How to buy shares?
Once you’ve made the decision to invest in the sharemarket, the next question you will ask yourself is how to buy shares?
There are a number of ways to purchase shares in a company.
The first involves buying shares that are offered in a float, when a company first lists on the stock exchange, or, in fact, when they relist.
An example of this is the Myer float. Myer was previously listed on the stock exchange before the company was sold to a private equity consortium. It will relist soon, and members of the public will once again be able to become owners of the company.
A float occurs when a company is looking to raise money by offering its shares to the public.
The second way to purchase shares is via the sharemarket, from other investors. Shares listed on the Australian Stock Exchange (ASX) are only able to be bought and sold through an authorised dealer, known as a broker.
Most brokers these days require people to provide funds before they will accept your orders to purchase shares. They may also require the establishment of a trading account which can be set up within as little as 24 hours. Furthermore, brokers will usually require the establishment of a cash management account with a financial institution, to which they have access. This enables the transfer of funds to cover the purchase of shares, as well as enabling the flow of proceeds from the sale of shares.
Given the growth of online banking, many people these days are using the discount online broking service provided by their banks. This allows investors the convenience of keeping their accounts under the one roof, and often banks will reward clients’ loyalty through cheaper brokerage.
Anyone considering investing in the market should consider consulting their bank to see what offers are available.
When placing an order to buy or sell shares, there are a number of options you may consider in terms of what price you are willing to accept for a stock.
The first type of order is known as ‘at market’. An ‘at market’ order means that you are willing to accept the prevailing market price at the time you are placing the order, subject to the availability of shares.
The second type of order is known as an ‘at limit’ order. In this case you will inform your broker of the highest price you are willing to pay for the stock, or, the lowest price you will sell. Orders where a ‘trigger’ or ‘execution’ price is set are known as conditional orders.
Upon placing an order with a broker, it is important to ensure that you are fully informed and that the order is confirmed. It is wise to make note of important details of your order, in particular, the current market price, the amount of shares you want to purchase, the type or order, and the price you are willing to pay of the order is ‘at limit’. Your broker should then read the order back to you to confirm the details.
For those who are trading online, via an internet based stockbroking website, confirmation details will allow you to double check your order before it is processed, as well as provide you with confirmation once it is.
Once the transaction is executed or ‘filled’ in the sharemarket, you will be sent a contract note. The contract will outline the details of the trade, including the number of shares transacted and at what price