A newbie's guide to buying shares for the first time
It's been a year since I took the plunge and made my first trade on the stock exchange.
Looking back, I made a huge error when I was facilitating my trade.
Three or four days went by after my order was executed and I still hadn't settled my account.
I pleaded with a service rep over dodgy reception to take pity on my ignorance and waive the fee.
Lucky for me it worked but I could have saved myself the embarrassment by researching exactly how to facilitate a trade before jumping in.
Choose a broker
First you need to open a trading account.
Online brokerage can be as cheap as $11 a trade (CMC Markets). These platforms are generally really easy to use.
Broking apps can provide you with real-time pricing information and can allow you to buy and sell your shares on the go. To be able to trade on the ASX you have to purchase a minimum of $500 worth of shares.
Get down to details
When you purchase shares, your details need to be recorded on a sub-register.
If you opt to be broker-sponsored, your details will be held on the ASX's clearing house electronic sub-register system (CHESS) and you'll be given your own personal holder identification number (HIN).
You can then have all of your holdings in one consolidated account, making it easier to track and also change any details.
But you must trade through that particular broker while the shares are sponsored, or else you are likely to attract a fee to change brokers.
If you choose to be issuer-sponsored, you will be assigned a security holder reference number (SRN) for your records.
This option allows you a bit more freedom - you can trade through any broker but you will have a separate SRN for each of your investments.
Check the price
You must select what type of order you'd like to place.
You can set a particular price that you're happy to trade at. This is called a "limit" order.
Or you can ask for your order to be placed at the top of the price queue and trade at the best available price. This is called a "market" or "market to limit" order.
Look first at the asking price. What is the cheapest price on offer?
If you want to buy more shares than what's on offer, you will have to accept a combination of prices to fill the volume of your order.
Or you can place a limit for a price of your choosing and see if any sellers in the market will adjust their price to meet your order.
During trading hours, the price of a share can move constantly, sometimes by large amounts, so spend some time checking out prices before you execute your order.
The settlement of your transaction will take place two days after the trade is executed.
You can choose an automatic direct debit from your bank account, or you can use BPAY or transfer funds to the broking account.
A clearance time of up to two business days may apply.
And that's it. You're a shareholder!
Remember to always do your research when making an investment and select an option that's right for your circumstances.
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