How to Buy Shares Online. More and more, online shopping is taking over as the primary means of purchasing goods and services. And trading shares is no different. Following on from my article from the 8th March “How to Buy Shares in the Stock Market”, I’ve received numerous queries about how to buy shares online.
When I first started in this industry in 1998, online brokerage was still very raw. In fact, even broadband internet access was not something the average person had at home, where the average connection was 128k. Remember sitting, listening for a dial tone for internet connection?
To place trades, I had to call my broker, give him specific instructions on what to do, and I would manage my positions using a Spreadsheet which I personally kept updated. This clearly meant I needed to know a hell of a lot about what I was doing with my decision making process.
Brokerage services were expensive back then. I remember buying $1,000 worth of shares and paying $80 in brokerage. That’s an 8% cost to trade, requiring a reasonable share price movement before I covered the cost and could make a profit.
Over the last 15 years, we have seen a phenomenal shift away from Full Service brokerage and towards what is referred to as Discount Broking. If you want to buy shares online, then you will most likely be using a Discount Brokerage service.
How to Buy Shares Online – What is Stock Broking?
Stock Broking is a service required to make a transaction on behalf of a client, into the stock exchange. Full Service stock brokers will typically place this directly into the stock market, whereas Discount services are an electronic transaction that does not require human interaction.
The stock market is basically a crowd of investors, all vying to buy and sell. There are professional traders, Mums & Dads, Institutions, and Market Makers who are all the participants in buying and selling for various reasons.
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As a ‘retail client’, you cannot go directly to the stock market and place your order to buy or sell. This is because the Australian Stock Exchange is a regulated market, stating that only licensed participants can transact orders. The cost of gaining the right licenses is extremely expensive, and requires various qualifications along with a large bank balance for fees, services, licence and legals.
Buy Shares Online with a Discount Broker
Fast internet connections, the transition from an Open Outcry trading floor to electronics, and the need for cheaper services has seen the development of the Discount Broking industry.
There are many different platforms you can use to buy shares online. Because the stock market only provides standardized information, each and every platform presents the same information. Just in a different way. The information received includes; Open, High, Close, Low prices, Volume, Company Announcements, and Stock Exchange regulatory announcements.
What makes each platform different is Price to trade, Speed of transaction of orders, Ease of use, and Support. Most platforms will provide a demonstration version which will allow you to test how to use the platform, however, you won’t know the speed of your transaction in the market until you are using live money.
Many traders don’t realize that there are more “Front-end” platform providers, but only a few “Back-end” platform providers. You might start using one brokerage platform, but there could be several brokers that use the same back-end. The only difference between the platforms will be Fees to trade or available functions. Process, support and speed of transaction will all be the same.
Buy Shares Online – For the Beginner Trader
For a beginner trader, if you want to buy shares online with a Discount Broker, then you will most likely require assistance. Discount Brokers won’t give you advice on what to do with your trades, but you will want support in how to place trades and how to use the platform.
Finally, be aware that if you phone a Discount Broker and want them to place the order directly, there may be an additional charge above the fee you would normally pay for transactions over the trading platform. Many people are unaware of this, and question why they have paid higher fees.
Matthew Brown – US Stocks & Options specialist
Client Advisor
Halifax Investment Services
ASIC Australian Financial Services License Number – 225973
Matthew is an Authorised Representative of Halifax Investment Services (Halifax). Halifax provides broker services, including Full Service and Discount Services using multiple trading platforms. For Discount platform services, Halifax charges the same fees for phone service as the online trading platform. If you would like to enquire about Halifax broker services, you can contact Matt on brown@halifaxonline.com.au
