Want to start your journey with stock investing? Great!
I am going to purchase some shares today and take you through the step-by-step process. Keep in mind that this is a very basic guide and is certainly not inclusive of all options and steps that one can take.
In Australia, the Australian Securities Exchange (ASX) is Australia’s Primary Securities Exchange, with over 2,000 companies. I’ll be focusing on this today. They have created a guide of common terms which I would highly recommend checking out here.
How to start stock investing
1. You need to get signed up with a share broker
In order to purchase a share, you will need to use a share broker to purchase these on your behalf. There are many different types available, but I will be focusing on online brokers as they are affordable, quick and easy. This will allow you to start stock investing.
The big 4 banks have their own versions of the service which I find the most convenient to use. There are cheaper options out there too, just do your research and figure out which one is right for you. I use Westpac as it is my primary bank. They charge a brokerage fee to make a transaction on your behalf and you have to pay this fee every time you buy or sell a stock. For the big banks, it is around the $20 mark but I’ve seen this as low as $9.95.
You can sign up to these services online within a few minutes. You will be given a Holder Identification Number (HIN). This number is documented in the CHESS register, which is used by the ASX to confirm holdings. Make sure you take note of this and keep it in a safe, private place.
When this is all done, you will have access to the trading platform. With Westpac’s service, you are given a “cash investment account” that works as a bank account to transfer funds to invest.
2. Find out the ASX code of the units you want
In Australia, all stocks on the ASX have a code which corresponds with the company. For example, Westpac’s code is WBC and Qantas code is QAN. You can find these easily with a quick Google search.
Today, I am going to purchase some units from a fund called Vanguard Diversified High Growth Index ETF. The stock code for this is VDHG. Just an FYI, I am not recommending this as a purchase, it just happens to aligns with my personal goals, objectives and investment horizon.
This is what your online broker homepage will look like:
3. Figure out the quantities you want to purchase
When you purchase a stock, you purchase it in units. If stock price A costs $100 and you have $10,000 to invest, you would purchase 100 units. The minimum amount you can purchase is $500. However, the price of a stock changes constantly, so you can google your stock code to get a rough idea of what the current price is.
Today, I am going to purchase around $20,000 of VDHG stock. The current market price for VDHG is $57 – $58, so I will be purchasing 349 units, which will cost me $21.95 in brokerage fees.
4. Make your purchase
At this stage, you should have signed up with an online broker, know the stock code and quantity you wish to purchase.
The ASX is open from 10am to 4pm (AEST), Monday to Friday. It is possible to add, cancel and amend orders outside of normal hours but it will not be executed until the market is open.
Start by transferring the investment funds into your brokerage account. With Westpac, I transferred $20,000 to my Cash Investment Account from my everyday spending account. This is easy, similar to just transferring money out to a savings account. This money won’t be taken out today – I will go into this in more detail in the final step.
Logging into my online broker, I clicked the “place order” section under Share Orders.
I input the order type as “Buy”, ASX code as VDHG, number of units (349) and I will tick the “At Market” price and expiry as “Good for Day”.
Then, I clicked “Proceed”, “Submit Order” and then see the below screen.
Once my order has been executed, I will receive an email confirming all details of the trade.
5. Paying for your shares
Share settlement occurs two business days after the transaction (T + 2). This means that the money won’t be taken out of my account to pay for this until this settlement date. As these funds are automatically taken from the account, I always have my funds ready to go the day I make the trade so I don’t have to worry about it on the settlement date.
It is up to you how often you check your portfolio. Some investors like to check it daily or even multiple times a day, however that would stress me out! Therefore, I check it once a month or whenever I am about to make a trade.
And, that’s it! You are officially a share investor and have kicked off your journey into stock investing. If you have any issues or questions, shoot me an email on firstname.lastname@example.org or send me a DM on my insta @themoneymarketerblog.
If you are unsure what any terms means, check out ASX’s guide of common terms here.
If you’re looking for more information in relation to stock investing, here are some of my other articles around this:
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