So, you’re ready to take the plunge into the stock market but not quite sure how to get started. Here’s a quick guide to get you going. Maybe you’ve seen the share price of Z1P and Afterpay skyrocket. Maybe you’ve seen the long track record and the compounding effect on the stock market or maybe you’ve read a few of our articles about ETFs. Whatever the reason, getting started can be quite daunting.
How to Invest in Stocks
And we get it you’ve tried googling “How to start investing” but they’re talking about asset allocation and risk analysis and all this stuff. So here’s the steps for investing in the stock market in Australia.
Step One: Do your research
This is pretty self-explanatory. But one of the most important steps. It is essential that you do not put your money into things you do not understand. So first up just spend some time reading about the stock market, what it is and how it works. Have a read through our other articles, and also check out the ASX website they have a lot of great education resources. You need to Learn about what stocks are and learn about the different stock markets and companies of the world. Here in Australia our domestic stock market is the ASX. It is where equities or stocks are traded in Australian listed companies, this is done through a broker. Which brings us to step 2.
Step Two: Find a Broker
This is the step I see a lot of people getting stuck on. The key here is don’t overthink it. A broker is a company that allows you to buy and sell financial products. There are so many options out there so we often having people asking us who to pick.
The answer is simple. If you bank with any of the big 4 banks, they offer a brokerage service all of which work well. That is Nabtrade, Commsec, Westpac Share Trading, ANZ share Investing. Another name you’ll hear is Selfwealth, which is also a good option. These services charge brokerage which is a fee for every time you buy and sell a share, in Australia this usually ranges for $9.50 to $20 depending on the size of investment. We recommend Pearler.
One thing I would recommend here is sticking to a CHESS sponsored brokerage. Basically, this means when you buy a share you own it. All the services we listed before are CHESS sponsored. If you’re not sure if a service is just google it, or message us on Facebook if you’re struggling. Check out our favorite brokers here.
Step three: Set up a Brokerage Account
After you pick a brokerage service, you’ll have to set up an account. This can be done online and is a little bit involved. It’s just like setting up a new bank account so there will be a lot of identity checks until you’re all set to go.
Step Four: Transfer the Money
So, at this stage well assume you’ve done your research and you know which stocks to buy. If that’s not true start reading our other articles for ideas and check out our book which will walk you through everything you need to know to get started and picking stocks and things we’ve learnt along the way. To transfer funds across its simple, these brokerage sites allow you to transfer funds across in a variety of methods just like you would in transfer funds to a bank account. On nabtrade go into your accounts and view your cash account, this will give you your BSB and account number so simply transfer funds to that account to get them across.
Step Five: Buy
Find an equity that you would like to purchase then fill in the details such as amount of shares to buy (in units or dollars) and price to buy at (limit, or at market). Limit allows you to set a limit to buy/sell at, this amount won’t necessarily occur so your order may not go through. At market will trade for you at the current market value of the shares, these are generally executed immediately.
You will also select your duration there are three options; Good til cancelled (GTC), Good til expiry (GTE), Good for day (GTE). This just means how long your order will remain on the market for if its isn’t filled immediately. This is self-explanatory, GTC means it will wait for your order to be filled until you cancel It GTE means it will wait until you cancel or for a set time period, GFD means it will cancel it at the end of the day if it isn’t filled. Have a think about what suits you. We generally go GFD.
You will then be prompted to confirm your order and enter your trading pin, which is a pin number for security reasons. It really is that simple.
For more help in getting started and to learn how we look at companies check out our new eBook: The Gateway to Investing…