What to do after buying shares for the first time

Congratulations, you’ve begun your investment journey! But what now? What do you need to do after you’ve placed your first trade? Glen James talks through how to get started in this edited extract from his book, Sort Your Money Out & Get Invested.

If you haven’t yet taken the leap and placed your first trade, Glen talks you through how it’s done.

Placing your first trade

Placing your trade online is as easy as:

Selecting your stock

First, you would search for your desired stock or ETF. This will be a live search of the market. You would usually type in the ticker. Once you select your stock, your broker might give you ‘market depth’, which shows the volumes of buying and selling of the selected stock (not overly relevant for beginners). Always confirm you have selected the correct stock

• Choosing your order type

  Select whether you’re buying or selling. In this instance, you’re buying the stock.

• Choosing the quantity or value

  You can select two ways to purchase. ‘I want to buy 20 shares in XYZ’ (quantity) or ‘I want to buy $2000 of shares in XYZ’ (value)‘. I always do ‘value’

• Selecting a price type

  You can select whether or not you’ll take whatever price comes up for your stock (I do this myself) or you can set a limit that you don’t want to pay more than $x for your stock — so if the price falls, the broker will grab it for you. It happens the opposite way if you want to sell shares

• Entering an expiry date

  You can select day only, which keeps the order active for that day (or until filled) or until a certain period of time if you’re putting a limit order

• Reviewing your order

  Before you click ‘go’, you’ll be able to review your order to confirm that you do want to commit to the trade.

You’ll also be able to see how much cash is in your cash account, approximately how much the trade will cost and any brokerage costs.

Once you’ve placed your trade

There’s a saying in the investment world: ‘T+2’. That’s ‘time plus two days’. It can take two business days for your trade to settle. Some brokers will instantly show your trades in your portfolio. However, there are others that you may not see until after the two days. Likewise, when you sell you won’t have access to the proceeds until after three days. Your mailbox will now likely get bombarded with paperwork!

Record keeping

Record keeping is a big part of your investing life. Those financial years come around very fast. Here’s what you’re going to have to track if you’re not using an app (one-stop shop) or platform that provides a consolidated taxation report:

• name of investment and ticker (e.g. CBA, VDGR, IVV)
• date and amount invested (including the number of shares in the company or ETF purchased)
• amount of brokerage for each trade
• share price for each share or ETF purchased
• date and amount for additional investments (including the number of shares and price.)
• date and amount of dividend
• if it’s a dividend, the dividend reinvestment date
• if you’re selling shares, the date of sale, number of shares, share price and brokerage.

Do I still need to keep records if I use an online broker?

The share registry will provide records such as the dividend information and this can be accessed online via the registry online portal. I would suggest having a separate Dropbox, Google Drive, iCloud or similar online folder where you keep all documents you receive via post or electronically. There’s no good reason to keep your long-term electronic records stored locally.
I think it might be appropriate to have a folder for each financial year and within that a folder for each holding. This will help with year-on-year income taxation. I would also suggest a folder that is just used as a record of share purchases.

For example, you might have a directory structure like this:

FY 2022

Corporate actions

• •         CBA
  •         WOW

Other registry info

• •         CBA
  •         VDGR
  •         WOW

Purchases and dividends

• •         CBA
  •         VDGR
  •         WOW

The purchase folder will have a record of the purchases of shares, including dividends year on year. Not only do you need to keep all PDF records and also scan in other relevant details such as CHESS purchase details and other confirmations from the share registry, but I would also have one consolidated spreadsheet that keeps a high level of the above bullet points. Having a platform doesn’t mean you don’t need to keep records. You should be scanning in or saving the consolidated tax documents year on year.

Over time, fewer documents will be posted to your mailing address, which helps the environment and saves you time and effort from having to scan in documents. I personally use Dropbox, and the app has a built-in document scanner which works a treat! As time goes on it will become apparent (after your first couple of tax returns with owning shares) what you need to keep and what not (for example, you don’t need to keep a document about the notice of an annual general meeting but if in doubt save anything and ask your accountant).

I would also ask your accountant how they want the documents stored to make their life easier. It will save their time (and your money) if you do it their way. There are products available such as ‘Sharesight’, which is a web-based share record-keeping company. They provide a free service for limited holdings.

Your broker might also have some options available, but nothing beats your own records, which you control and can access in 10 years’ time if needed.

This is an edited extract from Sort Your Money Out & Get Invested (Wiley $32.95), exclusive to Canstar, and republished with permission.

Cover image source: Cameron Stephen Prins (Shutterstock.com)