantity traded
- Dividend: Companies can distribute their profits or earnings to shareholders in the form of dividends. A dividend is calculated as a number of cents for each share you own
- Float: The initial raising of capital through public subscription to a security
- Fundamental analysis: This involves analysing the financial statements of a business to determine its overall financial standing
- Futures: Futures are contracts to buy or sell an asset at a specified future date
- Limit order: A limit order specifies the maximum (when buying) or minimum (when selling) price you are willing to accept for a share transaction
- Listed company: Listed companies have shares that are purchased and sold through the ASX
- Live price: This is the price of a share at a precise moment in time
- Market order: A market order is an order to buy or sell a share at its current market price
- Short selling: This is when you borrow a security and subsequently sell it, with the obligation to buy it back in future at a much lower price
- Volatility: This reflects the amount of fluctuation in share prices
- Warrant: This gives its holder the right to purchase a security at within a certain timeframe and at a specific price
- Yield: This is your return on an investment and is expressed as a percentage
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