How to Buy Shares in Australia: A Step-by-Step Process

Buying shares in Australia offers a pathway to potentially grow wealth by investing in publicly listed companies. This guide outlines the practical steps involved, from understanding the Australian market to executing and administering share purchases. It provides a structured approach for individuals new to share investing.

Preparing to Buy Shares in Australia

Shares represent units of ownership in a company. When you buy shares in a company listed on the Australian Securities Exchange (ASX), you acquire a small part of that business. The ASX is Australia’s primary securities exchange, facilitating the buying and selling of a wide range of financial instruments, including shares. It provides a regulated marketplace where companies can raise capital and investors can trade securities.

Shares are bought and sold through brokers who execute transactions on behalf of investors. The ASX operates an electronic trading system where buy and sell orders are matched. In Australia, shares can be held in two main ways: CHESS sponsored or via a custodian model. CHESS (Clearing House Electronic Subregister System) directly registers your shares in your name with the ASX, providing a Holder Identification Number (HIN).

Under the CHESS sponsored model, the ASX records ownership changes, linking your holdings to your HIN. This provides direct legal ownership. Alternatively, a custodial model involves a licensed financial institution holding and managing securities on your behalf, where they hold legal title but you retain beneficial ownership and economic rights.

Choosing and Setting Up Your Trading Account

Selecting a suitable broker is a foundational step, as they provide access to the ASX. You can choose between online or discount brokers, which typically offer lower fees and no advice, or full-service brokers who provide advice, research, and tailored plans, often with higher fees. Consider their fee structure, trading platform features, research tools, and customer support.

Once you select a broker, setting up your trading account requires specific information and documentation. You will need to provide proof of identity (e.g., a passport or driver’s license) and proof of address. Your Tax File Number (TFN) is also required for tax reporting.

You will complete an online application form with personal details. Link a bank account to your trading account for depositing funds and withdrawing proceeds. This ensures seamless financial transactions related to your investments. The account setup process can take up to a week, though it can often be arranged within 24 hours.

Researching Investments and Understanding Order Types

Before placing a trade, research companies listed on the ASX to make informed investment decisions. Information is available through company websites, ASX announcements, financial news, and research tools provided by brokers. The ASX provides a transparent environment for information.

Understanding different order types is essential for executing trades effectively. A market order instructs your broker to buy or sell shares at the best available price at the time of execution. For Australian markets, what is often referred to as a “market order” functions as a “market to limit” order, meaning it will fill at the best available price but if not fully filled, the remaining portion converts to a limit order at the executed price. Market orders are generally executed quickly during trading hours (Monday to Friday, 10 am to 4 pm Sydney time).

A limit order allows you to specify the maximum price you are willing to pay for a buy order or the minimum price you are willing to accept for a sell order. This provides price control, ensuring you do not pay more or receive less than your desired price. If the market price does not reach your specified limit, the order may not be executed. Limit orders can be placed at any time, even outside market hours, and will queue until matched at or better than your specified price.

Placing Your Share Purchase Order

After preparing your account and researching investments, place your share purchase order through your broker’s online trading platform. You will begin by logging into your account using your credentials. Navigate to the trading screen or use the search function to locate the company by its ticker code or full name.

Once you find the company, select “buy.” Input the quantity of shares you intend to purchase. Then, select the order type: a market order for immediate execution at the current price, or a limit order to specify a maximum purchase price.

Before confirming, the platform will present a review screen detailing the order. This typically includes the number of shares, the estimated total cost, and any associated brokerage fees or commissions. Review all details for accuracy. After confirming, you will receive a trade confirmation, which serves as a record of your purchase.

Understanding Share Ownership and Administration

Once your share purchase order is executed, shares undergo a settlement process. In Australia, the standard settlement period for ASX trades is T+2, meaning the transfer of ownership and funds occurs two business days after the trade date. For example, a trade executed on Monday will settle by Wednesday.

Following settlement, you will receive documents like a contract note, confirming trade details (date, price, fees). If CHESS sponsored, you will receive CHESS holding statements from the ASX, typically monthly if there’s a transaction or change. These statements are similar to bank statements, detailing transactions and balances. If held under a custodial model, you will receive statements from your custodian.

Dividends, a portion of a company’s profits, are typically paid to shareholders, usually twice a year. These payments can be received as cash (often via direct credit) or as additional shares through a dividend reinvestment plan. Keep accurate records of all purchase and sale transactions and dividend statements for tax purposes. The Australian Taxation Office (ATO) generally recommends keeping investment records for at least five years after the sale of an asset or receipt of income.