How To Buy Shares in Australia: A Beginners Guide

Students want to know how they can buy shares online in Australia and what are the best stock trading platforms.

 

Online trading platforms have made it easier than ever to buy and sell shares from Australia and overseas.

 

If you want to join the many Aussies who invest in shares, then here is a beginner’s guide to help you understand the basics of the stock market, the benefits and risks of investing, how to buy shares online, and what factors to consider before you jump in.

 

If you don't have a share trading account yet, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

 

 

1. What Are Shares?

 

Shares represent ownership in that company. When you own a share, you become a shareholder and a part owner in that company.

 

You can find shares of over 2000 companies listed on the Australian Securities Exchange. Some big names include Commonwealth Bank of Australia, Rio Tinto, Woolworths, etc.

 

There is no limit to how many shares you can buy if you have adequate capital to buy those shares. The most common way to trade shares on the ASX exchange is to use an ASIC-regulated 3rd party called ‘broker’.

 

 

2. Why Invest In The Australian Share Market?

 

ASX is the 8th largest stock market worldwide and the 2nd largest in the Asia-Pacific region based on a free-float market capitalization. Australia has become the leader of overseas trade and the home to several high-tech companies.

 

Historically, the Australian share market has delivered high long-term gains to investors than other investments, including bonds and cash.

 

ASX is a high-capacity and high-speed trading platform where shares are traded electronically and settled through the globally recognized Clearing House Electronic Sub Register System.

 

More than 2,000 companies ranging from well-established ones to early-stage start-ups are listed on ASX. These listed companies are classified into various sectors such as insurance, banking, telecommunications, media, resources, and IT.

 

Top benefits of investing in stocks listed on the ASX exchange:

 

  • The open-market and internationally integrated economy that attracts global investors to invest in this dynamic country

  • Top producer of gold, iron ore, and uranium worldwide

  • The stable economic and political climate

 

Besides stocks, ASX also lists other professionally managed financial instruments such as bonds, futures, warrants, Electronic Traded Funds, hybrids, and options to enable investors to build a diversified investment portfolio across various investment strategies and asset classes.

 

Investors can view the performance of a specific sector or broader market by following S&P/ASX 200 Index

 

 

3. What Shares Can One Buy Online?

 

The type of shares you can buy depends on the brokerage platform. Some platforms allow only exchange-listed shares, while others allow both ASX-listed and international shares.

 

So, based on your investment goals, you can explore to find the best share trading platforms for buying your preferred stocks.

 

 

4. How Much Money Do You Need For The First Trade?

 

In Australia, many brokers require the 1st trade to be of a minimum of $500. This is called the 'minimum marketable parcel of shares.

 

However, the Australian Stock Exchange recommends investing for beginners should start with a minimum of $2,000 in general.

 

Additionally, you need to understand the fees involved to know how much you can invest in the stock market.

 

 

5. How To Buy Shares In Australia Online?

 

The internet is flooded with articles and blogs on stock investment. With so many stocks and investment strategies, it can become confusing for a newbie to take the first step in stock investments.

 

So, here is a guide about buying shares for beginners in Australia to help you buy your first stock:

 

 

Step 1: Plan Your Investment

 

You need to consider certain factors before you initiate your first investment in the stock market.

 

  • What is your investment objective?

  • What do you expect from shares investment: capital growth or regular income?

  • How much do you want to invest?

  • What is your investment horizon/timeframe in the stock market? 

  • How do you want to invest: regular contributions or one-time investment?

 

 

Step 2: Learn About The Stock Market

 

If you are a stock market newbie, you need to learn first about the economy, exchange rates, interest rates, and government policy. They all affect a company’s performance.

 

The Australian Securities Exchange education centre offers plenty of investing resources and online seminars on stock investing.

 

 

Step 3: Choose An Digital Share Trading Platform

 

Dozens of trading platforms are available to investors and selecting the best one becomes a challenge.

 

If you don't have a share trading account yet, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

 

Compare different platforms based on the brokerage fee, annual maintenance fee, services offered, types of stocks traded, accessibility, regulation, ease of use, customer support, and more.

 

Once you have decided on the platform, create an account by providing your basic information, and deposit a specified minimum amount:

 

  • Name

  • Residential and postal address

  • Date of birth

  • Contact details

  • Your tax file number

  • Identity Proof

  • Bank account details that you want to link with your trading account

 

 

Step 4: Decide Which Shares To Buy

 

There are over 2,000 companies listed on the ASX and several other options offered if you wish to invest in the international markets and exchanges. Identify the best shares to buy for beginners in Australia.

 

Blue-chip companies are the safest option for those starting in the share market. Some of the best shares to buy right now are the top 50 companies listed on the S&P/ASX 50.

 

These are well-established companies and offer the best chance to minimize your risk and provide consistent returns.

 

 

Step 5: Place Your Purchase Order

 

There are two main ways to place a buy order for a stock: “at the limit” or “at market” price.

 

Where market orders are executed instantly at the current stock price, limit orders execute when the stock price reaches the “limit price” you specified to buy a stock.

 

Some platforms also provide conditional orders that enable you to take advantage of stock market opportunities. Some of these buy orders include:

 

 

  • Good until cancelled order

  • Good until expiry order

  • Good for day order

 

 

Step 6: Pay For The Transaction

 

Once you have decided on your order type, you will need adequate funds in your trading account to buy those shares with the associated brokerage fees.

 

The settlement period for trades executed on the ASX is two business days, T (trade day) +2. It implies that you must have adequate funds in your trade account two business days after buying the shares.

 

Once you have bought the shares, you need to monitor their performance periodically, depending on your investment strategy.

 

If your stocks aren’t performing, you should take professional financial advice to decide whether to sell them, hold them, or switch to other stocks.

 

 

6. Tips For Beginners To Invest In Shares In Australia

 

Here are the five tips that will help you invest wisely and improve your chances of higher returns from online share trading:

 

  • Tip 1: Do a fundamental analysis of the company before you invest in their stocks. Study its annual reports, balance sheets, and profit and loss report to evaluate its financial health, past and present performance, and growth prospects.

 

  • Tip 2: Stay updated with the health of the Australian economy, Reserve Bank interest rate decisions, changes in government policy, exchange rates, the interest of investors, and the performance of stock markets on a national and global level. All this will give you an idea about whether it is the right time to put your money in the stock market.

 

  • Tip 3: Choose the services of only an ASIC-regulated and reputed broker. Decide between a full-service or discounted broker based on your investment needs and preferences.

 

  • Tip 4: Identify the right shares to invest in and analyse the business's past and current financial performance, accomplishments, and job growth prospects indicators to determine the company's stability.

 

  • Tip 5: Like the proverb says, do not keep all eggs in one basket you should not invest all your money in one stock. It is because if that stock crashes due to any reason, you will incur huge losses. It is wise to distribute your funds across various industries. This strategy offers better protection against losses if a specific sector experiences a sharp decline.

 

 

7. What Are The Best Stock Trading Apps In Australia?

 

Here is our list of top-rated stock trading apps in Australia:

 

 

eToro Trading App (Our Recommendation)

 

  • Free to download

  • $0 per trade commission on global stocks

  • Social trading to copy other traders' trading strategies

  • Easy to use

 

 

IG Trading App

 

  • Free to download

  • $0 per trade commission on global stocks

  • The design of the software adapts to the OS of the smartphone/ tablet of the user

 

 

Superhero App

 

  • Low brokerage $0 for US stocks and ETFs, and $5 brokerage for ASX shares 

  • Low minimum investment of $100 at a time

  • Simple design with only essential features that makes it user-friendly for beginners 

  • Real-time stock prices at no additional cost

 

 

Self Wealth App

 

  • Cheap brokerage fees. At $9.50 per trade for Australian or US stocks, it's among the cheapest brokerages on offer.

  • No ongoing fees. You don't get charged an inactivity fee or monthly subscription fee.

  • No minimum account balance. There's no minimum transfer balance when you open an account, and you don't need to maintain a minimum balance.

  • Comparison tools. You can monitor other high-performing traders' portfolios and use insights gained for your investment strategy.

 

 

Stake App

 

  • $0 brokerage for investing in US stocks

  • Cheap CHESS sponsored brokerage (only $3 for ASX CHESS sponsored shares)

  • Easy to use and beginner-friendly

  • Advanced filtering features

 

 

Commsec App

 

  • Free to download

  • Facility to create watchlists to evaluate the performance of different shares in Australia

  • No monthly fee, inactivity, and subscription charges for the Australian shares account

  • Place orders directly within the application without logging in on your desktop 

 

 

NabTrade IRESS

 

  • Access an extensive array of trading information to make informed share buying or selling decisions 

  • Ability to access live market data

  • Avoid risks with contingent orders

 

 

8. What Are The Best Online Share Trading Platforms In Australia?

 

Here is a comparison of the top Australian stockbrokers based on their fees and features to choose the best one:

 

Name Brokerage charges Account Charges Markets Served International Markets
eToro " No Global Shares, US shares, ASX shares Yes
ThinkMarkets $6.49 No Global Shares, US shares, ASX shares Yes
Superhero Share Trading $5 No ASX shares, ETFs, CFDs, Forex Yes
Self-Wealth $9.5 No US shares, ASX shares Yes
Saxo Capital Markets $5 No Global shares, ASX shares, ETFs Yes
IG Share Trading $8 $50 per quarter for less than 3 trades in that quarter US shares, ASX shares Yes
CMC Invest $0 No US shares, ASX shares, Global Shares, mFunds Yes
Go Markets $7.7 No ASX shares, Forex, CFD’s, ETFs No

 

 

9. How To Buy Shares On Commsec?

 

CommSec is the leading online trading platform in Australia. It gives the traders the ability to trade Australian shares.

 

The platform offers a simple, affordable, and flexible way to trade and invest in shares in Australia. It allows investors to use various strategies based on their investment horizon and time frame.

 

Users can open a Cash Account or Share Trading Account on Commsec.

 

  • Trade starts from just $10 - Commsec cash account

  • Trade starts from just $29.95 - CommSec Share Trading Account 

 

 

Features of Commsec:

 

  • Easy to get started with just $500. 

  • Track your portfolio and trade online with Commsec App.

  • Choose between an existing Australian bank account or a cash account with Commsec as an account settlement option

  • Trade today without cash for the stock price of up to $5,000 without any initial cash deposit

  • Free access to live company data and quotes

  • Free access to market research and the recent financial market news

  • No account opening and maintenance charges

  • Hassle-free account opening in just 5 minutes

  • Low brokerage cost from just $10.00

  • 50% Capital Gains Tax discount for shares held for more than a year 

  • Choose from a large range of shares and sectors to build and diversify your trade portfolio of leading companies

  • Seamless transactions and settlement 

 

 

Procedure To Open A Commsec Trading Account:

 

If you wish to invest in shares via Commsec, you need to complete an online application form and apply as an Individual, Company, Joint, or Trust account.

 

 

Who can open a CommSec Share Trading Account?

 

  • 18 years or more with an Australian postal and residential address

  • A listed or incorporated company in Australia

  • An SMSF or Australian trust

 

 

What documents do you need to open a CommSec Share Trading Account?

 

  • ID (passport or driver’s license)

  • Australian Business Number and SMSF name 

  • Australian Company Number and Company details 

  • Certified copy of the Trust Agreement 

 

 

10. How Does Buying And Selling Of Shares Work On ASX?

 

  1. You place a buy order for shares on ASX.

  2. ASX sends a confirmation mail to you confirming the details of the trade.

  3. The ASX needs you to pay for your shares 2 business days after purchasing the shares.

  4. When you wish to sell your shares, ASX will credit the amount directly to your bank account after 2 business days of your sell trade.

  5. You can use the sale proceeds instantly (before settlement) if you wish to purchase more shares.

 

Once you purchase a share of any company, you become the owner of a small percentage of that company. Your share price will rise or fall per the fluctuations in the stock market.

 

You can track the share value, daily change in its value, company quarterly reports, updates about the company, announced bonuses/dividends, or market news.

 

It is a good practice to regularly evaluate the performance of your stocks to check whether they align with your investment plan or whether you should sell them, or switch to other shares.

 

 

11. How Long Does It Take To Process A Buy/Sell Order?

 

The time needed to process your buy or sell order depends on the order type you have placed, market order or limit order. If you purchase shares at market value, the order will get executed instantly at the current market price.

 

However, if you placed a “limit” order, your order will execute only when the share price reaches a specified limit price. The limit order will remain on the market until the designated expiry date. You can always modify or cancel your order when it is still on the market.

 

However, you can not cancel the order if it was already processed. The order is getting cancelled automatically when not executed by the date.

 

 

12. What Are The Different Types Of Share/Stock Brokers In Australia?

 

A stockbroker acts as an intermediary between the trader and the share market exchange. In other words, it invests in ASX shares on behalf of the traders.

 

Those new to investing should understand how to buy shares online in Australia. You have mainly two types of brokers to choose from for buying shares in electronic format.

 

 

  • Discounted brokers or non-advisory stockbroker

  • Full-service broker or adviser

 

Full-service brokers offer investment advice, recommendations, personalized investment plans, and accredited advisers for futures, options, and warrants at a higher fee.

 

Discounted brokers provide all the necessary trading tools for a low brokerage charge. As they do not offer any recommendation or advice concerning the appropriateness of your trade decision, they are cheaper than the full-service brokers.

 

Those with good market knowledge and confidence in their trading decisions interested in low-cost trading should go with discounted brokers.

 

 

13. How To Buy Shares On ASX Without A Broker?

 

Do you want to know how to buy shares without a broker? According to the Australian Stock Exchange, it is mandatory to use the services of a broker to buy or sell shares listed on the exchange.

 

Ensure the broker you choose is regulated by ASIC to conduct buying and selling of shares on your behalf.

 

 

14. Advantages And Risks Of Investing In The Stock Market

 

Investing in shares in Australia for a beginner is a great way to build wealth through appreciation of share price or capital gains, dividend income (company’s profit distribution to its shareholders), or both.

 

Furthermore, the stock market offers liquidity to traders and investors. It makes it a fast and more economical way to trade than other investments such as real estate.

 

Are you excited to invest in stocks? Before you invest, you should also know about the risks associated with trading and investing in stocks:

 

 

  • Capital loss risk: Selling shares at a lower price than the purchase price.

 

  • Credit risk: In case the company gets bankrupt, shareholders are the last to be paid out as compared to the other investors of that company. Thus, there is no certainty that you will get your money back.

 

  • Liquidity risk: Not all company’s shares have high trading volumes and are traded frequently. You may need to wait to buy or sell stocks of those companies that have fewer buyers/sellers. Thus, a halt in trading is another risk that a trader might have to face.

 

  • Market risks: Stocks are subjected to national and global economic conditions. This can make the market volatile and cause the share prices to fluctuate. Unexpected issues such as natural disasters, bad company news, changes in government policy, and terrorist attacks can adversely impact the share price.

 

  • Stress: The fluctuating nature of the share market daily can cause a lot of mental stress for investors. 

 

Due to the above risks in stock trading, you need to assess your risk appetite, investment timeframe, and goals and seek professional financial advice before investing in stocks.

 

Gaining expertise, constant learning, and a cautious approach can help you with a good start.

 

 

15. Why Invest In Australian Shares Using Nabtrade?

 

Nabtrade is a popularly used online trading platform in Australia. It provides access to more than 2,000 Australian shares, from blue chips to small-cap stocks.

 

What sets it apart from other online brokers is cheap brokerage and a competitive high-interest rate for your cash.

 

Moreover, the platform provides the latest insights and stock market news. The live streaming of data enables traders to make real-time investment decisions.

 

Funding options for ASX shares:

 

  • As every Nabtrade account is linked with a cash account, you can easily add cash to your trading account. 

  • You can borrow to invest in more than 500 Australian shares using a NAB Margin Loan.

 

 

16. Conclusion

 

Buying shares is the starting point for many investors. It is a great way to build wealth over time. However, there is always a risk, so a careful approach is needed while investing in stocks.

 

Learning about the stock market, researching companies, selecting the right broker and stocks, and diversifying and regularly tracking your investment portfolio will help you with a good start in the stock market.

 

If you don't have a share trading account yet, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.

 

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