One of the most challenging investing barriers to overcome, is how to actually buy shares. We have put together this little step-by-step guide to help you get started.
Step 1: Choose an online stockbroker
Stockbrokers provide access to share markets. They are the agent by which you can buy and sell shares. Think of them as an eBay for stocks – as a buyer you have access to all the shares being sold on the share market through stockbrokers (and vice versa).
Thanks to the internet, these days they are really easy to access and use. Often, all that is needed is a tax file number and a bank account.
In Australia, the most widely used brokers are with the big four banks. One reason they are so popular is that bank accounts can be easily linked to trading accounts.
So the easiest place to start can be with the stockbroking platform made by your bank. Just google “[your bank] online stockbroking platform.”
But as always, it can pay to shop around and find what suits you.
When choosing a broker, we recommend doing a bit of research on brokerage fees (the amount charged to execute each trade), account fees and the user experience (will the platform be easy to navigate?).
Step 2: Research your investment
But before making that initial investment, it is important to research and decide what you want to invest in. Things to consider when researching…
What type of share do you want to buy?
- Do you want to buy a specific company or do you want to buy an ETF to get exposure to many companies?
What is your investment rationale?
- When choosing what to invest in, it is important to have a strategy and understand the reasons why you are choosing a company or asset.
What are the risks?
- It is important to consider the risks associated with your investment. Try to think about reasons why an investment may decrease in value. Are you willing to bear those risks by investing?
Often the share broking platform that you use will provide resources to help you understand these decisions.
Step 3: Understand the sale process
Once you have chosen a broker and researched an investment, it is important to understand how share trades are executed.
Similar to other marketplaces (eBay), a share sale only occurs when a buyer and a seller agree on a price. Luckily, you won’t need to go searching for sellers as this process is facilitated by share brokers.
Step 4: Place an order
Finally, you my friend, are ready to buy some shares. To do this you must place an order. There are two ways to place an order.
1. Bid Price
- Ordering at bid price means that you set a price you want to pay per share. A share trade will not occur until someone is willing to sell at that price.
- You get full control over your purchase price, but it may take additional time to execute the trade.
2. Market Price?
- Ordering shares at market price means that you will buy at the lowest price that someone is willing to sell.
- Your trades are executed quickly, but you may end up paying more than you anticipated.
One final note… some brokerage platforms will have a minimum order size when purchasing shares. This amount won’t be hard to find in the T&Cs.