How To Buy Shares? Guides for Beginners.

1. Howto buy shareson ASX? The stockmarkethas a complex mechanismof buyingand sellingoflistedsecurities.However,inorder totransactinthese securities,it’s nota mustfor anordinary investorto knowalltheintricaciesof how this mechanismworks.However,hemustknowthe front-endprocedure tobuyor sellthesesecurities inordertotransactthem inanorderlymanner. Image Source:Copyright©2020KalkineMedia Givenbelowisanorderly procedure following whichaninvestor canbuy/sellshares onthe ASX. 1.Chooseabroker The very first thing one needs to know is that any individual cannot transact directly with a recognisedexchange such as ASX. In order to make a purchase or sell existing securities, one needs toplace these ordersviaa stockbrokerthathastobe affiliatedwiththe stock exchange of interest. Thisbrokeracceptsbuy/sellordersfromitsclients(investors/traders)androutestheseorders tothe exchangewhere they arefinally executed.Someof the renownedbrokers inAustraliaare BellDirect,CanstarCommSec,etc.While choosinga stockbroker,an investor needsto keep a few points inmind: the number of affiliated exchanges withthe broker,thecommission charged,technological infrastructure,etc. Read More:5TipstoselecttherightStockBroker

2. Openanaccount withthebroker ToopenabrokerageaccountinAustralia,oneneedstobeatleast18yearsoldandan Australianresident.To signup,you’llbe askedtosubmita few documents suchas yourtaxfile number(TFN),bankaccount details,proofofID,etc. Intoday’s fast-paced world,itusuallytakes only a fewhours tobe approvedforthe account opening. Also,onecouldbe askedtodepositaminimumsum to opentheaccount,which varies frombrokertobroker. Once theaccounthasbeenopened after fulfillingalltheformalities,an investor can start planning tobuysecurities ofhisinterest. Selectionofsecuritiestobebought As theaccount hasbeen opened now,an investorcanstartplanningwhich securities/shares to buy. Hemay usefundamentalanalysisor technical analysisasperhis knowledge. Whatevermay be the approach, it is recommended to have a medium- to long-term view about the shares and veryshort-term trading.Also,intradaytradingshouldbeavoidedforanewbie. Some stockbrokers also provide research-based recommendations for their clientswhich could alsobe lookedupon.However,one thingtonoteis thatthese recommendationscouldbefree, butthe riskis bornecompletelyby investors and therefore,an investormustnotmiss outon duediligence. There are two categories of brokers: a full-service broker such as Morgans and online brokers suchasBell Direct. Orderplacement Once thestockhasbeen selected,theinvestor now needstoplace the order withthe brokerto buy those shares.Thebrokerthen routesthese ordersto the respectivestockexchange,where they are electronicallymatchedbetween buyersandsellers to transactattheir respective prices. There are differenttypesoforderswithdifferentfeatures to facilitatesomeconditionalorders. The mostcommonly usedisamarketorderwhere theinvestor buys/sellssecurity atthecurrent marketprice,whateveritmaybe. However,ifaninvestor is notwilling tobuy or sellatthe currentmarketpriceandwants a better price,he may placebuy/sellstop order.Thatallows the investors todecide their price for the transaction and the order will only be executed if that security comes to that price, else the orderstandscancelledattheendofthetrading session. ShareSettlement Itis importantfor aninvestortoknowthatthe sharesettlementperiod inAustraliais T+2days, whichcouldvary inothercountries.The clearingandsettlementprocessisameans by which thetransfer of sharesandtransferoffunds (between buyer andseller) takes place.

3. ThedateoftradeexecutioniscalledTDayandthefollowingdaysarecalledT+1andT+2– which are the days when the clearing and settlement takes place. On T+2 day, that is two days after thetransaction,an investor’smoneyisdebited,andsharesare credited (incaseofa buyer) –viceversainthe caseofaseller. In a nutshell, an investor does not receive shares immediately after the transaction, but two daysafterthesuccessful transaction. Read More:UnderstandingTheRoleOf AStockBroker? Disclaimer: The principal purpose oftheContent istoeducateand inform.TheContentdoes notcontainorimply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such.Kalkine Mediaisneitherlicensednorqualifiedto provideinvestmentadvice through thisplatform.Users should maketheirownenquiriesaboutanyinvestmentsandKalkine Mediastronglysuggests theusers to seekadvice froma financialadviser,stockbrokerorotherprofessional