The Motley Fool

How To Buy Your First Share – A Beginner’s Guide To Investing – #AskAFool Video

“Ok, we want to start investing… how do we go about actually buying our first shares?” We hear this question a lot from people who are in the early stages of learning about investing. It’s a perfectly valid question, so we put it to members of our investing team to discuss.

VIDEO TRANSCRIPT

RYAN: Scott, how do you go about buying your first share?

SCOTT: Yeah yeah, it’s one of those things where I got to say, for myself, I can remember when I started investing, it feels like it’s a difficult thing to do. An online broker is, it’s a new system a new process, lots of jargon and stuff we don’t otherwise know. Once you’ve done it twice, it’s actually really, really easy, so the first thing I’d say to people is don’t be dissuaded. That’s not necessarily the how, but it’s kind of like don’t get to that site and go, “It’s all too hard, I can’t possibly do it!” Even if it feels a bit unusual, a bit foreign, first up. It will get really easy, really obvious very quickly, so don’t be discouraged. You want to find, first thing you do is A, you got to choose the company that you want to buy. So let’s assume that’s been done. You want to find an online broker, now you can use a full service broker, but they’re very expensive for brokerage and most people don’t need that extra cost. It comes with some extra advice sometimes, some people will find that useful. We generally say, stick with an online broker, make your own decisions. And you can trade shares for as little as $14 or $20 a share. For larger amounts of money, and frankly as low as $10, if you buy less than 1 000 bucks worth of shares with say, someone like CommSec. You want to open up an online brokerage account. It’s normally a four or five page form, we’ve all filled ’em out. Basically like a bank account, is what you’re doing. You’re putting your personal details in, and you’re doing a 100 point ID check, and they’re giving you a brokerage account, like a bank account, you can use to buy and sell those shares. Once you’ve setup that account, you’re going straight to the tutorial and someone like a CommSec again, I keep using ’em, I’m a customer but I don’t own the shares. They have really great tutorials, really great customer service, really get stuck into that stuff. You’ll find it’s really, really easy once you get started. You put the money in an investment account, either your own account or an account with the broker. You then decide how much you want to to spend to buy those shares and you jump on in, and which shares you want to buy. And it’s simply a matter then of saying, which company, put in the company code. Put in the amount of money or price per share you want to pay, and the number of shares you want to buy. And the rest happens as if you’re buying something from Amazon.

RYAN: So really I guess, the summary of that is to select a broker and, sorry can you explain the difference between a, I guess, an online broker and a full advice broker.

SCOTT: Right, so online brokers are what they call execution only. You go in there just to, as if you’re shopping again at Amazon, just to place your trade. A full service broker is something more akin to a personal shopper. Where you’re saying, “I need to find a new suit jacket, “can you come and help me, do the transaction for me?” They going to charge you more, because they’re giving you extra help. So execution only is online, that’s why it’s cheaper and easier. The full service, is the everything thrown in, including the kitchen sink. It can be useful if you find the advice useful, but it’s very, very expensive, so be careful, you don’t get caught in that trap. Spending $100 per trade, when you could do it much more cheaply, doing execution only online.

RYAN: Makes sense, so really you want to select a broker, deposit money into that brokerage account.

SCOTT: Correct.

RYAN: Select the share to buy. And invest for the long term.

SCOTT: Pretty straight forward.

RYAN: Excellent, Thanks Scott.

SCOTT: Thanks Ryan.