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Online share trading makes it easy and affordable for anyone to begin investing in shares through the New Zealand Stock Market (NZX) and other markets. In this guide you’ll learn how online share trading platforms work, how to make money from stocks, what kinds of fees you’ll pay and what all that confusing terminology means.
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A company’s share price changes several times throughout the day as people buy and sell the shares, so most shareholders aim to buy shares when they’re low in cost and sell when the price of the share increases to make a profit.
For New Zealand-listed companies, all trading is done through the NZX, which lists over 165 companies. Overseas shares are traded on a variety of exchanges, including the Australian Securities Exchange (ASX), New York Stock Exchange (NYSE), the NASDAQ and the London Stock Exchange (LSE).
In the pre-Internet era, the only way to buy or sell shares was by hiring a full-service stockbroker, which could be expensive and time consuming. Today, investors can buy and sell shares themselves through online trading platforms with the click of a button.
Using an online platform is far cheaper for individual investors than using full-service brokers. When you buy shares online, you’ll pay a brokerage fee for each transaction, which typically ranges from $15 to $30 for NZX trades, as opposed to $75 to $100 for full-service brokers.
The standard NZX trading hours are 10am to 5pm NZST Monday to Friday, while other global exchanges keep similar hours. Along with shares, you can trade in index funds, such as exchange traded funds (which track the performance of a range of stocks) and other products.
Keep in mind there’s a minimum first order of $500 when buying shares in a company on the NZX, however some trading apps get around this by offering fractional investing, just as others choose to impose a higher minimum limit. To buy shares online, simply open an account with an online share trading platform.
Brokerage fees are an important factor when comparing trading platforms, however there are other things to consider too. While share trading accounts tend to highlight their lowest available brokerage fee, this is usually impacted by how often you trade and how much you trade. Some accounts also have monthly inactivity fees if you don’t place any trades for a specific period of time.
There are two main ways to make money from share trading:
Blue chip shares are large companies that are financially strong and have a solid track record of producing good earnings to shareholders. Typically, they are industry leaders and household brands. Investing in blue chip shares could be a good strategy for beginners, as they are usually considered to be very stable and have been in the market for a long time. For example: Sky City, Fonterra, Auckland International Airport, Fisher & Paykel and Vector, are considered blue chip shares.
When choosing an online share trading platform, consider the following factors:
Here’s some tips to help get you started:
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