Buying Australian shares: a guide for new investors

Purchasing shares is a big decision if you are new to investing. On one hand, you have the chance to seriously improve your finances. On the other hand, if you are inexperienced, you risk losing your money.

Step by step guide to getting the right advice

Breaking into the stock market and getting started is probably the hardest part. Investor Buddy suggests a few things you should do before buying shares.

Step 1

Learn as much as you can about the market. You do not need to be an expert but it helps to know the basics. Getting your hands on a glossary of key market terms is a good idea. If you want to know more, there is also the option of online courses.

Step 2

After familiarising yourself with some basics, think about what you can afford to invest. Do not spend outside your day to day living means, as you risk running into financial difficulties. Remember that buying shares is a form of gambling (albeit a more profitable one), so you have to be prepared to lose some money. Set a limit for investing and do not extend it. If you have a financial advisor they can help determine what you can afford to spend.

Step 3

If purchasing shares is a viable financial option, start thinking about the kind of stocks you want to invest in. For example, shares in the mining industry are generally profitable. However, you may want to invest in a more environmentally friendly company (a form of ethical investment). Making some of these decisions before visiting a broker will assist them in selecting the shares that are right for you.

Step 4

In order to buy and sell shares that are listed on the Australian Securities Exchange (ASX), you'll need a stock broker. Brokers will help you select shares, monitor their progress and advise you when to offload them to maximise profit. Brokers can be found on the Internet or in the telephone directory under Investment Services. Most major financial institutions have brokers. Some of Australia's more reputable brokers are Commsec, Macquarie Bank, Shadforths, Goldman Sachs JBWere and Citigroup.