Have you ever wanted to buy shares? Maybe you've done your research and you know just enough that you're ready to get going. But how do you actually start? What the first step? How do you make a trading account?
Maureen Jordan, CEO of Tilly Money explains exactly how to buy and trade shares.
So first up, this article is going to take you through how you set up an account. Then to satisfy my friends who haven’t yet worked out how to activate their accounts and trade, I’ll take you through that too.
Setting up a CommSec account
This is how you set up a CommSec account. Setting up one on Nabtrade or any other broker account is basically the same process. I chose CommSec because that’s where I’ve had my accounts for some time.
- Go to www.commsec.com.au > Join Now > Share Trading >
- From here, you’ll be asked to choose between: Creating a “CDIA account” OR Using your existing bank account.
So, a Commonwealth Direct Investment Account (CDIA) is essentially an additional bank account you create with CBA that lets you easily settle any shares you buy, or receive money for ones that you might sell.
You can link any bank account you might have with another provider but for me, I’ve banked with CBA for years so that made it easier.
After you select a CDIA, fill in some personal details. As I’m a CBA customer, I was asked for my Netbank details.
Now choose what type of account you want to open: Individual, Joint, Company or SMSF. If you’re new to investing, it’s probably best to choose the individual account so it’s simply under your name.
You’re set up — it’s that straight-forward.
You’ll receive a letter from the Australian Stock Exchange (ASX) telling you that your “CHESS sponsor” has created a CHESS account for you with your own HIN (Holder Identification Number). Your HIN is very important. Think of it just like your password to your credit/debit card. Keep it safe! I’m not going to explain the ins and outs of CHESS right now – I’ll leave that for another day.
So there you go, you have a CommSec account. If you run into any technical hitches, you can give them a call. It takes a while to get your call answered but once they do, I find them knowledgeable and helpful generally.
How do you now buy a share?
Well, it’s easy in one way but in another way it’s not ! The action of doing a trade is a cinch but what to buy is the hard part. Don’t just buy a share because a friend suggested one or you overheard a “hot” tip. You may as well go to the casino or the races if you want to do that.
If you’re on CommSec (the process would be very similar on other broker platforms), these steps are easy:
- Go to the menu bar and select ‘trading’. If you have more than one trading account, select the one you want to buy from.
- Now select the 'Buy' option. There are only two options. The other one is 'Sell'.
- Enter the name of the stock or the stock code e.g Commonwealth Bank’s stock code is CBA. There’s a box on this page where you can work out the ticker code by entering the name of the company or you can simply google it.
- Enter how many shares you want to buy or the total amount you want to spend. Remember, the smallest trade you can do is $500.
- Now enter the price you’re prepared to pay per unit OR if you enter “at market” you’re leaving this up to the market to decide the price! If you do the latter, this has to be done when the market opens around 10am Monday to Friday.
- Select how long you want this price to be “in the market” for. So either select a date that it expires or enter ‘good for day’, which means if you don’t get to buy the stock at the price you want, it will expire at the end of the trading day i.e. around 4pm. You’ll then see how much this will cost you, including the brokerage fee.
- Click PROCEED. You’ll be taken to the next page that will show you exactly what you want to buy. If you’re okay to still proceed, then enter your trading password and hallelujah, you’re in the market to buy.
You can cancel your trade if you get in quickly but once you’re in the market, you could be an owner of that parcel of shares almost instantly if someone out there is eager to sell. So before you proceed, make sure that’s what you want to buy at this time.
Here’s how the purchase (or sale) works behind the scenes. Once you submit your order, the exchange electronically finds a match for your purchase (sale) to fulfil your order. For example, if you submit an order to buy ‘CBA’ at a set price, expiring this afternoon – once someone lists a sale of CBA at that set price, you’ll both be instantaneously matched. These matches happen in order of the time you submitted your offer to buy. If you select to submit the order “at market” and the stock price made a big jump up, you could be paying higher than the real value of the stock — so watch that!
Selling a share is the same process but you simply click the 'Sell' button. When to sell? Well, that’s the tricky part too, so watch this space! There’s a whole lot of things to consider here, including potential capital gain/loss issues.
Now you know how to buy a share on the Australian Stock Exchange. Proceed with caution, but even if you do make mistakes, you’ll learn a lot.
As to what shares to buy, well, that’s the subject of many articles, podcasts and videos that you’ll have access to over coming months on Tilly Money.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.