Welcome to a step by step guide on investing in the ASX.
Whenever you're watching, now is a great time to get started.
First thing you'll need is a stock broker.
In Australia, the big four banks all run stock broking services, called Commsec, NABTrade,
ANZ Share Investing and Westpac Online Investing.
Commsec is the biggest in Australia and has the best app and desktop interface.
Each of these brokers make money by charging you fees everytime you buy or sell a share.
This can begin from $19.95 per trade under $10,000 or a percentage of your trade above
that.
You can reduce this by using smaller brokers such as CMC Markets which has lower fees and
lower trade percentages or avoid trade percentages altogether through another broker called Selfwealth
which has a flat rate $9.50 per trade regardless of the trade size.
There are brokers in America like Robinhood offering free brokerage, but have not made
the move to Australia yet.
Whatever broker you choose, you'll be asked to create a HIN number or Holder Identification
Number when you register.
This number links you to the shares you own even if your broker goes bankrupt, so that
your ownership is still identifiable.
You'll get a letter in the mail alerting you of your new HIN number once you sign up and
you can transfer your shares to another broker using that number afterwards.
You can also have multiple HIN numbers with different brokers if you choose.
It can take up to 5 business days for the full signup process to clear, and you wont
be able to do any trades until this finishes.
It can feel like a long wait while you watch shares that you like go higher and higher.
Now that you've set up an account with a broker and got your HIN number, you are ready to
buy.
All brokers will set up a trading account for you.
This is the account with which you use to fund your share purchases, and the account
that money received for selling shares is put into.
It has an account name, BSB and account number just like any other bank account.
For brokers like Selfwealth, you'll need to transfer funds to your trading account the
day before you buy.
Just transfer using the BSB and account number like you would for any other bank account.
For bank brokers, they provide T+2 process, which allows you to buy a share without any
funds yet, and give you two days to transfer sufficient funds to your trading account.
The second business day after your trade date is when your trading account is debited to
pay for your investment.
This also lets you buy and sell shares on the same day without any funds, and after
the second business day, only the difference is deducted or credited in one transaction.
T+2 also applies to selling shares.
Sell your shares and you'll receive the funds in your account after 2 business days.
If your broker does not offer T+2, selling shares gives you funds instantly into your
trading account.
Before you buy anything, you need to do some research.
You can try using the ASX website for all basic information presented in an unbiased
way.
But it is clunky and not very user friendly.
There are plenty of subscription based websites offering insights and opinion articles but
I don't find them particularly useful or worth your money.
The best free website for researching about ASX stocks is Marketindex.com.au.
It has a page listing all the ASX companies by market capitalisation which is just a fancy
way to saying the company's size.
Each company is identified by a unique 3 letter combination ticker usually derived from the
initials of the company name.
Clicking on the ticker provides everything you need to know about that company from historical
data, dividend information, company announcements and director transactions.
Speaking of director transactions, Marketindex also has a page dedicated to this and is an
excellent way of determining which company has a positive future outlook from a company
insider.
Another free online resource you may accidently come across is the Motley Fool.
They post a lot of clickbaity articles on "The next big Share to buy!" sort of posts,
and should only be used as an introduction into more research into any particular share.
Now once you've determined the right shares to buy, the actual buying process is very
simple.
Click on the Place Orders or equivalent page and type in your 3 letter company ticker.
Set the order type to Buy, set the price and the quantity that you want to buy and the
page will work out the total price plus the brokerage.
The final setting is the price type, which is either set to Market or Limit.
Limit means to purchase the shares at the exact price that you've specified.
Market means to buy the share at the cheapest price available right now by a seller.
You can see how much that is by clicking on Market Depth to show the sale prices by sellers,
and purchase prices for buyers.
For casual traders, I recommend always using Limit as the price type as the Market setting
tends to only be used due to desperation.
You can also add in an expiry date which prevents your order being filled if it takes too long
for the market to meet your price.
Once your order is met, and the transaction is completed successfully, you will get an
email notification and a PDF statement which goes to your accountant at tax time.
If you are using the T+2 process, make sure sufficient funds land in your trading account
in 2 business days.
Congratulations, you are now a shareholder.
Continue to keep an eye on your investment and dont panic if the price goes lower than
what you paid.
Investing in shares is a long term play and daily fluctuations mean nothing in the overall
picture.
Shares also provide income back to you for owning them for long enough.
This is called dividends and is paid to you as a dollar amount per share that you own.
For example, CBA paid $2 per share in early 2020.
If you owned 100 CBA shares, then you'll receive $200.
These shares are also 100% Franked, which means that tax is already paid for you at
the Company tax rate of 30%.
This means that CBA actually paid you $285, just that the $85 goes to your ATO account.
If you have a tax rate of less than 30%, then the ATO will refund you a proportion of the
tax that CBA paid.
If your tax rate is 19%, then you'll get $31 refunded.
But if you have a tax rate of 32%, then you just pay the difference in tax to the ATO,
which works out to be around $5.70.
Shares can also be classed as growth shares, where profits are not used to pay dividends,
but used to reinvest into the company.
This means that while you receive no dividends, the potential for the share price is increase
is much greater and you are rewarded only when you sell.
Despite this, the price can also go down so ensure that you choose the right growth share.
In a couple weeks time, you should receive a letter in the mail notifying you of your
new share ownership.
This comes from the Share registries and the main ones are Link Market Services, and Computershare.
These letters will prompt you to create an account with them to receive all correspondence
by email, keep track of the shares that they manage, and most importantly direct them to
make dividend payments to a specific bank account rather than mailing out cheques.
You can set your trading account as the dividend recipient so that any dividends that come
in can also be invested.
Dividends have a cut-off date known as the ex-date where if you are the owner of the
shares on that day, then you'll receive a dividend payout on the payout date, usually
a month later.
ASX companies usually pay out dividends twice a year, and this is announced around 6 weeks
before the ex-date.
When this happens, the share price will usually go up as the dividend hunters buy the shares,
and drop immediately after the ex-date as the same people sell those shares to buy other
shares with upcoming dividend ex-dates.
You dont need to hold the shares until the payment date to get the dividend.
The Marketindex website can also show the upcoming dividends if you choose to trade
that way.
Finally, I'll finish off this guide with some words of advice.
Investing in the long term is a much better strategy than short-term gains.
Dont get caught up in the emotion of selling shares when it has fallen in price to avoid
more losses.
In general, a big crash in the stock market is followed by an equally big recovery afterwards,
dont sell early and risk missing out on the market recovery.
Also, dont invest more than what you can afford to lose.
Playing the stock market is taking risks with your money and if you cant afford to pay your
bills, rent or mortgage after investing in shares, then dont invest at all.
The stock market is only for investors with spare cash that are otherwise just lying around
doing nothing.
And thats my guide on investing in the ASX.
I made this video because I was looking for a guide on investing in Australia and all
I could find were videos talking about strategies and goals, rather than actual how tos.
Hopefully this gives you a better understanding before you dive into the stock market.
Be sure to subscribe so I know that it was all worth it and get me to make more videos
like this.
Thanks for watching.