6 Steps to Buying Your First Shares
By Nathan on The Capital
Stocks, shares, equities, whatever you want to call them, these are the 6 steps to buying your first shares.
Step 1: Find a Broker
In order to buy shares, you need to have a broker. The cheapest brokers are known as discount or online brokers. Most online brokers will charge you between $10 and $50 per trade in Australia. In America, these fees are usually lower with some even offering free trades such as Robinhood.
For simplicity, the easiest way to open a brokerage account is through your bank. Go to your bank's website and look for something that says investing.
Another way is to use a comparison site such as canstar.com.au. Here you can filter Brokers by rating and fees.
We want a broker with a low or no account balance and low fees.
My Broker of choice is Self Wealth.
Self Wealth has:
- No account balance
- $9.50 trades
Please note Self Wealth only allows you to invest in Australian shares at the moment but they say they plan to allow international trading in the future.
Step 2: Apply for an Account with the Broker
To apply for an account you will have to be 18 in most countries.
You can sign up for most brokers online these days and will usually just need to provide proof of ID and residence.
Step 3: Learn about Investing
Before you go out and buy a bunch of shares you need to know what you are doing.
Do you want to be an active or passive investor?
Are you investing for Dividends or Capital Growth?
What is your Investing Strategy?
Want to learn how the Greats invest? check out my Investor Strategies articles.
You need to read books, takes courses and learn about Investing.
A great source to learn about Investing is Down Under Investor.com.
Step 4: Deposit Money into your Trading Account
You are going to need to deposit at least $500 into your trading account before you make a trade.
$500 is the minimum amount that you need in order to place a trade on the Australian Stock Exchange.
It is important that you only deposit money that you won’t need for the next 5 years or more.
Investing is a long term game.
If you think you might need that money within the next 5 years I wouldn't invest it.
why?
The stock market doesn't always go up.
What if you invested all your savings today and the market crashed tomorrow?
You might be forced to sell your stocks for a loss.
In the short term, the stock market can go down, but over the long term, it has always gone up.
The best thing to do when the stock market crashes is to wait it out.
Step 5: Decide What Stock you Want to Invest in
After doing some research and learning about investing decide which stock you want to buy.
I recommend that beginner investors start by buying an Index Tracking ETF such as VAS.
Now decide how much you want to pay per share and the amount of money you want to invest.
Step 6: Place an Order Through your Broker
The last step is actually placing the order through your broker.
You can do this online.
All brokers are different but the steps to placing an order will be something like this:
- Click trade
- click buy or sell
- type in the stock ticker. A stock ticker is a 3 or 4 letter code for a company. For example, the ticker for Apple is AAPL.
- Choose the order type. The two main order types are Market Order and Limit Orders. When you place a Market Order you don’t enter the price you are willing to pay, you just pay the price that the stock is trading for. When you place a Limit Order you decide the price you are willing to pay. E.g. if a stock is trading for $25 you can place a Limit Order at $20. This means you won’t buy any shares until the price goes down to $20.
- If you chose Limit Order, enter the price you want to pay.
- Choose how many shares you want to buy or how much you want to invest.
- Click submit.
If your buy order is met by a sell order than the deal will go through. Your account will usually be debited 2 days after the trade this is known as T+2.
I will be posting a step by step guide to placing an order on Self Wealth shortly you can find it here.
Congratulations
If you followed these 6 steps you are now a Stock Investor.
