How to buy & sell shares
Buying and selling shares
The most common way to buy and sell shares is on the share
market using a broker or broking service.
You can also buy shares through a prospectus when they are first
put on the market or indirectly through a managed fund. Another way
to buy shares is through an employee share scheme.
Using a broker to buy and sell
You can choose whether you want to a use an online broking
service and make your own investment decisions, or use a full
service broker who can give you advice and recommendations.
Online broking service
If you are looking for the lowest possible fees, an online
trading account might suit you. The fee to buy or sell a parcel of
shares starts from around $30. You're only charged when you buy or
sell a share.
Full service brokers
A full service broker charges more but they can also advise you
on what to buy and sell. The law requires brokers to have a
reasonable basis for their recommendations. They must also tell you
about any interests they have in investment decisions they
recommend to you.
Brokerage fees are usually based on a percentage of the value of
the purchase or sale. The percentage typically reduces as the
amount of the transaction gets bigger. Most brokers have a minimum
fee which they charge. Typically, the fee on a transaction of up to
$5000 will be 2.5%. For large trades, it may only be 0.1%. Small
trades worth a few thousand dollars can therefore be relatively
Use the Australian Securities Exchange's find a stockbroker tool to help you
find a broker that suits your needs.
Initial public offerings (IPO)
Companies may decide to offer new shares to the market as a way
of raising capital. This is called a 'float' or an 'initial public offering' (IPO).
If you don't understand something in the prospectus, speak to a
stockbroker or financial adviser.
The best way to decide if you should invest in an IPO is to read
the prospectus. This document must contain
key details about the company and the float, and it must be lodged
with the Australian Securities and Investments Commission (ASIC).
To check if the issuer has lodged a prospectus, see ASIC's OFFERlist
All prospectuses must contain information on the features of the
securities being offered, including how many are for sale, how you
can apply to buy them; as well as information on the company, its
operations and financial position; and the risks associated with
We recommend you read the whole prospectus, to help you decide
if the company suits your investment objectives.
Video: What to look for in a prospectus
What is a prospectus video
Kate O'Rourke and Jane Eccleston from ASIC talk about what to
look for in a prospectus before you invest.
Check the prospectus to answer these questions:
- Sector - Do you understand the sector the
company operates in, or plans to operate in?
- Competitors - Who are the business'
competitors and why does the company think it can compete with
- Financial prospects - Do you understand the
financial statements? Have revenues/profits been growing? If the
company is not profitable, do you get a clear sense of when (if
ever) it might be profitable? Companies at an early stage of
development are a much riskier investment proposition.
- Relative value - What is the price-earnings ratio (P/E ratio) of the
company? How does this compare with its competitors? The P/E ratio
will help you to get a sense whether the IPO is fairly priced.
Generally, a higher P/E ratio means investors expect higher
- Dividends - Does the company intend to pay a
dividend? If so, when is this expected?
- 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 will it get
- Directors - Are the company's directors and
managers paid what you would expect for the company's size and
industry? Do the directors and managers appear to have appropriate
skills and experience? Check that they are not listed on ASIC's Banned and
disqualified register. The prospectus should disclose if any of
the directors have managed a company that failed in the last few
- Advisers - How much are independent advisers
paid as a percentage of the funds raised by the IPO? If the fees
exceed 10% then you should consider whether the company's advisers
are being fairly remunerated. The more money that goes to advisers,
the less that is available to the company.
- Risks - Is the risk disclosure section
detailed and specific to the company? Vague language or general
disclosures (such as warning that the price of shares can go down)
could be a sign the company is not telling you everything you need
- Profit estimate - Are the assumptions
underlying the profit estimates (e.g. demand for the goods or
services produced, or assumed economic conditions) reasonable? What
will happen if they vary? Also think about your investment
timeframe and how you may be affected if the projections turn out
to be optimistic.
If the answers to any of these questions raise doubt in your
mind about the company's prospects, get professional advice before investing.
Alternatively, look for an investment you can understand more
easily or, if you want to take a chance with the IPO, only invest
money you can afford to lose.
Buying shares through crowd-sourced
Crowd-sourced funding (CSF) (also called 'equity crowd funding'
or 'crowd-sourced funding of shares') is a way for start-ups and
small and medium-sized companies to raise money from the public to
finance their business. You can invest up to $10,000 a year in a
company and in exchange you'll receive securities in the form of
Crowd-sourced funding of shares is different from crowd
Crowd-sourced funding of shares is different from the
donation-based crowd funding typically used by artists
or entrepreneurs to raise money for one-off projects.
It is also different from investment-based crowd funding, which
may involve investing in a managed investment scheme or be offered
by someone who does not need an Australian financial services (AFS)
If you want to invest in a company offering shares through a CSF
website, you will be asked to acknowledge that you have read and
understood the risk warning listed on the website and in the offer
You can only invest up to $10,000 per company in a 12-month
period, so your application will be rejected if you try to invest
more than the cap.
You have a cooling-off period of 5 business days to change your
mind if you decide the investment isn't for you. During this time,
you can withdraw your application to invest and receive a full
Check the intermediary is licensed
Ensure the company has listed their offer on a website that is
run by a licensed intermediary. Check ASIC Connect's Professional Registers to
see if the website operator has an AFS licence that allows it to
legally provide CSF services. If they do, the information will be
listed under the section called 'licence authorisation
Risks of crowd-sourced funding
Some risks of crowd-sourced funding include:
- Lack of company track record - Some businesses
that raise money through crowd-sourced funding are new or in the
early stages of development, so there's more risk that the business
will be unsuccessful and you may lose all the money you invested.
Read all the information available on the CSF website to check
specific risks associated with each business, as well as doing your
own research on the company.
- Shares may fall or be hard to sell - Even if
the company is successful, the value of your investment might fall,
and the return you receive could be reduced if the company issues
more shares. Your investment is also unlikely to be 'liquid', so if
you decide you need the money you've invested, you may not be able
to sell your shares quickly, or at all.
- Risk of fraud or insolvency - If your money is
handled inappropriately or the intermediary operating the website
becomes insolvent and hasn't met its obligation to keep your money
separate, you may lose all the money you've invested.
Before investing, read the offer document issued by the company
and use the portal on the CSF website to ask questions about the
company or investment.
Employee share schemes
Employee share schemes give
employees shares (or the opportunity to buy shares) in the company
they work for. The shares might be offered without a brokerage fee
or at a discount to the market price, but carefully read the terms
and conditions in the offer, as there may be restrictions on when
you can buy, sell and access the shares.
When you invest in a managed fund, your money is pooled with
that of other investors. A professional fund manager 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.
Listed investment company (LIC)
A listed investment
company (LIC) uses money from investors to invest in a
range of companies and other assets. LICs pay dividends from their
earnings and often have lower ongoing costs than managed funds.
However, they may be less suitable if you invest small amounts
regularly, as there are stock broking fees on each
Exchange traded funds (ETF)
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 invest.
You can buy or sell ETFs just like any other share. They
generally have lower ongoing costs than managed funds, but may be
less suitable if you invest small amounts regularly, due to a stock
broking fee on each contribution.
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 public exchanges in Australia.
When you buy CDIs you own shares in the foreign company, but the
shares are held by a depository nominee on your behalf.
CDIs can be swapped for foreign shares, and vice-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 many of the same benefits as other shareholders, including
entitlements such as dividends and the right to participate in
share offers made by the foreign company to its shareholders.
However, you will be unable to vote in person at a company meeting
unless you are allowed to by the laws of the country where the
company is established (but you can direct the depository nominee
to vote on your behalf).
For more information about the differences between holding CDIs
and directly holding shares in the company, read the prospectus or
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
Selling your shares
Regardless of how you buy shares, at some stage you may want to
If you hold the shares directly you can sell them by placing a
trade online or contacting your broker. When your trade is executed
you will be charged a brokerage fee.
When you sell your shares or units in a managed fund, keep a
copy of the trade confirmation or receipt for tax purposes.
When you sell shares, the legal title of ownership is exchanged.
Settlement for the sale and transfer of ownership occurs 2 business
days after the trade takes place (this is known as T+2). Once
settlement is completed, the money for the sale of the shares is
transferred into your designated 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. For more information
see how to buy and sell
Sometimes a company you own shares in may offer to buy back some
of its own shares.
If you receive a buy-back offer, you have the right to decline
if you wish. Before you decide, consider these questions:
- Why does the company want to buy back its
shares? - The company will send you a document
explaining why it is making the offer to buy back its shares, and
the steps it is taking to do this. For example, the company may
want to distribute surplus money back to shareholders, or reduce
administrative costs in a listed company by buying out holders of
small parcels of shares.
- Is now a good time to sell? - You're not
obliged to sell, so if you're happy with the company's prospects,
you can keep your shares. However, if you were thinking of selling
your shares anyway, selling them back to the company as part of a
share buy-back offer will save you paying broker's fees.
Unexpected offers to buy your
If you receive an unexpected letter offering to buy some of your
shares, there are some checks you should do before you decide to
accept the offer.
Find out who is making the offer and why
Check whether the offer is from a legitimate company by using ASIC Connect to search within
'organisation and business names' for the company's details and
The company or person making the offer wants to make money, so
perhaps there is public information about something that is about
to happen to your shares that you may not know about. Check company
announcements on the ASX or talk to a stock broker in case you missed
important news that was released to the market.
What are the shares really worth?
Get an up-to-date market price for your shares and compare it
with the price being offered. You can check with the company, the
ASX or a stockbroker.
Check the contents of the offer
The law restricts the way an offer can be made. For example, the
offer document should be dated and identify who is making the offer
and give you at least one month in which to accept. It must also
- the price offered
- if you will be paid in instalments
- how and when those instalments will be paid.
If your shares are not sold on the ASX or any other exchange,
the offer document must state a fair estimate of the value at the
date the offer was made. It must also explain how they arrived at
If your shares are sold on the ASX or another exchange, the offer
document must state the market price for those shares the day the
offer was made.
Report the offer
Although 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. Check the contents of the offer
To report an unexpected offer which you believe is against the
law, visit the ASIC website or call 1300 300 630.
Invest in shares only if you are happy with your
understanding of the stock market and are prepared to research and
manage your portfolio on a regular basis.
Last updated: 12 Dec 2018