Congratulations that you want to invest in the stock market. Investing in shares can seem daunting at the start and in our experience, the hardest step is hitting buy on your first share. Like anything, the more experience you get, the more your confidence grows. The aim of course is to make money!

Before you start investing in shares there is a bit of admin like setting up your brokerage account with an online trading platform, thinking about your investment goals and then picking stocks. Let’s get you started now.

How To Start Investing

What is a share and how do I buy one?

Companies like the Commonwealth Bank of Australia, BHP and Rio Tinto are all listed on the Australian Stock Exchange. The shares or units in the company are exchange traded on the ASX. You will have heard of the All Ordinaries Index. This includes the top 200 companies and helps you know how the stock market is performing.

There are also lots of smaller companies called Small Caps that are also listed and these can also be excellent investments. Afterpay was a little financial company a few years ago, but now it's big. It shows you what investing in shares can do for you.

You should concentrate on investing in quality stocks. You need to use a broker or have an online brokerage account to buy and sell shares.

You want to make money from share price growth over the medium to long term. Buying shares makes you a part owner of a company and you can get dividends from your financial investments. These are typically paid twice yearly.

Opening a brokerage account online

One of the first steps to start investing is setting up an online trading account. You can use a full service stock broker for buying and selling individual stocks or ETFs but most beginners and active investors now make the trades themselves from their online account on an app on their phone.

What it helps to know when choosing a brokerage account

Brokerage fees: The fees you will be charged by your broker every time you are buying or selling shares in your brokerage account. The fees are based on how often you a transaction on the stock market and the $ value of the transaction. The fees are as little as $10 for a $1,000 of shares or around $20 for up to $10,000 but each brokers fees are charged at slightly different rates.

Australian Shares: Most Australians stick to investing in stocks of exchange traded funds on the ASX. But if you know you want to make an investment in other markets or other financial products like options or forex check that your broker can do this as not all of them can.

There are lots of different brokers to choose from to set up your brokerage account. The biggest brokers in Australia are CommSec, CMC Markets, Bell Direct and NabTrade. Canstar will help you to find an up to date comparison on the different brokers and costs and services.

Setting up your account: Once you have chosen the best brokerage account for you, and you know the brokers services and fees for each trade, you will need a clear 5-10 minutes applying for the account. It’s like setting up any bank account for any investments and you need your ID, TFN and your current bank details so you can link to it.

Once your broker is all set up you can get to the fun part of investing in stocks! Please remember to seek out individual financial advice or advice on a specific financial product from a full financial services provider or one of the brokers if you need it. Remember to check their track record and any fees or hidden costs.

What are your investment goals?

You may want to invest in the stock market so you can make money now from dividends plus build your wealth in the short and long term.

ASX shares will be a segment of all your other investments in your full investment portfolio and before you start investing in individual stocks you should set your goals if you haven't already.

Buying and selling shares is not so different from investing in a house. You chose a suburb, a unit or a house, and you work out the amount of money you have to spend. Before you start you should ask yourself some questions to inform your investment plan and to set your goals.

Deciding the amount of money you have to invest is a key place to start.

Decide what is the minimum amount of money you have for your share investing account? How will you fund your investing? Do you have a capital lump sum from a fund or just $2,000 in savings but you plan to invest money from your salary or from other funds? Will you invest for the short or long term? What do you need now? What funds will you need in the future ?

Questions to ask yourself before investing:

1. What are you investing for?  

2. What life stage are you at? Are you saving for a house in 3 years time? Or you want some extra income from dividends now? Are you saving funds for your future retirement  or are you retired already?

3. Decide do you need regular income or capital growth? Or a combination?

4. The answers to these investing questions will help guide which individual stocks you'll invest in and help you understand your personal risk tolerance and wealth goals.

For more information about your investment, finances or setting up an account you can go to the Australian Government’s Moneysmart website.

How to start investing in stocks

So you have your broker, and you have budgeted money to invest in shares. Now you want to begin investing in stocks and it's time to choose which share to buy and to start making money. There are so many different individual stocks to invest in, you always hear from friends or family that they are making a killing, but it’s so difficult to know where to start. 

How to pick which share to buy

There are over 2,000 shares listed on the stock market and most people are looking to reduce risk and build wealth over time. To reduce risk beginners need independent research to know the company you are investing in is a quality company that is well run and profitable. You want to make quality investments and Under the Radar Report can help you do that.

We are experts at helping you to invest and we have researched and selected over 100 Small Cap stocks that we have chosen for their growth and investing potential and 40 of the best Blue Chip stocks that pay dividends. Our performance is an average of 655% returns over 200 small cap stocks. This is an excellent performance over the last 10 years and is proof of the quality of our services. If you’re looking for shares but are finding it difficult to do the stock picking and due diligence yourself, you can become a member and get started now.  We have done all the hard work for you. Our independent analysts search for the best stocks for you to invest in and you simply need to follow our clear advice.

Plan your diversified share portfolio

When investing in the stock market you don’t put all your money into one stock. It’s called diversification and it means owning shares in a number of different companies that operate in different industries. This is a proven way to reduce your risk. But don’t think you need to do this all at once. It’s ok to start with one stock and to build up your portfolio over time. It all depends on the amount of cash you have to hand. 

Once you have built a portfolio of shares the optimal strategy is to reinvest dividend income you receive from shares and add more cash that you save for more investing.  

The point to remember is that you are not buying a house and you don’t go out on one day and purchase every stock you want to own. You build up your share investing portfolio over time. So today you could put a minimum amount money into one stock, or a holding in one stock and tomorrow (or next month or when you have the money) you can purchase the next one. In the long term you can increase the number of stocks you own and the number of shares you own in each company to build up your investment over time. We recommend a minimum of 7-10 small cap stocks in any portfolio.

How to place a trade in the stock market

Once you have decided to buy a share, you go to your online trading account, select the stock you want to purchase, then you decide:

Purchase by: quantity or value

You can either choose a quantity of shares ie 100 or 1,000 or purchase by amount, ie $1,000 or $2,500.

It is a personal preference whether you trade shares to the nearest round dollar or by the number of shares but most fund managers would own a round number of shares rather than a round dollar amount at purchase. 

Price: Limit or market

This is what price you are prepared to pay per share. You can just select ‘at market’ and the trade will go through as soon as it can at the market price. 

If you choose a limit you put in the price you are prepared to pay for the shares.Your share trading screen will have a depth screen to see the number of buyers, the volume and price and the sellers volume and price. It will give you a sense of where the market is heading.

Also look at the price chart to see how the price has moved over the past 12 months, 6 mths, 5 days, and that day. The charts show you the trend over time and intra day as well.

Expiry: good till expiry/ good for day

Are you happy for this trade to only go through today? Or are you happy with your trade at that price until it is executed? If you put in a price and the market moves on from it, your trade may not go through on the day you put it through.

Fluctuation in share prices

What can be a surprise for a new investor is the range that each stock trades both within a day and over a period of time. For example the Commonwealth Bank (CBA) one of the largest on the market has traded from around $60 to $95 a share in the last 12-months. It obviously also takes more capital to get a holding of 100 shares and the share price can and does move around.

What is the stock market and how does it work?

In Australia the stock market where all the shares are traded is the ASX. Unlike the supermarket where there is a set price for bread and milk and anything else you buy, shares on the stock market are traded and buyers and sellers are matched. It’s like a giant averaging machine.

Understanding the stock price: Investor sentiment versus fundamental value

The stock price comes about from two things, investor sentiment and fundamental value. Sometimes the fundamental value, for example the cash flow, balance sheet and financials are strong but the stock is in an out of favour area and so it’s share price flounders due to investor sentiment. And the reverse can also be true, where investors think a stock or an industry is hot and everyone wants to invest in the shares but in fact, the company is still in a start up phase and has very poor fundamental value. 

Investors need independent share analysis with experienced stock pickers. Start a free trial and choose a stock to invest in now click here.

Isn't my money safer in a savings account?

Savings accounts and term deposits are a less risky type of investment. With bank interest rates at record low levels, a bank deposit is not even keeping up with inflation and investors are now forced to look at different investment opportunities to give your money the change to earn better returns than a bank account.

Investing in shares makes your money work harder for you and can give you better income and the opportunity for capital growth. Think what your future self needs. What are the costs of letting my money sit in the bank?

Investing in the stock market is becoming more and more popular with record numbers of new investors buying shares on the ASX. With a little bit of money, you can start building your share portfolio, one stock at a time.

How To Start Investing - Our Performance

Can I start investing with $1,000?

The ASX suggests you should 'start your share investing with at least $2,000' as a general guide but you can start with less. Many beginners and other investors love ASX Small Caps because they are cheaper than the CBAs and other big cap stocks so you don’t need such a big capital investment to own a meaningful parcel of shares. 

Over 90% of Under the Radar Report’s Small Cap stocks were less than $5 a share when we first recommended them and over 50% of these ASX Small Caps pay dividends too. If you are unsure, this is where to invest $1,000 now.

You can start with a minimum of 1,000 dollars and purchase one stock with that. If the share goes up 5%, 30% or 100% what would your return be? Is a $300 profit on a $1,000 profit if for example there is a big 30% jump enough? Consider what is the right size of holding for you. 

The Benefits of dollar cost averaging

It is possible to build up a holding over time and to get a $1,000 worth of stock in a company you like and then to go again when you have more available funds. Watch your brokerage fees in the costs. A $1,000 trade really should be your minimum as otherwise you are paying too many brokerage fees.

When you add up all your transactions you then get dollar cost averaging which is the term used to describe the strategy of making regular incremental investments over a period of time as opposed to a one-off lump investment. Your cost per share is then the average price you paid.

Diversification helps you to spread risk

Investors also like ASX Small Caps because it is possible to set up a diversified portfolio of stocks that are also high growth stocks at cheaper prices. This means that you have a number of stocks, we recommend 7-10 small cap stocks in different industries.

Taking the first steps when you start investing

Remember why you want to invest (for growth or dividends) and access our quality independent analysis now and head straight to our best stocks to buy now table. This is current and up to date and these are the small cap companies that our analysts agree offer the best risk/reward return. 50% of our stocks pay dividends.

We tell you why the stocks is a good investment plus we outline any risks. We tell you the dividend yield (the income you will receive per share). Stocks that are speculative are riskier and we outline why. 

It’s not easy choosing which stock to own and that is why Australian ASX investors turn to our team of analysts who have spent years studying and decades analysing stocks picking good stocks to invest in. 

We also tell you when to sell. This may seem obvious but it can be really hard to know when to take profits and when to sell. Our analyst team watch your stocks and tell you when to sell.

Investors need independent share advice with clear buy, sell and hold recommendations with the research conducted by experienced financial analysts. You may have the skills to do this yourself if you are a trained accountant or analyst but lots of investors look to our financial stock picking experts for our full service report and our independent research. 

Best stocks to invest in when you first start

Our Best Stocks to Buy Now table in our Small Cap report each week that makes it really easy to search and choose which stock to invest in. These are the stocks that our analyst team believe offer the best risk/reward return. The performance from these stocks is exceptional and is 1,113% return! All the research is done and easy to read with clear easy to action recommendations with the potential risks and why we like it reviewed and ready for you. 

Investment advice for beginner investors

Our best financial advice to beginners is to start small and to purchase small parcels of shares in quality companies over time.

This was also our advice to subscribers in 2021 when the market was falling fast during COVID-19. We chose 20 small companies that had strong balance sheets, business models in industries that would survive a downturn and our subscribers who followed our advice made record returns and the performance of these stocks has been exceptional.

Seek independent, quality stock advice, start buying in small parcels, watch your portfolio's performance (it’s really easy on your trading app) and follow our clear Buy, Sell and Hold recommendations which are also part of our service. Remember not every stock will go up and build a portfolio approach. Remember it's important selling also and to take profits along the way.

We wish you financial success in your investment journey and we hope that you love investing as much as we do.