Can international students invest in Australian stock market?
You can buy and sell shares in the stock market. The share prices will vary in response to several factors like company performance, economic changes and demand. It is currently a hot topic amongst young people and investors because of the pandemic uncertainties. Australian shares are traded electronically on a centralized exchange – ASX or CHI-X. Both are open Monday to Friday from 10 am to 4 pm.
Are you an international student looking to buy shares in Australia?
Well, the good news is that the Australian government welcomes foreign investment. Even if you don’t have an international student visa, you can still invest in the Australian Stock Exchange. You’ll have to create a brokerage account for trading on ASX, though. If your brokerage account is domiciled in Australia, the brokerage firm might charge a lower fee. Many international companies have invested in Australia and are benefitting from Australia’s infrastructure, workforce and economic excellence.
How much do I need to start investing?
The smallest amount you need to invest in shares depends on your broker and can differ. Compared to full-service brokers, Online brokers are generally cheaper. Brokerage begins at a minimum of $10 per transaction. You can start buying shares in CommSec with as little as $500, but small investments won’t generate any significant returns. At the rate of $10, brokerage fees for every share transaction (buying and selling) would amount to two percent of your $500- your share investment would have to increase by the same amount in order to make up for it! Thus, ASX does not allow share transactions below $500.
If you can, you should invest at least $2000, as also recommended by the ASX. $2000 would mean that the broker fees would amount to only 0.5%. But you could also buy shares of $500 at $40 brokerage fees in four companies instead of just one transaction – not likely to be a very successful investment, though, especially considering the lack of diversification. Moreover, Concentrated portfolios don’t perform the same as the main market index- so the market could go up by 20%, but you might go down if your portfolio lacks diversification.
Nevertheless, if you’re someone that has a hard time resisting impulse buying and can’t save a lot of money, you should go for a diversified investment with your smaller investment amount. This not only means you’ll have to pay only a single brokerage fee but also that diversification will significantly lower the risk associated with your investment. Hence, if you hold ASX three hundred via an exchange-traded fund, plunging stocks will have very little impact compared to a case scenario in which you held twenty stocks and ten of those fell. An exchange-traded fund means investment in the general share market. Individual shares, on the other hand, help you identify the shares which will outperform in the market. This is something even experts in the field have trouble with, so remember to be realistic.
Australian shares vs American shares – which one should I buy?
The ASX has correlated with the US stock market in the sense that the US market’s opening level determines the opening level of ASX for the next day. Although ASX shares are proven money-making machines, many investors, including many Aussies, are shifting to the US stock market. The US is the largest capital market globally, but is it really a better investment option than ASX? US shares have outperformed ASX shares over the last 5 and 10 years, and it is more popular, even among Aussies. Nevertheless, Australian shares are likely to take the lead at various periods in the future. In short, this choice is more of a personal preference of which company a group or individual wants to invest in-it’s not a very risky decision either way.
Which app should I use?
There are many stock exchange apps, but the most popular ones are CommSec for Australian stock and Stake if you want to trade US shares. CommSec is Australia’s leading broker, and with almost 20 years of experience in the business, it is definitely the go-to-choice for Australian trading shares. The service is free to join, and no monthly subscription is required. However, the app charges $10 brokerage fees per transaction.
For a Stake account, you will not have to pay any brokerage fees, fractional shares or FX fees on trades, and you won’t even be charged a monthly fee for the basic account. You can trade as much as you want and as many times as you wish, and you will not have to pay a dime! However, there is a flat fee of $5 to transfer funds in or out of your Stake account. You can find out more about USD transfer to/from Stake in the profile section of your account.
Index funds vs individual shares
Index funds are a passive form of secure, stable, and long-term investment, whereas investing in individual shares can often be very risky or very rewarding- it could go either way! For trading individual shares, you will have to go out of your way to research individual companies and invest your money in the right place at the right time. When you buy shares in an individual business, you actually get ownership of a portion of the company. Hence, you will get a proportional share of all profits and losses in the business. Let’s assume you had invested in McDonald’s or Walmart when they were just starting out. This means you would get a share of their profits depending on your total ownership of the company. Say for $2.4 per share; you would get $2400 if you had 1000 shares, $24000 if you had 10,000 shares and so on. Usually, you have to buy whole shares, but some apps also allow purchasing fractional shares. Investors who had bought shares in hugely successful businesses like Microsoft or Google have grown successfully with these companies’ success. However, companies don’t always succeed. If you had shares in a company like Enron, they would be pretty much worthless. If you pick the wrong stock, you could lose everything!
On the other hand, index funding allows investors to invest in a group of companies so that there is a lesser chance of loss due to company bankruptcy. Such investors get a stable and decent return that will eventually grow over time. They also don’t need to be familiar with any accounting or finance mumbo jumbo like balance sheets, income statements, financial ratio, management, strategy and the like. This type of investment is not only low-cost but also helps build, maintain and diversify your portfolio. Some popular index funds are Vanguard and Fidelity.
So, if you’re wondering which one is better, there is no right answer- but there is a safe one! Typically, index funds have no associated risks, and while you won’t become rich overnight, you certainly won’t lose all your money in a bad investment!
Tax, brokerage & emotional investing- all you need to know before investing
An investor will have to pay higher taxes if they sell the stock within the same year as they buy, and yes, dividends earned through shares are taxable too. However, if investors hold the shares for more than 12 months, the Australian Tax Office gives a 50% concession on their capital gains tax, so only half of their earnings will be taxable. To know more about the taxational rules, please visit our page on the Australian Taxation System.
A stockbroker is an individual or firm that executes your stock transactions for you! And best of all, you don’t necessarily need a lot of money to hire broker services- anywhere between $0 and $500 would get the job done. There are also different types of brokers, like full-time and discount brokers, which vary based on the cost and service level. Furthermore, when choosing a broker service, make sure they are regulated by the Australian Securities & Investments Commission (ASIC) or SIPC in the US.
Investors can often fall prey to media hype or fear and end up buying investments at their peak or selling during a depression in the cycle. Dollar-cost averaging and diversification can help eliminate guesswork and help you make the right predictions and, ultimately, decisions. As per the dollar-cost averaging strategy, an individual invests a specific amount of dollars at regular intervals. This means more shares are purchased when prices are lower and fewer shares when prices are higher. Moreover, diversification also provides a certain level of protection because gains in other counter losses in certain investments. Be realistic, rational and keep market forces in mind when deciding to buy or sell investments. And don’t be afraid to consult a specialist as and when needed.
When to buy or sell shares?
You can invest in stable shares for the long-term and earn from the dividend, only selling the stock after retirement or in case a better investment opportunity becomes available. The best approach to buying shares is to consider if the company is valuable in terms of financial results and if they’re selling for at least 25% less than the shares’ intrinsic value. If you want to sell shares, do it when prices are high or if long-term problems threaten the company and are not likely to be resolved any time soon. Remember that research is the most important step!
You can invest in Australian shares from virtually anywhere in the world, but research and careful planning are crucial at every step of stock management. As a beginner, you can find a wealth of resources like CommSec and several brokerage services. Generally, the higher you invest, the better. Diversity and dollar-cost averaging are good approaches to minimize the risk associated with the stock trade.
Austrade is the investment promotion agency of the government of Australia and provides opportunities in the sectors of agribusiness and food, tourism infrastructure, major infrastructure, energy and resources, as well as advanced manufacturing, technology and services. Austrade works with foreign companies that want to expand their business via direct investment in the Australian stock market. However, personal investments will need prior approval from the Australian Foreign Investment Review Board (FIRB). To learn more about investing in Australian shares, try contacting your nearest Austrade office or consult the FIRB website. You can also reach out to the Australian Tax Office or your own international tax advisor to find out about the tax implications of investment.
*Disclaimer: This article is in no way intended to persuade students into buying stocks. It is merely a guide if they’ve already made up their minds about investing.