How to Buy Shares Online in Australia

Online share investing allows individuals to participate directly in financial markets. In Australia, this involves buying shares, which represent ownership stakes in publicly listed companies on exchanges like the Australian Securities Exchange (ASX). Companies list to raise capital, offering investors the opportunity to gain from potential growth and profits through capital growth (share price increases) and dividend income (portions of profits distributed to shareholders).

Preparation for Online Share Trading

Before engaging in online share trading in Australia, you need an Australian Tax File Number (TFN), essential for all financial and tax-related activities, including reporting investment income to the Australian Taxation Office (ATO). A linked Australian bank account is also necessary to fund your trading account and receive dividend payments or proceeds from share sales.

A Holder Identification Number (HIN) is unique to the Australian share market’s CHESS (Clearing House Electronic Subregister System) sponsorship model. This 10-digit number, beginning with an ‘X’, is issued by the ASX through your chosen broker and signifies direct ownership of your shares. Under CHESS, your shares are held electronically by your broker, offering enhanced security and ease of trading. Understanding basic investment terminology, such as market and limit orders, is also beneficial.

Selecting an Online Share Trading Platform

Choosing an online brokerage platform in Australia involves evaluating several factors to align with individual investment goals. The market offers various platform types, from discount brokers with lower fees for self-directed investors, to full-service brokers that offer advice and research, often with higher costs. Mobile-first applications also cater to investors who prefer managing their portfolios via smartphones.

When comparing platforms, brokerage fees are a primary consideration. Other charges like inactivity fees or data fees may also apply. It is also important to assess the range of investment products available, such as Australian shares, Exchange Traded Funds (ETFs), or international shares, and the quality of research tools and educational resources provided. Factors like customer support availability, the platform’s ease of use, and its adherence to regulatory compliance by the Australian Securities and Investments Commission (ASIC) are also important.

The Process of Buying Shares

Once an online share trading account is established, the initial step involves funding the brokerage account. Most Australian platforms support various deposit methods, including direct bank transfers or BPay, allowing you to move funds from your linked Australian bank account to your trading account. After your account is funded, you can search for a specific company’s shares using its ticker code on the ASX.

When placing an order, you will typically encounter two main types: a market order or a limit order. A market order instructs the broker to buy or sell shares immediately at the best available current market price. This order type prioritizes speed of execution. Conversely, 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. A limit order will only execute if the market reaches your specified price or better. After selecting the order type, you will enter the quantity of shares or the total value you wish to trade, review the order details, and then confirm the transaction.

Post-Purchase Considerations

After purchasing shares, you will typically receive a contract note from your broker, confirming the trade details. Your ownership is recorded under your Holder Identification Number (HIN) within the CHESS system.

Share ownership often comes with the potential for dividends, which are payments from company profits. Some companies also offer Dividend Reinvestment Plans (DRPs), allowing shareholders to use their dividends to acquire more shares, often without brokerage fees. Selling shares generally mirrors the buying procedure, involving placing a sell order through your brokerage platform. Maintaining diligent records of all share purchases, sales, and dividend income is essential for tax purposes, particularly for calculating capital gains or losses and reporting to the ATO.