How to buy and sell shares

Once you set up an account with a broker, you can place a trade in a few simple steps.

What is a share

A share is part ownership in a company. Companies issue shares to raise money. After that, investors can buy and sell those shares to and from each other.

When you own shares, you own a small part of the company. As an owner you may be entitled to:

Vote on big company decisions like who sits on the board. One share usually equals one vote. You can vote online, by post, or in person at a company meeting.

Share in profits (and losses) depending on how the company performs. Companies can pay profits to shareholders as dividends. Not all companies make profits or pay dividends. You can also benefit from any increase in the value of the company (share) over time.

Sell your shares to someone else. If you sell for more than you paid, the difference is a capital gain. If you sell for less, you make a capital loss.

In Australia, most shares trade on the Australian Securities Exchange (ASX) – the main marketplace where people buy and sell shares. Learn more about choosing shares.

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

Ways to own shares

You can own shares directly or indirectly.

Directly – you buy shares in one company, usually through a broker. You own those shares in your name.

Through an investment vehicle – this may be a managed fund, an exchange-traded fund, or a listed investment company.

Through your super fund - Super funds pool members’ money and invest across different assets - including shares - to grow your balance over time. Alternatively, you might set up a self-managed super fund and invest in shares that way.

Owning shares directly

There are several ways to become a shareholder:

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). Learn what to look for and how to assess an IPO, by working through our checklist.

Buy through a broker - Use a broker to place an order for shares on the ASX (we cover this in more detail below).

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'.

Employee share schemes - some employers give you shares as part of your pay or let you buy them at a discount. Learn more about employee share schemes. 

Dividend reinvestment plan (DRP) – some companies let you use your dividends to buy more shares instead of taking cash.

Gift, inheritance or other transfer – shares can be transferred to you from another person outside the market – for example as a gift or through an estate.

Shares are not an appropriate investment for everyone. It’s important to consider your investing time frame and risk tolerance. Learn more about developing an investment plan, and how to seek financial advice.

How to buy shares

You generally buy and sell shares through a broker. A broker is a licensed business that provides access to the ASX and other markets allowing your trades to be placed. There are two types:

• Online broker – open an online account and make your own choices of what shares to buy and for how much. Most online brokers charge a flat fee for smaller trades – often around $20 or less – and switch to a percentage of the trade for larger amounts. A few brokers charge the same flat fee whatever the size. If you purchase overseas shares, the broker may also charge foreign exchange fees.
• Full-service broker – the broker places trades for you and can give you advice. Fees are higher, usually a percentage of each trade.

You can use the Australian Securities Exchange (ASX) find a broker tool to locate a broker that suits your needs.

Most people who buy shares use an online broker.

How to use an online broker:

1. Choose a broker and open an account. Opening an online broker account usually takes less than 15 minutes, although identity checks can sometimes take a day or two.
2. Add money to your account by transferring from your bank. Most online brokers need money in your account before you place a trade. Some let you settle a trade from a linked bank account within two business days. Check how your broker works.
3. Place your order by picking the company and number of shares you want to buy. Then pick the order type:
   • Market order – buy at the next available price. Usually, the trade will go through quickly.
   • Limit order – set the most you will pay (if buying) or the least you will accept (if selling). The trade only goes through if the market reaches your price.
   • Your broker may offer other order types too. Ask them to explain the options before you use them.
4. Check the confirmation. After you trade, you will get a confirmation showing the price, the number of shares and the fees. Keep it for tax time. You may also get a holding statement in the post or by email to confirm the shares are registered in your name.

How to sell shares

Selling through an online broker is similar to buying. You log in and place a sell order.

1. Pick the shares you want to sell.
2. Choose a market order, limit order or other order type.
3. Check the confirmation.

The money will be sent to your brokerage account two business days after the trade day. This is called a T+2 settlement period.

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's 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.

Costs and fees of shares

Shares cost money to buy, hold and sell. Check these costs before you start:

attach_money Brokerage fees – what the broker charges each time you buy or sell.

attach_money Platform fees – some online brokers charge a monthly or inactivity fee.

attach_money Foreign exchange fees – may apply if you buy shares listed overseas.

attach_money Tax – you may need to pay tax on dividends and on any capital gain when you sell shares for more than you paid. Australian dividends often come with franking credits that represent tax already paid by the company to make sure you are not taxed twice.

Fees can be a big share of a small trade. Check the fees before you place each order.

Finding the right investments can be challenging. If you need some help to build a diversified portfolio, talk to a financial adviser.