Sunday, May 31, 2009

Stockmarket Education: How do you buy shares?

Like a piece I wrote a few days ago called Stockmarket Education: What is a Share? the following was inspired by a Google search that reached this blog "How to buy Shares?"

Another bloody good question.

Well, unfortunately one of the first things you will need to do is get yourself a stockbroker.(I say unfortunately because I don't particularly have a high opinion of them) The most popular ways of getting yourself access to one these days is online. One can do this either by hooking up with a dedicated broker that just deals in sharetrading or through your own bank, which in most cases in New Zealand and other countries has a broker service attached to it.

These online brokers, some of which also have telephone services, offer either a "self service" level of brokerage where you do all the research, and selection of shares and execute the buy or sell yourself ranging to a "full service" broker that will do all of the above for you and more if you trade enough!

Beware, and it is only my personal opinion and experience here, full service brokers will try and push their favourite shares on you and their research is more than often than not biased and sometimes suspect in its accuracy and/or knowledge of business or the company being researched. Their loyalties lie with the brokerage company first, not you.

That is why I prefer to use an online broker and do the rest myself. Pick the level of service that is right for you.

The only extra services that I get with my online broker, ASB Securities are:

1. A website with a portfolio and watchlist function.

2. Live share prices with limited market depth - a list of buyers and sellers and the prices being offered and asked.

3. Brief bios of the NZSX companies listed on the NZX - financial ratios, broker ratings.

4. A link to a cash management account through ASB Bank that makes it easy to transfer funds to facilitate share purchases.

When making a buy or sell of a share online you can either sell "at market" (what buyers or sellers on the open market are prepared to pay or sell for) or a pre-determined share price set by you.

The best part of buying online and doing it yourself is that you can do the research at your leisure and set a a buy or sell in off-market hours and the trade will then be made at the price you requested.

The cost for the self service online level of brokerage varies from broker to broker but trading using my online broker, is around NZ$30.00 for a trade of up to NZ$10,000 and at a level of 0.3% brokerage over that. Large trades can be negotiated.

You can find a list of Australian brokers here and New Zealand ones here.

Good luck!

Stockmarket Education

Stockmarket Dictionary
Stockbrokers: What you should know before choosing one
10 Basic questions to ask before investing
How the Stockmarket works
Understanding Risk
Watch Your Risk Tolerance
Stockmarket Education: What is a Share?
What Moves the Stockmarket?
7 Signs of Shareholder Friendly Management
Financial Media For Investors
Dividends in detail

Related Links

NZX - How to Invest


Recommended Amazon Reading

How the Stock Market Works: A Beginner's Guide to Investment
How the Stock Market Works: A Beginner's Guide to Investment by Michael Ivan H. Becket
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c Share Investor & Shareinvestor.net.nz 2009