Your search for the right
stockbroker starts here

How to buy and sell shares

Buying and selling shares is not difficult, but there’s some important steps you need to follow:

1. Find a stockbroker

The first thing you need to do is find a stockbroker. Stockbrokers are authorised by stock exchanges to carry out the buying and selling of shares on behalf of investors. Sometimes we’re asked how to buy shares without a broker. The short answer is, you can’t, so you’ll need to find a stockbroker to do it for you. There are other ways to acquire shares, but ultimately, if you’re going to be active in the stock market, you’ll need a stockbroker.

As we discuss in ‘What is a stockbroker?’, the term itself may refer to individuals or firms. There are two main types of stockbroking firms (or stock brokerages as they’re sometimes called) - Full Service Stockbrokers and Online Stockbrokers - and our service is designed specifically to help you find the one that’s best for you.

2. Open an account

You will be required to complete an account opening form regardless of which type of stock brokerage firm you choose.

The form will ask a range of questions including:

  • Name
  • Residential address (can't be a post office address)
  • Date of birth
  • Citizenship
  • Tax File Number (if you are resident in Australia for tax purposes)

You will be required to complete an account opening form for each name you wish to invest in (e.g. you might want to own shares in your personal name, a company name and in your self managed super fund, this would require three separate account opening forms). You will be asked to provide certified copies of appropriate documents, such as your drivers licence, passport, power of attorney, company articles, trust deeds etc., to prove you’re legally entitled to make investments in the name of each person/entity.

At the time of opening your account you will be provided with a Financial Services Guide (FSG). The FSG is designed to assist you in deciding whether to use the services offered by your new stock brokerage firm. It will provide detailed information about:

  • the entity providing services to you (this will include the stock brokerage itself, but possibly other entities as well)
  • the services they are offering you
  • how the firm will be paid for providing services to you (by you and potentially third parties as well), and
  • how they will deal with any complaints you may have about the services they provide (or fail to provide).

3. Fund your account

Before you place your first order you’ll need to transfer funds to your account with your new stockbroker to cover the cost of your first investment/s. You’ll need to transfer separate amounts to each account you wish to buy shares in. In some cases you will also have to prove the source of the funds you transfer, e.g. did they come from the sale of a house, inheritance, or savings? Clear funds will usually be required before you can place your first order.

4. Place an order

Placing an order to buy or sell shares will involve communicating directly with your full service stockbroker, or visiting the website/mobile app of your online stockbroker. Before doing either, it’s important to be clear about the instructions you’re going to give i.e. what type of order you want to place.

There are two types of order:

  • Limit order. A limit order is one where you specify the maximum price per share you are prepared to pay - in the case of a buy order - or minimum price per share you are prepared to sell at - in the case of a sell order. The important thing to remember about a limit order is that by specifying your price limit, you may not transact at all. Even if there are trades at the price you have specified, if there aren’t sufficient shares transacted at this price, you may not transact any shares at all (or you may transact some but not all of the shares you wanted to trade).

  • Market order. A market order on the other hand is an instruction to buy or sell at the ‘market price’ i.e. to pay whatever price per share needs to be paid to buy the number of shares you want, or to sell at whatever price per share is required to sell the number of shares you want to sell.

While many investors prefer market orders to ensure they buy (or sell) as soon as possible, it is important not to generalise as the right approach will differ from investor to investor and stock to stock. In order to make an informed decision about what type of order to place, it is often useful to consider the ‘market depth’. Market depth is the volume of buying compared to the volume of selling at various share prices. Looking at the depth of the market for the stock you’re interested may help you make this decision as it presents an indication of current supply and demand and therefore, which way the share price may go in the short-term.

Orders may be placed at any time but can only be transacted during market hours. Once you have placed an order to buy or sell shares on the ASX, you should be notified after the close of trade i.e. 4:00pm, if you have bought or sold any shares. You should always be notified if you have placed a market order - as these are nearly always transacted the same day they are placed - however you may not be notified if you have placed a limit order that did not transact particularly if you did not place the order that day.

To formalise the completed transaction, you will receive a contract note with details of the completed trade (see buying and selling securities for more information).

Related Questions

Here’s a few questions we often get asked in relation to buying and selling shares.

Is the ASX open on weekends?

The ASX is not open on weekends. The ASX is only open between 10:00am and 4:00pm Monday to Friday (with the exception of National holidays when the ASX does not open).

How do I buy or sell international shares?

We’re often asked how to buy international shares. In many ways, other than the time differences and change of currencies, it is exactly the same process:

  • Find a stockbroker
  • Open an account
  • Fund your account
  • Place an order

You will communicate with your broker in the same way you normally do. If your stock brokerage firm has an office in the same country as the stock exchange on which you want to trade, then your firm will carry out the trade for you. If this is not the case however, your broker will pass the order on to another stock brokerage firm - one that is a member of the exchange on which you want to trade - to carry out the trade for you. This second broker will report back to your broker who will then report back to you. Unless you have arranged to pay in the appropriate foreign currency, you will pay for your shares in Australian dollars an amount equivalent to the value of your trade in the local currency plus costs, converted into Australian dollars.

Historically the only way to buy international shares was to use a broker to transact on an international exchange on your behalf however these days there are alternatives. If you are looking for a general exposure to international shares, you may consider investing in an Exchange Traded Fund (ETF).

What is an Exchange Traded Fund (ETF)?

An exchange traded fund, or ETF as they’re better known, is a pooled investment vehicle through which you are exposed to a portfolio of stocks with one purchase (rather than just one stock as is the case when you invest ‘directly’). While the most common form of investing in this pooled way is through an unlisted fund, ETFs have been growing in popularity due to the ease of entry and exit and their low cost fee structures. As with an unlisted investment fund, they are managed by a professional fund manager.

There are many ETFs that invest in international markets in a a range of different ways. If you prefer to choose your own stocks however, an alternative to investing directly is to buy TraCRs.

What are TraCRs?

TraCRs, or Transferable Custody Receipts, give you a beneficial interest in the international company you want to invest in, through an investment that’s quoted in Australian dollars and traded on an Australian stock exchange i.e. CHI-X. In addition, all dividends paid by the underlying company - Apple (NASDAQ:AAPL) for example - are paid to you in Australian dollars.

How do I buy shares without a broker?

While less common, there are ways to acquire shares which do not require buying shares through a stockbroker. These include:

  • Initial Public Offerings (IPO)
  • Employee Share Schemes (ESS, ESOP, ESP)
  • Off-Market Transfers

What is an Initial Public Offering (IPO)?

Initial public offerings (IPO) are associated with the primary capital raising process. They involve investing in the shares of a company before they've traded for the first time on a stock exchange. As the company undertaking an IPO has no public track record, investing in an IPO is seen as higher risk than investing in an already listed company (all else being equal). In an attempt to compensate for this, companies undertaking an IPO must publish a prospectus for investors. Under Australian law the prospectus must contain information including:

  • Investment Overview
  • Business model
  • Risks
  • Financial information
  • Board and management
  • Terms of securities

What is an Employee Share Scheme (ESS, ESOP, ESP)?

Employee share schemes, Employee share ownership (or option) plans, or Employee share plans are all designed to give employees the opportunity to become part-owners of the company they work for. Sometimes the plan involves employees paying for shares at a discount and sometimes the company pays for the shares (via an loan to the employee). There are a range of different structures these may take but they will result in share ownership without having to use a stockbroker.

What is an Off-Market Transfer?

There is also the ability to acquire shares via an ‘off-market’ transfer. As the name suggests, the transaction does not involves a physical trade via a stock exchange, rather a simple transfer from one name to another. As this suggests, the parties are usually known to each other. Often an off-market transfer is used to gift shares from one person to another (e.g. in the case of an inheritance). No brokerage or commission is paid, but often there are taxes payable such as capital gains tax and stamp duty.

To start the process of finding the right stockbroker, read What is a Stockbroker?

Or click here to find the stockbroker that’s right for you