In most cases to sell your shares you would open an account with a stock broker or online share trading platform, transfer your shares and pay a brokerage fee to sell them. However, it is not always so simple, to sell your shares you first have to work out what type of shares they are.
What type of share do you have?
The first steps to selling your shares is to work out where the shares are being held. Are they:
- CHESS-sponsored shares
- Issuer-sponsored shares
Let’s break down how these shares differ and how they can be sold.
Related article: How to buy shares in Australia: A 2021 guide
How to sell CHESS-sponsored shares?
CHESS, which stands for Cleaning House Electronic Subregister System, is a system that the ASX uses to record shareholdings and manage trade settlements. Essentially, it means that when you buy or sell your shares the ASX has a record of you owning the shares directly. These shares are the easiest to sell and are the most common.
If you own CHESS-sponsored shares you can sell them through the same broker that you bought them through. Alternatively, you can also sell your shares to a different broker. Often you will be required to fill out a transfer form with your new broker and then contact your current broker to arrange the transfer of shares. Once the transfer is complete you can place an order to sell with your new broker or online share trading platform.
How to sell Issuer-sponsored shares?
Issuer-sponsored shares are managed by the issuer of those shares via the issuer’s Share Registry. You can find out if your shares are issuer-sponsored or CHESS-sponsored by the reference number on your statement. If your reference number begins with an ‘I’ your shares are issuer-sponsored shares.
There are two ways to sell issuer-sponsored shares. You can sell them through the share registry or through a broker.
Selling your shares directly through the registry can be done through services like Computershare or Link Market Services. You’ll need to provide your reference number (SRN) and proof of ID. You may be able to complete the process online and typically there are fees involved.
Selling through a broker is much the same as with CHESS-sponsored shares. However, it is worth noting that not all brokers and online share trading platforms will allow one-off trades for people who don’t require a share trading platform.
Do you own the shares directly?
Another question to ask yourself when looking to sell your shares is: Do you own your shares directly?
Selling shares differs slightly depending on whether you own them directly or indirectly. Shares you own directly can be sold by contacting your broker or placing a trader through your online share trading platform or broker.
Shares you own through a managed fund are known as indirect shares. To sell your indirect shares you will need to sell units in your managed fund. Be sure to check if there are any withdrawal fees before selling. And it is also worth keeping a receipt of the transaction for tax purposes.
Occasionally, a company may request to buy back their shares, and typically you will have the option to sell or not. Before you make a decision you may want to consider why the company wants to buy back it’s shares. There are a number of reasons a company might buy back shares. The company might believe the market has discounted its shares too steeply, or they may want to invest in the company or to improve its financial ratios.
Before deciding whether to sell your shares via a buy back you should ask yourself if now is a good time to sell. If you are happy with the company’s performance and future prospects you may want to hold on to your shares. If you do decide to sell back your shares the brokerage fee is generally waived in this situation.
How much does it cost to sell your shares?
Whether you are buying or selling shares it is likely that you will be charged a brokerage fee. Brokerage fees vary depending on the share platform or broker that you use.
With issuer-sponsored shares often an additional fee of around $10–$15 applies when you sell them via a broker. Similarly, if you sell issuer-sponsored shares through a share registry a brokerage fee will also apply.
For one-off trades through a broker it is likely that you will be charged a flat brokerage fee, or your fee may be calculated as percentage of transaction amount, whichever is greater.
When do you know when to sell your shares?
Trying to time the market is very tricky to do and not often worth the effort. You can never know which direction the share prices will go. However, if the shares you hold are keeping you up at night that might be a good reason to sell. Additionally, when rebalancing your investment portfolio could also mean it’s time to sell.
Cover image source: NDAB Creativity (Shutterstock.com)
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