How to Invest in Shares

There are two different means by which you can invest in shares. The first is from the company itself during the very first instance of shares being offered in a float. The term float refers to the time a company first goes public in order to raise money by offering its shares to buy. After the float, shares can then be purchased from other investors and traders from the share market. Shares listed on the ASX can only be purchased or sold through a share broker.

Generally speaking, most share brokerage firms will require that you provide funds prior to them accepting your first transaction to buy shares. You also may be required to set up a client account or trading account before you can begin trading shares. Sometimes this can take up to a week complete, but can generally can be done in about 24 hours. Many share brokers will want you to establish a money management account with a financial institution or bank to which they have access. The reasoning behind this is for ease of facilitation when transferring funds either to pay for your shares purchases or to allocate the proceeds to you from sales of shares.

When placing a transaction to buy or sell shares, there are two main ways to tell your broker what price you will accept. You can tell your broker you want a “market” order, this means you will accept a share price at or near the market price of the shares at the time you place the order. The other method is called a “limit” order, when you tell your broker you want to use a limit order you are telling him or her the highest price you are welling to pay or the lowest price you are willing to sell.

Before placing your order with the broker, make certain you are fully informed, also after you place the order make sure that your order is confirmed. Ask your broker for the current market price and write it down, then tell your broker the details of your order (for example, the number of shares to buy or sell, and the price at limit or at market). The broker should then repeat your order details back to you. Online stock brokerage firms provide order confirmation screens that allow you to double check your transaction details before the order is processed. Most full-service brokers are very busy with many clients and so they will not necessarily call you as soon as your order has been filled, however, if your order is placed very near the current market price it is likely to be filled quickly.

Investing in shares can be a very exciting experience the first few times you make a share purchase. Just make sure you don’t let your excitement and emotions get the best of you, do your research and double check everything before you call your broker or enter your order online. It is very frustrating to make silly mistakes such as entering the wrong type of order (market or limit) or entering the wrong number of shares to buy, or even selling when you wanted to buy. Take your time and think logically about your share transaction and you will be unlikely to commit any of these beginner mistakes.