How to Buy Shares in Australia
How to buy shares online in Australia
Australians are no strangers to the world of online share trading, with approximately 9 million Australians holding investments outside of their superannuation or a residential home (with more than half of this figure investing in direct shares). As online share trading platforms continue to grow, more and more Australians have access to the share market through the use of these convenient online tools.
If you're new to the world of buying online shares, our guide will give you the foundation you need to navigate markets with insight and ease.
How does investing in shares work?
Purchasing a company's share makes the shareholder a part-owner of that company, giving them the right to dividends and other potential benefits. As an investor, you have the option to own shares directly, or to pool your money alongside other investors in the form of a managed fund, which is a collective investment scheme.
Direct ownership of a share gives you full control over the shares within your portfolio, while a managed fund can be a preferred option for those looking to make the most of a fund manager's expertise in where their investments are allocated.
Purchasing shares: buy and sell orders
In order to buy a share, a trade needs to be placed on the share market. Opening a 'buy' position means you, as the investor, are looking to buy an asset from the market. If you desire to sell your shares, you can close that position, selling that share back to the market.
Understanding self-directed trading
Brokers play a necessary role in the buying and selling of stocks, but broker-dealer platforms allow individuals to take part in self-directed trading. This can save investors significant brokerage fees, while giving them the benefit of full participation across the stock market.
There are a number of steps necessary to complete a self-directed trading transaction, including：
Identify the kind of trading account you'll use
No stock trading can take place without a trading account, so identifying the type of investment account you'd like to use is the first step to buying shares online in Australia. Platforms like moomoo not only give you direct access to stocks, but also provide you with educational tools and resources that can support your ongoing investment journey.
Once your account is set up, you can transfer funds from your bank account, and you'll be ready to make your first purchase.
Research your investment options
Many successful traders will point to the importance of research when it comes to the stocks they invest in. Thoroughly researching the stock you're considering purchasing is crucial when it comes to the development of a robust portfolio. By identifying your investment goals, you can use your research to analyse how likely that particular stock is to achieve a return on your investment within your preferred time period and strategic approach.
Research sources may include recent press releases, information shared from that company with their shareholders or the general market, analysis of the competitive marketplace, and background research around that particular industry. Learning how to effectively analyse stock choices is an ongoing process for both beginner and sophisticated investors alike.
Determine your budget and choose a stock
If you're planning on investing in multiple companies, you'll need to decide how you allocate your financial resources across your initial investments. This will reveal how much stock is affordable to you within each company.
Some investors choose to make use of fractional shares, owning a fraction of a stock, rather than an entire stock. This is particularly useful for investors looking to own a portion of a company that has a high stock price, creating opportunities for those who otherwise may be unable to access that stock as a result of its value.
After you've allocated your budget accordingly, you can make use of the following data sets to identify which stocks to buy or sell:
1. Trade index volume. This is a helpful indicator of how often stocks are traded, pointing to the interest in the stock from the general investor market. High levels of interest indicate an increased likelihood of larger movements, leading to opening trading opportunities.
2. Growth earnings
3. Market news, forecasts and opinions
4. Stock liquidity and volatility
5. Company SWOTs
Buy your stock
Once you've opened your account, established your budget, defined your investment strategy and identified the stocks you're looking to invest in, it's time to make your purchase.
Stocks are purchased through two main orders: a market order and a limit order. Market orders are filled immediately once they're placed, with the choice of a market order indicating that you're ready to buy at the current stock price. Investors need to remember that these prices can change within seconds, making it necessary to receive up-to-the-minute data on stock prices when buying and selling.
Limit orders are filled when the price reaches a certain point. This allows investors to identify the price they're willing to pay for a stock, setting a limit order that's only triggered if the investor reaches that price. Limit orders expire after a certain amount of time, and may expire without being fulfilled if the price doesn't fall within their parameters.
Once your purchase is complete, you're now a company shareholder - congratulations!
When using an online brokerage platform like moomoo, you can also track your investment's performance from right within the app. You'll also receive communication from companies you've invested in, as well as further resources that can help you develop a continued investment strategy.
Key considerations when buying stocks online
If you're looking to pursue self-directed investing by buying stocks online, there are three key pathways you can take.
Buying stocks directly from the company
Self-directed investors have the option to buy stocks directly from the company itself, which is known as either a direct stock purchase plan (DSPP) or a direct investment plan. This requires investors to know the exact companies they're looking to invest in, as well as the pathway to buy shares in that company through their own platform.
The advantages of this approach may include:
1. No brokerage fees
2. The potential for companies to offer discounts for investors purchasing via a direct purchase plan
Disadvantages include:
1. A lack of flexibility
2. No ability to manage multiple investments within a single platform
3. More time to buy and sell individual stocks, limiting quick actions for shareholders
Opening a dividend reinvestment account
For investors looking for passive investment opportunities, a dividend reinvestment account can achieve this. Once a stock is purchased, any dividends earned from that company are automatically reinvested and used to purchase more stock for the shareholder.
This strategy is of use to those looking to hold stock within a specific company over an extended period of time.
Using an online brokerage account
Online brokerage accounts are a great way to buy shares in Australia without the use of a traditional broker, which can result in significant savings on brokerage fees.
Through an online trading platform, investors can buy stocks across a wide range of companies and markets. The management of their portfolio is also simplified, with the online platform offering monitoring tools alongside buying and selling tools within one framework.
Although online platforms often charge trading fees, these are often much smaller than the fees charged by individual stockbrokers. They also offer additional benefits, such as educational tools, resources and communities of fellow investors.
The benefits of buying shares online
There are a number of benefits that come with buying shares via online brokers in Australia. As traders are able to take greater ownership of their decisions, online trading can be tailored to particular investment strategies, while offering easy accessibility to necessary share markets.
It's easy to get started
If you're new to the world of online shares, one of the key benefits it offers is how easy it is to get started. Within minutes, you can have the access you need to buy and sell shares, as well as a range of tools that can significantly improve your investor journey.
Buying shares online offers greater flexibility
As time is of the essence when buying or selling stocks, using online trading portals can be of great benefit to investors. Buying shares online allows you to execute trades almost immediately, while offline brokers may require appointments in order to initiate a trade of shares.
Access to free live data and quotes
Online trading sites give investors the benefit of stock quotes and trade information. This gives you the ability to monitor your investments in real-time, using up-to-date information to continue to inform your investment strategy.
Useful research tools
If you've ever looked for tools that help you with your investment strategy, odds are high you've quickly hit paywalls behind which that information is blocked. An online trading platform gives you free access to a wide range of research and education tools, empowering your buying and selling of stocks without incurring additional costs.
Low or reduced fees
When you open an online trading account and make your own investment decisions, fees are lower than traditional brick-and-mortar brokerage fees. However, you'll still pay a fee each time you buy or sell a share, so it's important to keep this in mind when building your investment strategy.
Diversification of portfolios
Diversifying your investments across varying asset classes can build lower risk within your portfolio and more stable returns. Online trading of shares gives you access to a wide range of investment opportunities, creating natural opportunities for diversification within your portfolio through these direct-to-market avenues.
Risks of buying shares in Australia
As with any speculative investment, buying shares comes with several risks. These include:
Capital loss risk
If you sell an investment for less than it costs you to buy it, this results in a capital loss. Capital loss risk is an undeniable part of any shares or stock investment, as either unforeseen or anticipated market changes can lead to reductions in the values of shares.
Should the decrease in value dip your share price beyond your initial purchase price, and you choose to sell, this results in the realisation of capital loss.
Liquidity risk
A liquidity risk occurs when you're unable to sell your investment, removing your ability to access the money you need to, at the time you need it, without impacting the price in the market.
Market and economic risks
Market and economic risks are an inherent part of any kind of investment. Mark risks can cause investments to reduce in value as an outcome of economic changes, or other events that impact the entire market.
Global events, such as COVID-19 and the World Trade Centre attacks, are examples of unforeseen high-level market risks that impact stock market outcomes.
Questions to ask yourself before you start investing in Australian shares
Any savvy investor knows the importance of planning when it comes to buying or selling shares. Before you begin trading within an online platform (or with a brick-and-mortar broker), here are some important questions to consider that will help you to clarify your investment strategy.
When should you invest in shares, and how often?
There's no single answer to this question, with each investor's strategy dictating what's the best fit for their individual market approach. Most investment experts advise that general investors continue to invest on a regular basis, such as fortnightly or monthly.
However, the right amount of investment occurrences will also be related to broker fees, so consider how the cost of your investment strategy impacts the suitability of investment regularity.
Should you invest in companies you like, or keep emotion out of it?
Emotional investing isn't recommended, as this can lead investors to place their money into stocks that are less likely to generate a return. Rather than investing in companies you like, financial advice guides towards investing in companies that are most likely to complement your investing goals and strategies.
Is investing in shares right for me?
Investing requires a certain level of risk appetite. However, it's largely recognised as one of the most influential ways to build wealth across the course of your life.
By identifying an investment strategy that suits your risk appetite, you can find a way to navigate the share market while staying comfortably within what feels appropriate to your goals and needs.
What is the minimum amount to buy shares in Australia?
While some shares will come with minimum purchasing requirements, the minimum amount required at purchase will differ depending on the type of share you're purchasing.
Can I buy shares without a broker in Australia?
As share trading platforms are technically brokers, the large majority of Australian investors purchase shares via a broker. Managed funds can be accessed without a broker, as can some IPOs. However, the vast majority of shares accessible within the market are purchased via a broker.
Final thoughs on how to buy shares in australia
Buying shares in Australia couldn't be easier with moomoo's app. Open an account and download today to find all the tools you need for your investment strategy in the palm of your hand.