Share trading for dummies – learn how to invest in the share market

If you’re looking to build a secure future for yourself and your family, investing in shares could help you generate wealth and achieve your financial goals. But if you’re new to investing, it’s hard to know where to start.

So let’s take a look at the basics of buying and selling shares in our guide to share trading for dummies.

Share Trading Account Offer

IG Share Trading Offer

AUD 5

Active trader brokerage - Australian shares

Share Trading Account Offer

Competitive broker fees on Australian shares, international shares, forex and CFD trading.

• Brokerage - AU shares: From AUD 5 or 0.05%
• Brokerage - US shares: USD 0
• Sign-up process: Instant
• Support - After hours: Yes

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Important: Share trading carries risk of capital loss.

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Name	Product	Standard brokerage fee	Inactivity fee	Markets	International
IG Share Trading Finder Award		8 AUD	AUD 50 per quarter if you make fewer than three trades in that period	ASX shares, Global shares, Forex, CFDs, Margin trading	Yes	$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares. Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.	Go to site More Info	Compare	loading Fetching your data...
eToro Share Trading (US stocks) Finder Award		0 USD	USD 10 per month if there’s been no login for 12 months	Forex, CFDs, US shares	Yes	Zero brokerage share trading on US stocks with trades as low as $50. Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider. Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.	Go to site More Info	Compare	loading Fetching your data...
Superhero share trading		5 AUD	No	ASX shares, ETFs	No	Pay zero brokerage on all Australian ETFs. Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.	Go to site More Info	Compare	loading Fetching your data...
Bell Direct Share Trading Finder Award		15 AUD	No	ASX shares, Options trading, mFunds, ETFs, Warrants	No	Invest in Australian shares, options and managed funds from the one account with no inactivity fee. Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.	Go to site More Info	Compare	loading Fetching your data...
CMC Markets Stockbroking Finder Award		11 AUD	No	ASX shares, Global shares, Forex, CFDs, Options trading, mFunds, ETFs, Warrants	Yes	$0 brokerage on global shares including US, UK and Japan markets. Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.	Go to site More Info	Compare	loading Fetching your data...
SelfWealth Share Trading (Basic account)		9.5 AUD	No	ASX shares, US shares	Yes	Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size. New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.	Go to site More Info	Compare	loading Fetching your data...
ANZ Share Investing		19.95 AUD	No	ASX shares, Global shares, Options trading, mFunds, ETFs, Warrants	Yes	Earn 1 Qantas Point per AU$3 spent on brokerage fees on certain instruments. Access Morningstar reports, company announcements and and live pricing via ANZ’s share investing platform. Available for desktop and mobile.	More Info	Compare	loading Fetching your data...
Westpac Online Investing Account		19.95 AUD	USD 63.50 per year on the global markets account	ASX shares, Global shares, Options trading, ETFs	Yes	More Info	Compare	loading Fetching your data...

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Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Share trading basics

The sharemarket is a place where investors can buy and sell “shares” in public companies. Also known as stock exchanges, share markets exist in countries all over the world – in Australia our national exchange is the Australian Securities Exchange (ASX), while other famous international stock exchanges include the New York Stock Exchange and the London Stock Exchange.

A share is basically an ownership portion of a company. When you buy shares you become a shareholder, meaning you own a percentage of a company and get to have a say in how it is run. The value of your shares is influenced by a wide range of issues, including the company’s performance and earnings, supply and demand, and broader economic factors.

Once you own shares you can also sell them to other investors. In the past, share trading was done physically at a stock exchange – you’ve probably seen old news footage of chaotic scenes of traders yelling out complex orders to buy and sell shares.

Today, investors can buy and sell shares via online share trading platforms. Many major Australian banks offer share trading platforms, including the Big Four, while other share trading platforms are offered by specialist brokerage firms.

How can I make money trading shares?

There are two main ways to make money selling shares:

1. Capital growth. This occurs when you sell shares for a higher price than what you paid for them. For example, you may have purchased 100 shares in Company A two years ago, with each individual share valued at $5 meaning an initial investment of $500. In the ensuing period, the value of one share in the company has risen to $9, so your total parcel of shares is now worth $900. It can be sold for a profit of $400.
2. Dividends. Many public companies pay dividends to their investors. A dividend is basically a shareholder’s portion of the company’s profits – for example, a company may offer a dividend of 50 cents per share to its shareholders, so you would receive a total dividend payment of 50 cents multiplied by the number of shares you own. Not all companies pay dividends, but those that do typically pay them twice a year. By choosing shares with a long history of providing dividends to investors, you can use your share portfolio to provide an ongoing source of income.

What are the benefits of share trading?

Share trading provides many benefits to investors, including:

• Shares typically grow in capital. Buying shares allows you to benefit from the growth in value of an asset over time. If you hold the shares for more than 12 months you can also take advantage of a 50% capital gains tax (CGT) discount.
• If chosen correctly, it can generate income. Shares in companies that pay dividends can be used to provide an ongoing source of income.
• There are tax benefits if you fall into the highest income tax bracket. If a company has already paid tax on its profits, the dividends it pays come with franking credits attached. These credits can be used to offset the amount of tax you pay on your other income.
• Rights issues. Some companies make rights issues, which basically allow shareholders to purchase more shares in the same company at a discounted rate and usually without paying any brokerage fees.
• Ownership benefits. Owning shares means you get to have a say in how a company is run, including voting on board resolutions and attending annual general meetings (AGMs).
• Shareholder discounts. Some companies also offer discounts to shareholders when they purchase goods or services from the company or its subsidiaries.

What are the risks associated with share trading?

Just like any other form of investment, shares come with a range of risks attached, including:

• Shares are volatile and are considered risky. Share prices can rise and fall quickly – prices in a company can even fall to zero and you could lose the money you invest.

• Shares don't always pay dividends. Dividend amounts are not constant. They will fluctuate in line with the company’s profits.

• Shares tend to decline in value during bad economic times. Some shares, for example mining shares, tend to be cyclical – investing at the wrong time of the cycle can be costly.

• Last in line if corporation liquidates. If a company goes broke, its shareholders are the last of its creditors to get their money back.

How do I choose which shares to buy?

Despite what some people and investment “experts” might tell you, there is no guaranteed method for choosing the right shares. Some shares offer a high risk/high reward approach: while they have the potential to increase in value quickly, they also have the potential to quickly drop in value. Other shares tend to be steadier performers and have a history of delivering solid profits and paying dividends to shareholders.

There are income shares, blue-chip shares in large companies, cyclical shares that rise and fall with economic trends, and even defensive shares that often maintain their value when the rest of the economy takes a dive.

The right shares for you will depend on your financial goals, your investment timeframe and your appetite for risk. Once you know exactly what you want to achieve with your share trading, you can start researching different companies and the benefits they will bring to your portfolio.

All sounds great, how do I get started?

If you want to start trading shares, there are a few simple things you need to do:

1. Compare and choose share trading platforms. Check out our reviews of online share trading platforms.
2. Sign up for an account. You will need to provide your name, contact details, proof of ID and bank account information.
3. Choose the shares you want to buy. Research the performance, earnings and future potential of a range of companies. It’s also important to consider your overall investment strategy and appetite for risk before choosing any shares.
4. Place a buy order. Your share trading platform provider should offer guides and advice on how to do this. The minimum amount of shares you can buy is $500, while your share trading platform will also charge a brokerage fee (typically around $15-$20) for placing the trade.

Share trading can help you generate wealth and reach your financial goals. Just make sure you’re fully aware of all the risks involved before you place your first trade.