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5 Steps: How to Buy Shares on the ASX

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Here is my simple 5 step guide to buying & selling shares online via the ASX.

Guide: How to Buy Shares

Just about every country in the world now has a market for trading shares, which is known as a share market, stock market or stock exchange. In Australia we have the Australian Stock Exchange or ASX for short.

5 Steps: How to Buy Shares Online

If you’ve never done it before, buying and selling shares can be an intimidating prospect. But in reality it’s no more than a simple step-by-step process that anyone can do.

Follow these steps and you’ll be buying and selling shares on the stock market in no time – and, hopefully, reaping the financial benefits!

1.Find a share broker

Your share broker will buy and sell shares on your behalf. There are two main types of broker: full-service and discount.

Full-service brokers not only buy and sell shares on your behalf, they also offer investment recommendations.

Discount brokers, on the other hand, charge a lower fee for trading because you make all the decisions. Full-service brokers tend to aim for investors with a lot to spend. For beginners, an online discount broker is the way to go.

Some Popular Online Brokers Include:

commsec-how-to-buy-shares-onlinebelldirect_logo-how-to-buy-shares-online       open-markets-how-to-buy-shares-online

You’ll find a list of brokers at www.asx.com.au. Check out a comparison website like infochoice,  or review the latest award winners from the AFR blue ribbon awards,  to gauge which broker will be most suitable to you. All of the brokers listed in the ASX website will enable you to buy and sell shares, the difference will be the transaction cost that they charge, known as brokerage.

2.Set up an account with your broker.

Online brokers can open new accounts fairly quickly, while other brokers can sometimes take several days.

You’ll need to fill in some forms and submit certified copies of personal documents such as your driver’s licence or passport and proof of address to verify your identity.

Most brokers will ask you to set up a direct debit – this is the most straightforward way to manage the proceeds of share trades.

bell-direct-account-opening-how-to-buy-shares-online

3.Complete a ‘buy ticket’ to buy shares (and vice versa).

On your broker’s website, you’ll find a ‘order pad’ for making an trade. You’ll be asked for:

how-to-buy-shares-example-order

  • Stock/ASX code: the unique three-letter code of the company you want to invest in. You can easily search for the code if you don’t know it.
  • Order type: ‘Buy’ or ‘Sell’
  • Quantity: how many shares you want to purchase.
    • If you have a certain number of shares in mind, simply plug in the figure.
    • If you have a dollar value in mind, divide the amount by the share price to find out how many shares you can buy.
  • Price: how much you are willing to pay per share. There are two options here:
    • ‘At Market’: check this box if you are happy with the current market value. Your broker will purchase shares at the lowest available price.
    • ‘Limit’: check this box if there is a limit on how much you are willing to pay, and enter that limit. The transaction will only go ahead if and when the share price drops down to your limit.

Make sure your order meets the ASX-imposed $500 minimum by multiplying the number of shares you are buying by the share value.

  • Expiry: the date at which your order will be cancelled if it has not yet been completed.

A word of warning – double check everything before submitting the order. Nothing worse than seeing the confirmation screen and realising you’ve accidentally bought more shares than you can afford!

When you’re ready, click ‘Trade’ or ‘Proceed’, and your order is on the market!

4.Pay for your shares.

If you’ve set up a direct debit, this step shouldn’t involve any work at your end.

Your broker will inform you (usually via a contract note to your email) when the order has been completed and the shares have been transferred into your name.

Example: Contract Note Confirming Trade from Open Markets

how-to-buy-shares-contact-note

Most share trades are settled ‘T+2’, which means payment is required three business days after purchase (and takes three business days to settle if you sell).

5.Sell your shares

Once you know how to buy shares, selling them is pretty intuitive. Just adjust the order type to ‘Sell’ and you’re halfway there!

The key difference is that when you enter a limit on your share price, instead of defining the maximum you are willing to pay, you will be deciding on the minimum you are willing to accept.

You will also need to make a call as to whether you want to sell all your shares in the company, a certain fraction, or a certain dollar value.

Once you’ve made a couple of trades, it will all become easy.

Shares: What Are We Buying?

Business is the growth engine of our economy. When we buy shares on the share market we are interested in investing in businesses that have been arranged into a legally recognised company structure.

A company is a business that has separate legal entity to its owners.

In other words, a company is a legally recognised organization that provides goods and / or services for sale to consumers.

CHART: Apple Stock Price History

how to buys shares Apple

 

Like Apple, they may have products that change the world as we know it, or like Woolworths, they may sell the food and groceries to enable us to survive. As investors we want to purchase a unit of ownership in a quality company.

For example we could buy one share in Apple for around $120 US dollars. As Apple has over 5.7 billion shares outstanding on the market, our one share would correspond to a 1 / 5.7 billionth ownership stake of the Apple business (not much, but it is a start).

Why Do Investors Buy Shares?

As an owner of a share in a company that is listed on a share market, we participate in the profits and also the losses of the company.

If Apple releases a new product that sells very well and delivers profits to the company, we get a share of those profits either through a higher share price, distributions of the profits (in the form of dividends) or a combination thereof.

As a share investor we want to buy shares in the best companies, or quite simply the companies where we think we can get the best return on our initial investment.

how to buy shares cba 1

 

Commonwealth Bank (CBA) was founded in 1911 and owned by the Australian Government before it was privatised and listed on the ASX in 1991.

When a company ‘lists’ its shares on the market, it means it is selling them to the public.

Q: $5,400 Invested in CBA shares in 1991 is now worth? 

Let’s imagine ‘Ian the investor’ purchased 1,000 shares in CBA for $5.40 each (total investment of $5,400) when they listed in 1991.

Fast forward to 2015 and Ian’s CBA shares are now worth over $80,000 and  he has received almost $60,000 in dividends since 1991.

CHART: CBA Historical Share Price Performance

how to buy shares cba 2

 

A: Over $139,000

Summary

So there you have it – how to buy shares online explained.

The hard part is not investing in itself, but deciding where to invest – that’s a whole other blog post!

The Wealth Guy Signature

 

Joshua Stega

The Wealth Guy

Joshua Stega is an expert financial adviser and founder of JAS Wealth in Sydney. He specialises in the habits and behaviours of wealth. Joshua has a Masters in Taxation and Financial Planning and is regularly featured in the media

M.TaxFP, LLB(Hons), B.Bus(Acc), FTI, Adv.DipFP, Dip.FP, SMSF Specialist
The information on this blog and website is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision. We recommend you consult a licensed financial adviser in order to assist you with this.

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