How to buy Commonwealth Bank (CBA) shares

The Commonwealth Bank of Australia (ASX: CBA), or CommBank, is an Australian multinational bank. It has operations in New Zealand, Asia-Pacific, the United States and the United Kingdom. CommBank is headquartered in Sydney.

Looking to buy shares in CommBank? Read on.

The bank was founded under the Commonwealth Bank Act in 1911. Since the bank started it has conducted both savings and general banking business. It floated on the ASX in 1991 and now serves more than 17 million customers and provides integrated financial services, both online and offline.

CommBank subsidiaries include CommSec, Bankwest, and Colonial First State among others.

Step 1: Choose a broker

When you buy shares online, you do it through an intermediary called a broker. There are hundreds of online brokers available, offering various options.

Here are some key features to look for when choosing an online broker.

Low-cost brokerage

The advent of online share trading has seen brokerage costs plunge.

If you shop around, you’ll be able to find online platforms offering very competitive brokerage rates.

Be careful to weigh up brokerage costs against other services the online trader may or may not offer.

Free trades

Some online brokers will offer free trades if you sign up with them — often limited to a certain initial period of time or capped per month — and this may be a consideration when buying your CommBank shares.

Easy-to-use trading platform

Trading in shares needn’t be complicated, so keep an eye out for a trading platform that is straightforward to use. Other useful features for new investors include demo trading accounts so you can practise without consequence and education guides (preferably in video format).

Research and reporting

Look for a platform that has a solid research and reporting section that can give you important information about CommBank, including company overview, price history, recommendations and price forecasts.

Step 2: Fund your account

Share trading accounts need money added to them to become fully active, but in the early stages it's a good idea to be cautious about how much you add.

Step 3: Decide how much you want to invest

You should always have an investment plan, based on what you can afford. Take a look at CommBank's current share price and make a judgement, but remember you can always buy more when the price drops.

Step 4: Shares or an ETF?

One big question you'll have to answer is whether you want to invest in shares or an ETF. An ETF (Exchange-Traded Fund) is considered to be a less risky option because it invests in a group of companies or market indices rather than relying on the performance of a specific company. This means less volatility, and you win if the market wins, but it is less interesting for those looking to actively manage their investments.

ETFs with exposure to Commonwealth Bank include VanEck Australian Banks ETF (ASX:MVB) and iShares MSCI Australia ETF (EWA).

Step 5: Decide your order type

Orders are your method of telling you online brokers what sort of trades you'd like to make, and how you'd like your money to behave.

Market order

A market order is an order to buy shares at the current market price. In fast-moving markets, these prices can change while you're making the trade. Let’s say you place an order for CommBank's shares at $100. You place an order but by the time it executes the share price has dropped to $98. You will get your shares at the lower price. The same situation applies if the share price goes up while your order is being executed.

Limit order

With a buy limit order, your trade will only execute when the share price reaches the price, or lower, that you nominate. Let’s say you decide you only want to buy CommBank shares at $101.50 or lower. Once the price drops to $101.50, your limit order will kick in.

Stop limit

This is when you nominate a price range within which you are willing to buy or sell your shares. Your order will be executed if it's possible to buy or sell them at a price within your range.

For example, you decide you want to sell your CommBank shares if they drop to $99, but hang onto them if your order can't be executed before they fall below $96. Once the price reaches $99, the order executes if they can be sold at a price higher than $96.

Stop loss

In this case, you nominate a price at which you decide to sell your shares if the market falls. If the share price drops significantly, for example, the stop loss means you automatically sell out before your shareholding suffers too much damage.

You might decide to set a stop loss at $90. If your CommBank shares hit this price, the order executes and they are sold.

Step 6: Place your order

Once you're happy with your strategy and with funds in place, it's time to trade. On most platforms, you can place your order with the click of a button.

Whether you are investing to gain from speculation on share price fluctuations or as a long-term investment, you should keep monitoring the company performance and its share price movements.

Track CommBank’s performance

You need to keep track of financial fundamentals and business performance as well as the share price movements of the company. CommBank is a dividend-paying stock, so you should also keep an eye on its dividend payments. Although CommBank’s revenues dipped during the pandemic, and the company reduced its dividend payments, both revenues and dividends have since recovered to pre-pandemic levels.

Watch for developments in banking and financial services sector

The Australian banking and financial services sector is highly competitive, with traditional banks competing with each other online and offline, and with financial technology (fintech) startups.

Competition from banks and fintechs

CommBank is competing with the other top banks in Australia including Westpac (ASX: WBC), Australian and New Zealand Banking Group (ASX: ANZ), National Australia Bank (ASX: NAB), Bank of Queensland (ASX: BOQ), and Macquarie Bank (ASX: MQG), as well as neobanks like 86400 and Up Bank.