The Motley Fool

How do I buy shares?

It’s one thing to realise that buying shares is a smart thing to do. But answering the question ‘How do I buy shares?’ is something else altogether.

When you haven’t bought shares before, the whole thing can be really daunting. Daunting enough that some people are easily put off.

But don’t be. It’s easier than you may think, even if you’re a complete novice.

Let’s assume you’ve already decided which shares to buy. (If you haven’t, you can sign up here to get our best offers.)

The next step is to find somewhere you can actually buy those shares. And the best way to think about it is just as if you’re buying a television online.

Stick with me as I explain. You’ve done your research and you know which telly you want. Now you have to decide where to buy it.

And shares are just the same. The equivalent is that you’ve decided to buy shares in Jester’s Jokes and Japes (ASX:HAHA). The next question is ‘Which broker do I use’?

Stockbrokers, for our purposes, are simply retailers of shares.

And, just as online shopping has changed retail, online brokers have changed how we buy and sell shares. Buying shares online is usually cheaper and easier — and can be done from the comfort of your own home.

And choosing a broker is much like choosing which online retailer you’ll buy your telly from.

Do you recognise the broker’s name? Can you trust them? Is the website easy to use? Can you find help when I need it? And how much will you have to pay?

And, like buying a product online, it’s not just one of those factors that matters, but the combination.

You wouldn’t buy just from the cheapest retailer, if you’d never heard of them. Or if you couldn’t easily contact customer service. Or if the website was hard to use.

But nor do you want to pay top dollar if you’re not getting value for money.

So here’s what I’d suggest. Google ‘online stockbroker’. Check out the websites and costs of three companies you’ve heard of that pop up in that search. Then pick the one that has the site you like best — including a thorough help section and/or online tutorials — as long as you’re not paying more than $20 or $25 per trade. As a Foolish investor, you won’t be trading too often, so paying a few dollars more per trade isn’t going to hurt you, and you’ll feel more confident in the process.

Then, sign up for an account. There’ll be a few bits of paper to sign — sorry, we can’t help you avoid that! — but unless you change brokers, that’ll be the last time you need to do it.

And if your broker offers you a linked bank account, take it. Yes, be careful of fees, but having a seperate account is vital, and here’s why: it’s too easy to spend money that you’d otherwise invest, whether that’s money you’re intending to save, or dividends you’re planning to reinvest. But if you have your dividends paid into that account, and regularly transfer savings into it, you’ll be less likely to raid it for the latest toy or fashion purchase!

And that’s it… once the accounts are set up, you’re ready to buy!

Each broker’s website is different, so we won’t try to tell you which buttons to click. But generally all you need is the company’s ASX code and the price you’re prepared to pay. And use a limit order. You can find a little more information here.

And with that, you’re on your way to building real, lasting, life-changing wealth. Just make sure you follow up your first investment with another. And another. And another… 

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Scott Phillips has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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