Different ways to invest in shares
Investing in shares
There are many ways to invest in shares - each has pros and
cons. Before you invest, you should understand the benefits and
risks of each option and decide which method suits your needs.
Buying individual shares
You can buy individual shares through a full service broker, an
online trading account or from the company itself when it offers
shares through a public float.
You have control over the shares you buy and sell. However you
must be prepared to put in the time and effort to track their
performance and watch the market to make your own buy or sell
decisions. For more information, see how to buy and sell
Buying shares via a Listed
Investment Company (LIC)
A listed investment company uses money from investors like you
to invest in a range of companies and other assets. It pays you
dividends from its earnings and hopefully its shares increase in
value over time.
LICs often have lower ongoing costs than managed funds
but may be less suitable if you are investing small amounts
regularly, due to the stock broking fees on each contribution. A
LIC's share price may not exactly reflect the value of its
Buying shares via an Exchange Traded
An Exchange Traded Fund (ETF)
invests in a basket of shares that make up an index, e.g. the
ASX200 Index. An ETF allows you to diversify
your portfolio without having a large amount of money to
You can buy or sell ETFs just like any other share. They
generally have lower ongoing costs than managed funds. But they may
be less suitable if you are investing small amounts regularly, due
to a stock broking fee on each contribution.
Buying shares via an index
An index managed fund is a type of managed fund that buys shares to mirror a
particular share market index. For example, an Australian shares
index fund may invest in a wide range of companies and property
trusts listed on the ASX and aim to match the return of the ASX300
index. You gain a diversified portfolio and pay lower management
fees than an active managed fund.
Compare fees and performance of different funds.
Managed funds fee calculator
Buying shares via an active
When you invest in a managed fund, your money is pooled together
with those of other investors. A professional fund manager then
buys shares and other assets on your behalf and tries to outperform
the market. This is a convenient way to buy shares where someone
else is responsible for the buy and sell decisions, but watch out
for the fees charged by the fund manager.
funds for more information and compare offers with our managed
Buying shares via an
employee share scheme
Employee share schemes give employees shares in the company they
work for, or the opportunity to buy shares in the company. The
shares might be offered without a brokerage fee or at a discount to
the market price.
Employee share schemes can be a great way of gaining access to
discount shares, however you should carefully read the terms and
conditions set out in the offer documents as there may be
restrictions on when you can buy, sell and access the shares.
See employee share schemes for more
Buying CHESS Depository
Interests over shares
CHESS Depository Interests (CDIs) are used to allow shares of
foreign companies to be traded on Australian exchange markets. You
can buy CDIs on any of the five public exchanges in Australia.
See how to buy and sell shares
for more information about the share exchanges.
When you buy CDIs you own shares in the foreign company, but the
shares are held by a depository nominee on your behalf.
Pros and cons of CDIs
CDIs can be swapped for foreign shares, and vice-a-versa, at any
time. However, if you choose to swap your CDIs for foreign shares,
you will not be able to sell them on an Australian exchange.
Generally, if you own foreign shares through CDIs, you will
receive the same benefits as other shareholders. This includes
entitlements such as dividends and the right to participate in
share offers made by the foreign company to its shareholders, or
other corporate actions.
However, as a CDI holder:
- You cannot vote in person at a company meeting unless you are
allowed to by the laws of the country where the foreign company is
established. However you can direct the depository nominee to vote
on your behalf.
- In some circumstances, you may not be able to vote due to
timing or practical difficulties
- You may have fewer entitlements than if you held the shares
For more information about the specific differences between
holding CDIs and directly holding shares in the company, read the
other disclosure documents prepared by the foreign company you wish
to invest in.
For more information about CDIs, see the ASX publication Understanding CHESS Depository
If you'd like to invest in shares, you don't
have to buy individual shares directly. However, if you decide to
invest using another method make sure you understand the pros and
cons of each.
Last updated: 31 Mar 2017