02.Buy shares directly
You’ll need to go through a stockbroker to buy individual shares. If you don’t need investment advice, the cheapest way is through an online broker. Their fees start at about $15 per trade, up to $50 for the more expensive providers – the table below shows some of the stockbrokers’ products; they sometimes offer a range to suit different investors’ needs.
Check other fees, read brokers’ Financial Services Guides and Product Disclosure Statements before choosing one. All the major banks have an online stockbroking arm whose websites provide a range of services to help you research shares and other investments, including daily market commentaries, their analysts’ research, research from independent ratings agencies and company profiles.
For investors who want advice or to deal in large amounts of shares, a “full service” broker could be the way to go. They usually charge a commission of 2.5%-3% for share trades, with a minimum fee of $100. Their recommendations are covered by the fee – and this must be provided in a written Statement of Advice. The percentage fees are reduced for very large trades (six figures), while the cost to buy international shares is higher.
You generally need plenty of money to make direct share purchasing work, otherwise broker fees could make it uneconomical. One of the basic principles of investing is to diversify to spread your risk; if you invest all your money in just one or a handful of companies’ shares, you’ll be seriously affected if any suffer a major price decline or collapse. Some of our top 200 listed companies have lost more than 95% of their value in the past 18 months.
The Australian Securities & Investments Commission (ASIC) says successful investors own shares in about eight to 14 different industries across the economy. According to the commission’s website, “so long as you get a good spread across different industries, the investment literature suggests you don’t need to own shares in 30 to 50 companies.”
Did you know?
The Australian index is worth just 2% of global share markets. You can buy shares from other countries through stockbrokers, managed funds, index funds and exchange traded funds. Broker fees for international trades are higher and it’s not always possible through some online broker packages (see the table below for more).