How to see who is buying and selling shares

To buy and sell stock, you usually need to have an account at a brokerage firm, also known as a broker-dealer, and give orders to a stockbroker at the firm who will execute those instructions on your behalf, or online, where the firm's technology systems route your order to the appropriate market or system for execution. The kind of firm you use will determine how you convey your orders, what types of services you have access to, and what fees you pay to trade your stocks. In general, the more services the firm offers, the more you'll pay for each transaction. Brokerage firms may also charge fees to maintain your account.

Full-service brokerage firms provide research as well as trade executions and may offer customized portfolio management, investment advice, financial planning, banking privileges, and other services. Discount firms offer fewer services but, as their name implies, generally charge less to execute the orders you place. The trick is to find the balance that's right for you. On the one hand, you don't want fees to cut into your returns, but on the other hand, you may benefit from more guidance. You'll want to check what effect the amount you have to invest—or what are known as your investable assets—will have on the level of service you receive and the prices you pay.

You can place buy and sell orders over the phone with your broker or you can trade stocks online. Many firms offer full account access and trading through their Web sites at lower prices than they charge for phone orders. If you do trade online, it's important to be wary of trading too much, simply because it's so easy to place the trade. You should consider your decisions carefully, taking into account the fees and taxes as well as the impact on the balance of assets in your portfolio, before you place an order.

There are ways to buy stock directly through certain companies without using a broker. For example, if you used a broker to purchase a share of stock in a company that offers a dividend reinvestment plan, or DRIP, you can choose to buy additional shares through that plan. DRIPs allow you to automatically reinvest your dividends and periodically write checks to buy more stock. Some companies also offer direct purchase plans, or DPPs, that allow you to buy shares directly from the issuer at any time.

DRIPs and DPPs are usually administered for the company by a third party known as a shareholder services company or stock transfer agent that can also handle the sale of your shares. Transaction fees for DRIP and DPP orders tend to be substantially less than brokerage fees.

Find a broker, buy and sell shares directly or indirectly

11 minutes

The most common way to buy and sell shares is by using an online broking service or a full service broker.

When shares are first put on the market, you can buy them via a prospectus. You can also buy through an employee share scheme, or invest indirectly through a managed fund.

How investing in shares works

Buying shares (stocks, securities or equities) makes you a part-owner of a company. As a shareholder, you can get dividends and other benefits.

You can own shares yourself, or pool your money with others through a managed fund (a collective investment).

If you're new to shares, visit the Australian Securities Exchange (ASX) education centre for information and online seminars.

Using a broker to buy and sell shares

You can choose to use an online broking service or a full service broker.

Online broking service

You open an online trading account and make your own investment decisions.
Because you do it yourself, fees are lower. You pay a fee each time you buy or sell shares — starting at around $20.

Full service brokers

The broker does the trading for you, and can advise you on what to buy or sell. They must have a reasonable basis to recommend something to you, and disclose any interest they have in it.
Fees are a percentage of the value of a trade. Typically, the larger the transaction, the lower the percentage you pay. Most brokers charge a minimum fee. For example, the fee on a transaction of up to $5,000 may be 2.5%. For a large trade, it may be 0.1%. So, small trades worth a few thousand dollars can be relatively expensive.

Find a broker

Use the Australian Securities Exchange (ASX) find a stockbroker tool to locate a broker that suits your needs.

Buying shares directly

Initial public offerings (IPO)

Companies may offer new shares to the market as a way of raising capital. This is called a 'float' or an 'initial public offering' (IPO).

Get the prospectus

To decide whether to invest in an IPO, read the prospectus. A prospectus contains details about the company and the float. It tells you:

features of the shares (securities) on offer, how many are for sale, how to apply to buy
company information, its operations and financial position
risks associated with the offer

A prospectus must be lodged with ASIC. To check this, see ASIC's OFFERlist database.

Prospectus checklist

Things to look for in a prospectus:

Sector — How well do you understand the sector the company operates in?
Competitors — Who are the company's competitors? How does it compare to others in the sector?
Financial prospects — Look at the financial statements and cash flow. Is it generating revenue and making a profit? If not, why? Many companies do not make a profit during their start-up phase. If this is the case, when does it expect to make a profit?
Profit estimate — Are the assumptions underlying the profit estimates reasonable? For example, demand for goods or services produced, or assumed economic conditions. What if they vary? Consider your investment time frame and how this would affect you.
Relative value — What is the price-earnings ratio (P/E ratio) of the company? How does this compare to its competitors? The P/E ratio will help you assess whether the IPO is a fair price. Generally, a higher P/E ratio means investors expect higher growth. During times of higher market volatility, such as COVID-19, past earnings may not be indicative of future earnings. It can also be more difficult to forecast future earnings. So the P/E ratio may not be a reliable indicator. Look at other metrics.
Dividends — Does the company intend to pay a dividend? If so, when?
Purpose of float — How will the company use the funds raised through the IPO?
Licences — Does the company have all the necessary licences and permits to operate? If not, when?
Directors — Are the company directors and managers paid what you would expect for the size and industry? Do they have appropriate skills and experience? Check they are not on ASIC's banned and disqualified register.
Advisers — How much are independent advisers paid as a percentage of funds raised by the IPO? If the fees exceed 10%, consider whether this is reasonable. The more money paid to advisers, the less available to the company.
Risks — Is the risk disclosure section detailed and specific to the company? Or does it use vague language and generalised disclosure (such as saying the share price may go down)? This could mean the company is not telling you everything you need to know.

If there's anything in the prospectus you don't understand or are unsure about, talk to a broker or financial adviser before you invest.

Crowd-sourced funding

Crowd-sourced funding (CSF) enables start-ups and small to medium-sized companies to raise public money to finance their business. This is also known as 'equity crowd funding' or 'crowd-sourced funding of shares'.

Different from crowd funding

Crowd-sourced funding of shares is not the same as:

Donation-based crowd funding — This is typically used by artists or entrepreneurs to raise money for one-off projects.
Investment-based crowd funding — This may involve investing in a managed investment scheme. Or it could be offered by someone who doesn't need an Australian financial services (AFS) licence.

How crowd-sourced funding of shares works

There's an annual investment cap — You can invest up to $10,000 per year in a company in exchange for shares.
You need to understand the risk warning — If you invest through a CSF website, you need to declare that you understand the risk warning on the company website and offer document.
Intermediaries need a licence — Check that the CSF website operator has an AFS licence on ASIC Connect's Professional Registers. Look at 'licence authorisation conditions' to make sure it can provide CSF services.
There's a cooling-off period — You have five business days to cancel if you decide the investment is not for you. During this time, you can withdraw your application and get a full refund.

Risks of crowd-sourced funding

Lack of company track record — Some businesses using crowd-sourced funding are in the early stages of development. So there's a higher risk that they will be unsuccessful and you could lose the money you invest. Do your own research on the company. Use the CSF portal to ask questions about the company or investment.
Shares may fall in value or be hard to sell — The value of your investment could fall. Your returns may decrease if the company issues more shares. Your investment is unlikely to be 'liquid'. So if you need to get your money back, you may not be able to sell your shares quickly — or at all.
Fraud or insolvency — You could lose the money if the website operator handles your money inappropriately or becomes insolvent.

You may get shares, or the opportunity to buy shares, via an employee share scheme at your workplace. You could get a discount on the market price, and may not have to pay a brokerage fee. Check if there are restrictions on when you can buy, sell or access the shares.

Managed fund

When you invest in a managed fund, you buy fund 'units' and pool your money with other investors. A professional fund manager buys a range of shares and other assets on your behalf, diversifying and reducing risk.

This is a convenient way to buy shares, as someone else makes the buy and sell decisions. Depending on the type of fund you choose, fees may be higher than on other indirect investments.

Exchange traded fund (ETF)

An exchange traded fund (ETF) invests in a group of shares that make up an index, such as the S&P/ASX 200. An ETF allows you to diversify your portfolio without having a lot of money to invest.

You can buy or sell ETFs just like any other share. ETFs generally have lower ongoing fees than managed funds. But if you want to invest small amounts regularly, you’ll pay a broking fee on each contribution.

Listed investment company (LIC)

A listed investment company (LIC) uses money from investors to invest in a range of companies and other assets. It pays dividends from earnings.

LICs generally have lower ongoing fees than managed funds. They may not suit you if you want to invest small amounts regularly, as you pay a broking fee on each contribution.

CHESS Depositary Interest (CDI)

A CHESS Depositary Interest (CDI) allows shares of a foreign company to be traded on Australian markets, such as the ASX.

When you buy a CDI, you get the financial benefit of investing in a foreign company. But the product title is held by a depositary nominee company on your behalf. Generally, you get the same benefits as other shareholders, such as dividends or participation in share offers. Usually, you cannot vote at company meetings, but can direct the depositary nominee to vote on your behalf.

To find out more, see the ASX publication Understanding CHESS Depositary Interests.

Types of buy and sell orders

Limit order

Used when you want to buy or sell your shares at a specific price, or better. If buying, you set the maximum price you’re willing to pay. If selling, you set the minimum price you’re willing to accept. A limit order may not execute. It can be placed for the day, or left open until cancelled or expired.

Market order

Used when you want to accept market price for a share at the time you place the order. If buying, you pay the highest asking price. If selling, you accept the highest bid. A market order is more likely to execute. But you effectively pay a transaction cost when you cross the bid-ask spread.

‘Good til cancelled’ (GTC) order

Stays open in the market until cancelled, giving you the benefit of order queue priority. The risk is it could expose you to significant price swings, for example due to overnight international news and market moves. So you could experience a loss. The risk is higher during times of greater market volatility, such as COVID-19.

‘Good til expiry’ (GTE) order

Stays open in the market until the expiry date, giving you the benefit of order queue priority. Expiry can be a date you nominate, or your broker’s default, commonly set at 20 trading days. The risk is it could expose you to significant price swings, for example due to overnight international news and market moves. So you could experience a loss. The risk is higher during times of greater market volatility, such as COVID-19.

‘Good for day’ (GFD) order

Stays open in the market for one trading day. The unexecuted portion of the order, if any, is cancelled at end of day. If all or part of your order doesn’t execute, you can put it back on the market next trading day. This means your order will avoid exposure to overnight price swings and unexpected loss. But your order will get a new place in the queue, according to price-time priority.

Selling your shares

How to sell your shares

If you hold shares directly, you can sell them by placing a trade online or contacting your broker. You pay a fee each time you make a trade.

You exchange the legal title of ownership when you sell shares. Settlement for the sale and transfer of ownership happens two business days after the trade (known as T+2). After settlement, the sale proceeds are transferred into your bank account.

If you hold shares indirectly through a managed fund, you can sell them by selling your units in the managed fund. Before you do this, check if there are any withdrawal costs. Keep a copy of the trade confirmation or receipt for tax purposes.

Market volatility and trading halts

Be aware that, during times of higher market volatility like COVID-19, share prices may change dramatically. It’s very hard to time the market, so stop and think before you trade. If you buy or sell too frequently, you’ll pay more in transaction costs which may not be worth it.

Sometimes a trading halt is placed on shares. For example, to allow the market to digest new information about a company. In this context, prices could fall and volatility may increase. You may not be able to sell your shares when you want, or at a price you like.

When looking at share performance, look beyond recent events. Markets typically recover over the longer-term.

A company you own shares in may offer to buy back some of its shares. If you receive a buy-back offer, you can choose to accept or decline it. Before you decide, consider:

Why does the company want to buy back its shares? For example, it may want to distribute money back to shareholders. Or it may be reducing administrative costs by buying out holders of small parcels of shares.
Is now a good time to sell? If you're happy with the company's prospects, you may prefer to keep your shares. If you'd rather sell, selling via a buy-back offer means you won't have to pay a brokerage fee.

Unexpected offers to buy your shares

You may receive an unexpected letter from someone offering to buy your shares. Before you accept it, check:

Who is making the offer? Check the offer is from a legitimate company. Use ASIC Connect to search for the company's details — search within 'organisation and business names'. Then verify if they sent you the offer.
Why? Is something about to happen to your shares? Check company announcements on the ASX or contact your broker, in case you missed important market news.
What are your shares worth? Get an up-to-date market price for your shares and compare it with the price in the offer. Get this from the company, the ASX or your broker.
How long do you have? An offer letter must be dated and give you at least one month to accept.
How are you paid? How often are instalments paid?
Are your shares sold on the ASX or another exchange? If so, the offer letter must state the market price on day of offer. If not, it must give a fair estimate of share value and explain how it arrived at that price.

It is not illegal to make an unsolicited offer to buy your shares. It is against the law to mislead shareholders into making or accepting an offer. If you get an unexpected offer you believe is misleading, visit the ASIC website or call 1300 300 630 to report it.