How to buy shares in Australia
Investing in the stock market can be a powerful way to grow your wealth and secure your financial future. The most common way for new investors to learn how to invest in stocks in Australia is by using an online investing platform like Stake.
This article focuses on how to buy securities in Australia, however, it is not a recommendation to invest in them and should not be taken as financial advice. Do your own research and make your own decisions, or even consider getting advice from a licensed financial adviser before investing.
You've come to the right place if you want to learn how to buy shares online in Australia, the process has never been easier. Your investing journey starts here.
- How to buy shares in Australia
- How to sell shares in Australia
- Understand where you're investing: the stock market
- How much does it cost to buy stocks in Australia?
- Learning how to invest in stocks
- How do you know what shares to buy?
- Types of ways to buy shares
- What are the benefits of investing in shares?
- What are the risks of investing in shares?
✅ Check out this guide on things to consider when choosing an investment platform
How to buy shares in Australia
To purchase shares in Australia, the main methods used are online broking services or full-service brokers. You can buy and sell shares using an investing platform like Stake, which allows you to place orders to invest in the equities of your choice.
Follow the steps below to learn how to start investing in shares in Australia:
1. Find an investing platform
An individual can open an account with a firm that offers online investing services. If you are ready to start your investing journey you can open an account in just a few minutes.
2. Fund the account
Once the account is opened, the individual must fund it with cash or securities in order to make trades.
3. Research and analyse stocks
It is important to thoroughly research and analyse stocks before making any trades. This can include reviewing the company's financial statements, analysing market trends, and considering other factors that may impact the stock's performance.
4. Place an order
The individual can place an order to buy or sell stocks through the investing platform. There are various types of orders, such as market orders, limit orders, and stop-loss orders, each with its own benefits and limitations.
5. Monitor and manage the portfolio
After making a trade, the individual must monitor and manage their portfolio to ensure their investments are performing as expected. This can include regularly reviewing stock prices, dividends, and other relevant information.
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How to sell shares in Australia
Follow these steps to sell shares in Australia:
1. Log in to your account
You'll need to access your account through the website or app of the investing platform you've chosen.
2. Choose the shares you want to sell
Select the shares you wish to sell from your portfolio and enter the desired number of shares you want to sell.
3. Place a sell order
Use the trading platform to place a sell order for your shares. You'll need to specify the price at which you want to sell the shares, which can be either a market order (to sell at the current market price) or a limit order (to sell at a specific price).
4. Wait for the sale to be executed
Once your sell order is placed, it will be executed when a buyer is found and the transaction is completed. The proceeds from the sale will be credited to your brokerage account.
The actual process for selling shares may vary depending on the platform you use, but the steps outlined above are generally applicable.
Understand where you're investing: the stock market
The stock market is a marketplace where investors can buy and sell shares in publicly traded companies. In Australia, the main stock market is the Australian Securities Exchange (ASX), which was established in 1987 and is now one of the largest exchanges in the Asia-Pacific region.
Investors make money in the stock market by buying shares in companies that they believe will perform well and selling these shares at a higher price than they paid for them. This process is known as capital appreciation, and it can be a significant source of long-term wealth for investors.
Additionally, many companies pay dividends to their shareholders, which are typically paid on a semi-annual or annual basis. Investors can also make money from dividends, although the amount and timing of dividends can vary depending on the company and its financial performance.
Of course, investing in the stock market also involves risk, and there's no guarantee of returns. The value of shares can go down as well as up, and there are a number of factors that can impact the performance of individual companies and the stock market more broadly, including changes in the economy, shifts in consumer behaviour, and technological developments.
To manage these risks, it's important for investors to diversify their portfolios, invest in a mix of different assets and industries, and adopt a long-term investment perspective. It's also important for investors to carefully research and analyse individual companies and the stock market more broadly.
How much does it cost to buy stocks in Australia?
The cost of buying stocks in Australia can vary depending on the platform you choose and the type of account you have. Some common costs include:
- Brokerage fee: This is the fee charged by the platform for executing the trade. Brokerage fees vary widely and can range from a flat fee per trade to a percentage of the total value of the trade.
- Securities Exchange Levy (SEL): This is a fee charged by the Australian Securities Exchange (ASX) for each trade executed on the exchange. The SEL is currently $0.0075 per security traded.
- Stamp duty: This is a tax that may be levied by some state governments on the purchase of shares. The rate of stamp duty varies by state.
- Other fees: Some platforms may charge other fees, such as account maintenance fees, inactivity fees, or withdrawal fees.
The costs involved when buying stocks will also be determined by the exchanges you are buying stocks from. Fees will differ when buying Australian shares, U.S. shares or shares from other international stock exchanges. At Stake, we keep our pricing simple, consistent and transparent.
Learning how to invest in stocks
Investing in stocks can be a great way to build wealth over the long term, but it's important to approach it with a solid understanding of the markets and a well-thought-out investment strategy. Here are some steps you can take to learn how to invest in stocks:
- Educate yourself: Read books, articles, and online resources to gain a solid understanding of the stock market and investment principles. Focus on topics such as stock valuation, portfolio diversification, risk management, and market cycles.
- Develop a long-term strategy: Decide what your investment goals are, what level of risk you're comfortable with, and what your investment timeline is. This will help you determine what types of stocks and strategies are best for you.
- Open an investing platform account: Choose a platform that offers the tools and services you need to meet your investment goals. Open an account and fund it with the amount of money you're comfortable investing.
- Start small: Begin by investing a small amount of money in a diversified portfolio of well-established companies. As you gain more experience and confidence, you can gradually increase the amount you invest and the risk you take on.
- Monitor your portfolio regularly: Keep track of your investments and review your portfolio regularly to make sure it's aligned with your goals and strategy. Consider seeking professional financial advice if you're unsure about any aspect of your investment strategy.
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How do you know what shares to buy?
Choosing the right shares to buy is an important part of successful investing. Here are some steps you can take to determine what shares to buy:
- Define your investment goals: Determine what you want to achieve with your investment and the time horizon for achieving your goals. This will help you determine what types of stocks and strategies are best for you.
- Research companies: Use online resources, financial statements, and other data to research stocks and their financial performance. Look for well-established companies with a history of strong revenue and earnings growth, and use a stock comparison tool to compare similar shares.
- Evaluate stock valuations: Use financial metrics such as price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and dividend yield to evaluate the relative value of different stocks. Look for stocks that are undervalued compared to their peers.
- Consider market trends: Be aware of the current state of the overall market and the performance of different sectors. Consider investing in sectors that are performing well and avoiding sectors that are underperforming.
- Diversify your portfolio: Don't put all your eggs in one basket. Spread your investments across a mix of different types of stocks, industries, and geographic regions to reduce your overall risk.
Types of ways to buy shares
There are several different ways to buy shares. These are the most common ones:
- Initial Public Offerings (IPOs): An IPO is when a privately held company first offers its stock for public sale. IPOs are often highly publicised events, and investors have the opportunity to purchase shares in the company at its initial offering price.
- Capital raising: This is when a company raises capital by issuing new shares to the public. Capital raising can take the form of rights issues, share placements, or public offerings.
- Off-market transactions: Off-market transactions are private sales of shares between two parties, without the involvement of a stock exchange. These transactions can be beneficial for both parties, as the buyer may receive a better price for their shares and the seller can avoid paying brokerage fees.
- Exchange-Traded Funds (ETFs) and Managed Funds: ETFs and managed funds are investment products that allow investors to gain exposure to a diversified portfolio of stocks, bonds, or other securities. Rather than buying individual stocks, investors purchase shares in the ETF or managed fund, which then invests the money on their behalf.
- Direct investment: Direct investment involves purchasing shares in a specific company directly from the company itself, rather than through a stock exchange. This type of investment is often available to employees of the company and may include benefits such as discounted stock prices or stock options.
Each of these methods has its own benefits and drawbacks, and the best option for you will depend on your investment goals, risk tolerance, and individual circumstances.
What are the benefits of investing in shares?
There are several benefits of investing in shares, these include:
- Potential for capital growth: One of the main benefits of investing in shares is the potential for capital growth. When a company's earnings and profits grow, the value of its stock is likely to increase, providing investors with the opportunity to make a profit.
- Dividend income: Many companies pay dividends to their shareholders, which can provide a regular income stream for investors. Dividends can be a valuable source of passive income and help to offset expenses and losses from other investments.
- Diversification: Investing in shares allows you to spread your money across a range of different companies and industries, reducing the overall risk of your portfolio and wealth.
- Liquidity: Shares are often considered a liquid investment, as they can be easily bought and sold on stock exchanges. This makes it easy to access your funds if you need them.
- Potential for higher returns: Over the long term, stock shares have historically provided higher returns compared to other investment options, such as bonds or cash. With any type of investing you can still lose your investment, so always do your due diligence and invest what you can afford to lose.
What are the risks of investing in shares?
Investing in shares involves several risks. Here are some of the key ones:
- Market volatility: The value of shares can fluctuate rapidly due to changes in market conditions, economic events, and company-specific news. Market volatility can lead to significant losses, and there's always the risk that the value of your investments could fall.
- Company-specific risks: The success of an individual company can also have a big impact on the value of its shares. Company-specific risks could include poor financial performance, changes in management, or product failures.
- Interest rate risk: Changes in interest rates can also affect the value of shares, as higher interest rates can make bonds and other fixed-income investments more attractive to investors, reducing demand for shares.
- Political and economic risks: Changes in government policies, economic conditions, and global events can also affect the value of shares. For example, a global recession or trade war could lead to lower economic growth and reduced demand for shares.
- Liquidity: Shares of smaller companies are known to have fewer investors both interested and allowed to invest in them, raising the risk that whenever you're willing to sell shares you purchased, there might not be enough buyers in the market and share prices might be lower.
It's important to consider these risks when investing in shares and to diversify your investment portfolio to reduce your overall risk.
- If you want to invest in shares in Australia, you'll need to open an account with a regulated investing platform. There are a number of investing platforms to choose from, and it's important to compare fees and features to find the best option for your needs.
- Investing in stocks can be profitable, but high brokerage fees can take away a significant amount of profits. Keeping costs low will allow you to enhance the compounding growth rate of your wealth.
- Before you start buying shares, it's important to consider your investment goals and risk tolerance. Think about your time horizon and the level of risk you're comfortable with, and use this information to inform your investment decisions.
Frequently asked questions about buying shares in Australia
In general, you can start investing in U.S. shares for as little as $10, or Australian shares from $500 due to the minimum marketable parcel rule. The specific amount will depend on your individual circumstances, investment goals and risk tolerance.
The amount of money you need to invest in shares can also depend on other factors, including:
- Brokerage fees: The cost of buying and selling shares can vary between platforms, and some may have minimum account balances or investment amounts.
- Investment goals: Your investment goals and risk tolerance will impact the amount of money you need to invest in shares. If you're looking to achieve long-term growth, you may be able to invest a smaller amount and reinvest the dividends over time, while if you're looking for short-term gains, you may need to invest a larger amount.
- Diversification: Diversifying your investments can help to reduce your risk, and you may need to invest more money in order to spread your investments across a range of different companies and industries.
The Australian Securities Exchange (ASX) offers a wide range of assets that can be bought and sold, such as:
- Shares: Investors can buy shares in ASX-listed companies, allowing them to own a small piece of the company and benefit from its growth and earnings.
- Exchange-Traded Funds (ETFs): ETFs are investment funds that trade on the ASX, and provide investors with exposure to a diversified portfolio of shares, bonds, or other assets.
- Managed Funds: Managed funds are professionally managed investment portfolios, which provide exposure to a diversified range of assets.
- Bonds: Investors can buy bonds issued by companies or the government, providing them with a fixed income stream in exchange for loaning money to the issuer.
- REITs: REITs are a type of investment vehicle that allows investors to own a share in a portfolio of real estate properties.
Cboe Australia, which is an exchange that competes with the ASX might have a different array of available instruments, most distinctively in ETF offerings.
The best investment strategy for beginners will depend on several factors, including their investment goals, risk tolerance, and financial circumstances. However, some general principles that can be helpful for beginner investors include:
- Start with a long-term perspective: Investing in shares and other assets can be a great way to grow your wealth over the long term, and it's generally recommended to have a long-term investment horizon when investing in shares.
- Diversify your investments: Diversifying your investments across different assets, companies, and industries can help to reduce your overall risk exposure and improve your chances of achieving your investment goals.
- Keep fees low: Investment fees and charges can add up over time, reducing the overall return on your investment. Consider investing in low-cost index funds or ETFs, or using a platform that charges low fees, to help keep your costs down.
This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.
Megan is a markets analyst at Stake, with 7 years of experience in the world of investing and a Master’s degree in Business and Economics from The University of Sydney Business School. Megan has extensive knowledge of the UK markets, working as an analyst at ARCH Emerging Markets - a UK investment advisory platform focused on private equity. Previously she also worked as an analyst at Australian robo advisor Stockspot, where she researched ASX listed equities and helped construct the company's portfolios.