Online Share Trading

The Australian stockmarket

 The Australian stockmarket is one of the most advanced markets in the world because it has full electronic trading capability. Australia has only one major stock exchange for listed entities – the Australian Securities Exchange (ASX). There are more than 2,200 listed companies to choose from in many different sectors.

Online share trading

Because of the highly automated nature of the stock exchange, online share trading is very popular with around two million Australians using online brokers to buy and sell shares every year.

Online trading is a do-it-yourself way to invest in the stockmarket. All you need is a computer and an internet connection. Trading online tends to eliminate many hassles associated with investing:

• it’s convenient because you can easily access all the information you need about the market and the listed companies you’re interested in
• there’s a wide range of tools and guides to help you with your investment decisions
• there’s very little paperwork involved as all transactions are performed online, with records of your activity and statements available whenever you need them.

Getting started

To start investing online you need to open an online trading account by registering with an online share trading service provider. There are a number of online brokers in Australia to choose from and they all offer a range of prices and services.

Choosing a broker

The costs

Generally, you can expect to pay anywhere from $15 to $30 in brokerage for a transaction that is less than $15,000 in value compared with around $150 when using a full service broker (who will provide you with their expert advice). So you can see that online share trading could well be right for you if you’re willing to do the research, make your own investment decisions and place the trades yourself.

With some online brokers, the services are bundled up in pricing. Other brokers, usually the less expensive ones, offer a more transparent pricing structure, so you will pay for what you use.

Keep in mind that the cost of brokerage is important, because more you pay in brokerage, the more it will eat into your investments.

The features

The next step in choosing a broker is to decide which features are most important to you and then match those to the online broker that offers what you need.

For example, you may think that research tools and services are not necessary for you. However, you may find that online tools, live market data and research services will save you time and money. Most online brokers offer these additional tools in varying degrees and sometimes at an additional cost. With Bell Direct, Australia’s best value online broker, you can access inexpensive brokerage and additional trading tools at no extra cost. Also, the complexity of the underlying software may vary considerably, so again, it’s worth shopping around to find what’s right for you depending on the kind of trader you are.

Trader types

New investors

If you’re new to online trading, an online broker’s overall service (including website features and customer support) will be a critical factor in your choice. A broker with highly rated customer service will help you as you get started, so it’s important that you can access client support staff on the phone at all times.

Your online broker should not only offer internet trades but also telephone trades, SMS trades and even an iPhone trading application so that you can trade whenever you need to.

Long-term investors

If you’re a long-term investor, the research tools on your online share broker’s website should be an important factor in your choice.

Paying for additional research services or tools to help you review your portfolio will be valuable in the long-term, and you should view these costs as an investment in your share trading success. Of course, online brokers like Bell Direct don’t charge extra costs to access independent broker research from the likes of Bell Potter so keep that in mind.

Other tools that might interest you include free tax reports, charting, portfolio management, company profiles, fund profiles and access to floats. You may also need assistance in interpreting available research information.

Active traders

If you buy and sell shares at least once a week, finding a broker who offers the lowest brokerage will be your priority. Also consider additional costs, like charges to set up conditional orders (stop loss orders). With Bell Direct, setting up conditional orders is free, so you only pay brokerage once the trade is actioned.

You may also require easy access to time-sensitive information and software and frequent trader tools.

It is also important to make sure that the online broker you choose has a good client service record — this is crucial and could mean the difference between a profitable trade and losing money.

Arnie Selvarajah, Chief Executive Officer of Bell Direct, says “We know that speed is a priority. That’s why we’re proud to be the only Australian online broker to offer a 1 second placement guarantee. That means, if your ‘at market’ order isn’t placed on the ASX within 1 second, you don’t pay any brokerage”.

In summary, Australia provides a wealth of information and services to get you up and running to trade shares online. Who knows where the sharemarket will go in 2012 but if you’re keen to trade, make sure you choose the right online broker for you.

Good luck and happy trading!