How to Invest in Shares Online: A 6-Step Approach From a Professional

Investing in the stock market can be a pretty powerful way to make some great returns on your hard-earned money and improve your financial situation. It’s the only investment vehicle that provides the highest potential for making some pretty hefty returns. Don’t believe it?

On May 15, 1997, Amazon Inc. had its initial public offering (IPO) on the Nasdaq. It essentially meant that the company was selling a portion of its ownership to public investors. Each share was retailing at $18. At the time of writing this, a share is now worth a whopping $2,878.

Let’s do the math, shall we? If you invested $1,800 on 100 shares 23 years ago, that investment would be worth $287,800 today. That would be equivalent to earning an extra $12,434 every year for the last 23 years without so much as lifting a finger to do it.

If you’re new to the stock market and haven’t got a clue on where to begin, this article details 6 easy steps on how to invest in shares online. Finding the right investment strategy is a lot easier than you think. Here’s what you need to do.

Step 1: How to Invest in Shares Online 101 – Choose a Good Online Stockbroker

The first thing you need to do is sign up with a reputable stockbroker. You have two options.

On the one hand, you could opt for a full-service broker. This is your conventional stockbroker and includes the likes of Morgans and Goldman Sachs.

You would typically call or email them with any trade instructions, and they would carry them out at a premium fee. This could range anywhere between $50 and $200 on average per trade.

On the other hand, you could opt for an online service broker, also commonly referred to as a share trading platform. It costs significantly less compared to using a full-service broker.

So, rather than have your broker place a trade on your behalf, you would do it yourself. You can pick a trading platform that exclusively trades Australian shares or pick one that deals in forex or foreign stocks such as those on the Nasdaq or New York Stock Exchange.

Step 2: Create an Investment Account and Deposit Money in It

Once you identify a good online stockbroker, the next step involves opening an investment account. You’ll need it to start trading. It’s almost like having a bank account, but instead of using it just to hold your money, it’ll hold your shares as well.

Creating an online investment account is easy. But it could take as little as one day or up to two weeks – at the most – depending on the broker you use. Most of them require that you provide the following information:

  • Your name, date of birth, address, phone number, and any other relevant contact information
  • Your tax file number (TFN)
  • Bank account details
  • Proof of ID

You’ll then need to fund your account using a debit or credit card, bank wire transfer, or BPAY.

Step 3: Plan, Plan, Plan

Once you have your trading account set up, the next important step involves planning. You need to have a solid strategy in place that addresses these key questions:

  1. How much can you afford to invest?
  2. How much can you afford to lose?
  3. For how long can you leave your money in the stock market?
  4. What action will you take if the share prices begin to fall?
  5. What will you do if they start to rise?

The answers to these questions will determine the types of shares you should invest in. Blue-chip stocks are generally safer long term investments. Penny stocks, on the other hand, are riskier but have the potential to earn you much bigger profits. Ultimately, the decision rests on your overall risk appetite.

Step 4: Choose the Companies You Want to Invest In

This is no doubt the most difficult part of the process. There are tens of thousands of stocks available to choose from. So, you need to pick the ones that align with your investment goals. Here are a couple of things to keep in mind:

  1. Do you trust that the company in question will continue on its growth trajectory?
  2. Do you believe in its products and services? Do you use them?
  3. Are the company’s debt levels under control?
  4. Are its profits meeting its projected earnings expectations?
  5. Does it plan to scale and expand to new markets and sectors? If that’s the case, it usually means that you can expect a rise in the share price.
  6. Does it pay a dividend to its shareholders?
  7. Is the stock price overvalued? If so, it often means that its share price is about to fall.

It’s always a great idea to keep a diversified stock portfolio to spread the risk and offset the potential for suffering major losses.

Step 5: Buy the Stock

Once you do your homework on the shares you want to invest in, and have deposited enough cash in your investment account to buy them, simply:

  1. Log into your online trading platform
  2. Search for the company by name or stock code
  3. Enter the number of shares you want to buy or the amount you want to invest
  4. Choose the order type – You could opt for a market order to buy the shares at their current price, or place a limit order to purchase them at a lower price in future
  5. Preview and confirm your order details
  6. Hit the “Buy” button to confirm the purchase

Step 6: Monitor Your Share Positions

Once you buy the shares, they’re yours. All you have to do from there is monitor your investments.

Ensure that you participate in the company’s annual general meetings and gather all the news and information you can about them. This is particularly important if your goal is to hold the shares for the long term.

For short term shares, on the other hand, you could set up a stop-loss price to sell them if their price drops below a predefined threshold. You could also set a target price at which to sell your shares for a profit.

Highly Volatile but Worth It

Now that you understand how to invest in shares, there’s one thing you need to keep in mind before you jump in head-first.

Investing in shares is not a get-rich-quick scheme. So, don’t put your money in the stock market, expecting to make loads of cash in a couple of months, or even a year.

Stocks are highly volatile investments, meaning that their value can drop in the short term. But, if you’re in it for the long haul, there’s truly no better investment option out there that guarantees the sort of returns you get from putting your money in shares.

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