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If you’re looking to join the many Australians who invest in shares, our beginner’s guide explains how to do it and what factors you should consider before jumping in.
One in five Australians invested for the first time in 2021, new research shows, with shares proving to be by far the most popular option among rookie investors.
According to Canstar’s 2021 Consumer Pulse Report, 46% of these first-time investors chose to invest directly in shares, 21% bought their shares via a managed fund and 13% did so through a micro-investing app. A further 19% of first-time investors invested via an exchange traded fund (ETF), another indirect way of investing in shares. This compares to 25% of people who said they invested in property and 24% who bought into a cryptocurrency.
Below we provide an overview of the steps usually involved in buying shares online. But before we get started, it’s important to note that investing in shares, like any other kind of investing, can involve risks and may not be a suitable option for everyone. It’s important to do your own research on the potential pros and cons based on your circumstances and goals, and if you need it, get financial advice from a qualified professional.
How can I buy shares online in Australia?
- Choose an online share trading provider
- Research which shares to buy
- Place an order to purchase the shares
- Keep an eye on your portfolio’s performance
- Decide whether to sell, hold or buy more
1. Choose an online share trading provider
To buy shares online, you typically need to go through an intermediary or ‘broker’ known as an online share trading platform. These services enable investors to buy and sell shares and monitor the performance of their portfolio. Many of the well-known Australian banks offer a share trading service, but there are also a number of specialist providers to choose from.
When deciding on which provider to go with, it can be a good idea to do some research and consider a range of factors. For example, when assessing providers as part of its Online Share Trading Star Ratings and Awards, the factors considered by Canstar Research include:
- fees, both for making trades and any ongoing fees charged for using the platform
- features, such as the customer service and educational resources on offer, research tools to help you decide how to invest, the range of trading options available (e.g. which markets customers can access), and how easy the service is to access and use.
Once you have chosen which online share trading provider you’d like to go with, you will need to sign up for an online account with that service.
2. Research which shares to buy
There are more than 2,100 companies listed on the Australian Stock Exchange (ASX) and many multiples of that if you start to consider the international markets and exchanges that some Australian share trading platforms also offer access to. This means deciding on which shares to buy can be difficult. In fact, the Australian Government’s financial information service, Moneysmart, suggests that experienced investors can spend months researching shares before buying. “Take your time” is its advice.
Moneysmart suggests taking steps such as following the latest news on the Australian economy and market changes by reading the finance sections of reputable websites, magazines and newspapers. Reports and forecasts published by banks and stockbrokers can also be helpful, it says.
When getting into the nitty gritty of researching individual companies, Moneysmart suggests taking a look at company annual reports to find out about company strategy, core business activities, whether it is making a profit or loss and what its future prospects are. Subscribing to updates from the Australia Securities and Investments Commission (ASIC) and ASX could also help you stay up to date on company announcements that might affect your investment decisions. If a company is listing its shares for the first time, reading what’s called the ‘prospectus’ could help you understand what you’re getting into if you buy shares.
There are also countless newsletters and other services that offer ‘stock picks’ based on their experts’ recommendations. While these can be useful for generating ideas, doing your own research and seeking professional financial advice can still be valuable.
When researching shares, it’s important to also keep in mind that past performance is not a reliable indicator of future performance. In other words, just because a company’s shares have previously gone up in value, it doesn’t mean they will continue to do so.
3. Place an order to purchase the shares
When you have decided which company or companies to invest in, you will need to deposit cash into your investment account with the trading platform to cover the cost of the shares plus any trading fees that apply. You can then place an order to buy shares through the platform by inputting the stock code for the company (a unique three-letter code assigned to it) and the number of shares you would like to purchase, or simply the amount of money you want to invest.
The broker will then purchase the shares on your behalf, generally either at the best available price at that time (market order), or if you want to specify a maximum price at which you are prepared to buy, you can place what’s known as a limit order. A limit order means your purchase will not be completed unless the share price gets to or below an upper limit you have set.
4. Keep an eye on your portfolio’s performance
When you have purchased shares, they become part of your ‘holdings’ which you will be able to view through your online share trading account. You will generally be shown the current value of the shares you bought and what percentage gain or fall this represents based on the price you paid.
While it recommends checking in on your holdings regularly, Moneysmart explains that how often you should check on your portfolio’s performance may depend on your financial goals and how long you are planning to invest. It warns that “over-tracking may lead to over-trading” which could mean deviating from your investment plan or locking in a loss if prices have temporarily fallen. The more you trade, generally the more you will pay in fees too.
5. Decide whether to sell, hold or buy more
Depending on how your investments are performing, you may eventually decide to sell them, buy more or do nothing for the time being. If you decide to sell, you will be able to execute the trade through your online trading platform, again generally either at the current market price or at or higher than a set price you have specified.
Deciding whether to sell, when and for how much can have a big impact on the outcome of your investment. It’s important to think this through carefully, seeking expert advice if necessary. Remember, there can also be tax implications when you sell shares that vary depending on when you decide to sell, so it may be worth factoring this into your plan too.
Compare Online Share Trading platforms
If you’re comparing Online Share Trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to the company’s website. The information displayed is based on an average of 2 trades per month. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical). Use Canstar’s Online Share Trading comparison selector to view a wider range of Online Share Trading companies.
4 questions to ask yourself before you start investing in Australian shares
There’s a lot to think about before you commit to investing in shares. Here are some key questions to consider.
1. Should you invest in shares directly or indirectly?
“It all depends on how much you have to invest, both in dollar terms and time, and how much control you want,” Canstar’s money expert, Effie Zahos says.
“Direct ownership of shares comes with voting rights that can impact the company’s management. You also control when to buy and sell and you decide whether or not you want to increase or decrease the amount of money you have invested in a stock.”
But choosing which shares to invest in is not necessarily straightforward, and a lot of Aussies choose to invest indirectly for the sake of simplicity. Investing in a fund can also be a cost-effective way of diversifying your share portfolio, compared to paying brokerage fees on multiple purchases of individual shares, according to Ms Zahos.
If you want a greater level of control and choose to invest directly, she says it’s important to remember the golden rule that when you buy shares, you are becoming a part owner in the business.
“If a friend asked you to invest in her business, chances are you’d ask some serious questions like: ‘How will it make money? Who’s running the show? What sort of competition does the business face?’
“It’s no different when it comes to investing in listed companies. You need to ask serious questions to check whether the business has decent growth prospects.”
2. When should you invest in shares, and how often?
When you are ready to start investing in shares, the temptation may be to go all-in with whatever amount you have to invest. Or alternatively, to try and ‘time the market’ so that you are buying when your preferred companies’ shares are going at bargain prices. Ms Zahos says this can be a difficult strategy to execute successfully.
“Timing the market would call for good research, good timing and good luck. I prefer a strategy of drip-feeding my money into my investments evenly over time, which helps me to be somewhat protected, thanks to dollar cost averaging (DCA).”
Ms Zahos says that by adopting this approach, you buy more shares when prices are low and fewer when prices are high.
“The end result? A better average price,” she says.
Keep in mind, however, that while DCA may be an effective way to manage risk, it is still not a risk-free strategy. Sometimes you’ll end up with a lower return than you would have if you’d invested your entire lump sum in one go, such as when the market is steadily rising over time.
3. Should you invest in companies you like, or keep emotion out of it?
If you’re going to invest in a company, does it make sense to go with brands you’re a fan of, like your favourite restaurant chain, or industries you know a lot about, such as the one you work in?
Ms Zahos says there can be advantages to investing in companies and industries you are familiar with.
“I always like to keep things simple and invest in what I know, and I find it can pay to have an interest in the companies you invest in,” she says.
“This way, you’re probably more up to date with news and events that may impact the company.”
She adds a word of caution, though, explaining that emotions can get in the way when it comes to decisions about buying and selling.
To avoid your judgement becoming clouded, investors may benefit from having some buying and selling rules in place, and sticking to them regardless of the companies involved. An example could be committing to holding onto the shares for the long-term, even if there is short-term volatility.
4. Is investing in shares right for me?
Lastly, it may help to consider whether investing in shares is suitable for you, based on your situation.
When done well, share investing can help people to grow their money over the long term, potentially well beyond what might be earned in interest by keeping cash in a bank.
On the flip side, it is generally a riskier approach to take than putting your money in a savings account, and there is the potential that you will lose money. Of course, there are also wider investment options you may like to consider too.
“There is no guarantee that your shares will rise in value and that dividends will be paid,” Ms Zahos says. “If you need your cash fast or you’re saving for a short-term goal, shares may not necessarily be the right investment fit for you.”
If you are looking for a way to ‘try before you buy’, you could consider the ASX Sharemarket Game, which allows prospective investors to ‘invest’ hypothetically and see how their practice stock picks perform based on the real-life performance of the companies. The game usually opens in early February and runs from March to June.
Investing in shares FAQ
What is the minimum amount to buy shares in Australia?
If you are buying shares in an ASX-listed company directly (not through a fund) the minimum value of the shares for an initial investment is $500 plus brokerage fees. However, some brokers may allow you to top up your investment in companies you have already invested in using smaller amounts. Bear in mind that for trading platforms with trading fees based on a dollar amount (as opposed to a percentage of the trade value), trades involving small amounts can be expensive.
How much does it cost to buy shares in Australia?
In most situations, there is a cost for buying and selling shares, which depends on the method you use and potentially the value of the transaction too. Fees can have a big impact on the returns you may be able to get from investing, so they are an important consideration. Some common fees you may encounter include brokerage fees and fund management fees.
Brokerage fees
A brokerage fee is charged by a provider in return for facilitating investment trades. It is commonly charged as a flat rate for smaller transactions and as a percentage fee for larger ones.
Fund fees
If you invest via a fund, you will typically be charged a regular management fee in return for the manager running the fund. This fee is usually a per annum percentage of your investment balance.
At the time of writing, based on the managed funds on Canstar’s database investing in shares, the management fees charged by funds can vary significantly, so it can be a good idea to shop around based on fees and other factors.
If you invest in an ETF through an online share trading platform, you will generally still be charged a management fee by the ETF provider, in addition to the brokerage fee.
How can I buy shares using a full-service broker in Australia?
If you want to buy shares, but would like more support and advice along the way, you could opt to use a full-service broker. In addition to facilitating the transactions, this kind of broker may offer advice on which companies to invest in and how to build a portfolio of shares and other assets. They may also be able to offer advice on related areas such as retirement planning and tax.
While full-service brokers typically offer a broader range of services than online share trading platforms, they are generally a more expensive option.
How can I buy shares using an investment fund in Australia?
If you do not want to purchase shares in specific companies and instead want to invest in a range of stocks with a single trade, you could choose to go with an investment fund. If you buy into a fund with other investors, you generally own investment ‘units’ rather than individual shares.
Examples of investment funds include managed funds and ETFs. Some funds simply aim to replicate the returns of the market overall, or a particular ‘index’ such as the S&P/ASX 200, which is the 200 largest publicly-listed companies in Australia. These are known as index funds.
You can buy into an investment fund directly through the fund manager (generally for larger investment amounts) or if the fund is listed on the stock market (an ETF), you may be able to buy into it via an online share trading account.
How can I buy shares through micro-investing?
If your aim is to buy into shares by investing small amounts regularly, you may be interested in the micro-investing platforms available in Australia. These platforms allow you to invest in shares using very small amounts, some even by allowing you to round up the value of purchases, such as rounding up your $4.50 coffee to $5 and investing the $0.50 difference. With micro-investing, you are generally investing into a pool of shares, such as an ETF, rather than buying individual shares.
Because of the low value of the trades typically made through micro-investing platforms, it’s a good idea to watch out for the fees charged, as your costs can end up making up a high percentage of the value of your investments.
How can I buy shares through super in Australia?
You can generally also invest in shares through your super. If you have money saved in super, chances are some of it is already invested in the share market via one of your fund’s standard investment options.
Generally, ‘growth’ investment options invest a larger proportion of a member’s investments into Australian and international shares than other asset classes, like property or bonds. Shares can be more volatile as the value can go up and down fairly regularly.
Depending on the fund, you may also have the option of choosing a more ‘hands on’ investment option, potentially allowing you to allocate more of your super to shares. Some funds may also offer their members the ability to invest in particular ASX-listed companies directly. In some cases, funds may charge higher fees for this service.
Another option, if you want to invest your super in the shares of particular companies, is to set up a self-managed super fund (SMSF), which typically offers greater flexibility and control to investors compared to what’s on offer via an industry or retail super fund. Bear in mind that managing your own super is a big commitment, can involve significant set-up and ongoing costs and would require you to follow strict regulations for managing the fund.
Before making any changes to how your super is invested, it may be wise to get professional financial advice to ensure you are aware of any risks and possible long-term implications of adapting your strategy. Some super funds offer basic financial advice to members at no additional cost, as it is generally included in the other fees you pay to the fund. Comprehensive advice may cost extra.
→ Related: Independent financial advisors in Australia
Can I buy shares without a broker in Australia?
In some cases, you may be able to buy shares without going through a broker. Some examples include buying into a managed fund or investing in shares through your super, or purchasing shares directly from the company issuing them through an IPO. If you already own shares, you may be offered the option to purchase additional shares in a company if it chooses to raise extra capital. This is known as a share purchase plan (SPP).
Cover image source: Hand Robot/Shutterstock.com
This content was reviewed by Sub Editor Jacqueline Belesky as part of our fact-checking process.
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