A Guide for Share Trading in Australia

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Anyone who has ever wanted to get into the stock market in Australia can do so quickly and easily by opening an account with an online brokerage firm. Of course, it’s still possible to use traditional brokers, but online firms feature lower commissions and an easy-to-understand process. Share trading in Australia takes place on many exchanges, the most common ones being the Australian Securities Exchange (the ASX) and the National Stock Exchange of Australia (NSX). But many trading enthusiasts also opt to trade shares on the Chi-X Australia (CXA), the NYSE (the U.S.-based New York Stock Exchange), the NASDAQ, the London Stock Exchange (LSE) or any of the other major global marketplaces.

For those who are new to share trading in Australia , there are some important things to know before getting started, like how taxes apply to profits and losses, how to earn profits and how to compare brokerage firms and find one that suits your needs. Here are the essential points to keep in mind when you set out to participate in the Australian securities markets:

How to Get Started

The simplest way to get started is to choose one of the better online brokers and open an account. All the top brokerage firms offer extensive educational materials on their websites. They also allow newcomers the chance to practice their skills on a simulator, a specialized app that lets you use fictitious money in order to get the feel for the mechanics of actual transactions.

How to Make a Profit

There are two ways to earn a profit by buying and selling securities . First, you can buy low and sell high, as the old adage goes. In that case, you would purchase, for example, one share of XYZ company for $1 and sell it later on for $2, netting a total of $1 in profit for each share you bought and sold, less whatever commission the broker charged.

Compare Brokers Carefully

Search for brokers who offer extensive research resources, reasonable fees in comparison to similar firms, excellent customer support, simple integration with your personal bank accounts and access to several global markets. Don’t make a quick decision about a broker just because they have the lowest fees. Sometimes, as is true in all forms of commerce, you get what you pay for. Evaluate a brokerage based on its entire package of services, not just one factor.

Taxes

Taxation of capital gains under Australian law is straightforward. Whenever you sell shares for a gain, you pay your marginal tax rate on the amount of the gain in the year you sell it. Losses can offset gains and can be carried forward to future years if they are unused. Finally, any gains on shares you have held for more than one year are only taxed at one-half your marginal rate. For beginners, those are the basics of the tax situation you need to know. 

Four Rules for Success

If you’re new to the securities markets, it’s helpful to follow a few time-tested rules that have served millions of others quite well. These guidelines are not set in stone, but you should at the very least familiarize yourself with them before making your first transactions.

  • Do your research: Go online and read a company’s most recent annual report before investing in their shares. Unless you are an accountant, don’t expect to understand everything in the document, but read the whole thing in any case. Also check news sites for recent stories about the organization. Comprehending the basic financial situation and recent developments about a corporation will provide you with a well-grounded feeling for what the company does and what its current state of fiscal health is like.
  • Stay informed on current events: Keep up with what’s happening in world and national news. Many events that affect the markets have little to do with business or the economy. Wars, strikes, summits, treaties, disasters and major weather events can have a profound effect on particular sectors of the securities markets.
  • Spread your risk with diversification: Everyone is familiar with the don’t put all your eggs in one basket philosophy. The concept applies doubly well in the world of commerce. Newcomers are strongly advised to spread their funds among shares of several companies in different industries in order to minimize risk.
  • At first, stick with the blue chips: Until you develop a sense of confidence in your ability to evaluate companies, focusing your investment dollars on blue chip corporations is a smart way to preserve your capital and avoid losses.
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