How to buy National Australia Bank (NAB) shares

National Australia Bank (ASX: NAB) is one of the four largest financial institutions in Australia. It was founded in 1982 and is headquartered in Melbourne.

This is your complete guide to buying shares in NAB.

NAB offers banking, financial and related services in over 900 locations throughout Australia, New Zealand, Asia, the UK and the US. Although company performance suffered during the pandemic, NAB was still profitable due to strong fundamentals.

NAB subsidiaries include Bank of New Zealand, UBank, JBWere Limited, Plum and 86 400.

Step 1: Choose a broker

In order to buy shares online, you go through a broker. You can choose from a wide range of online brokers.

When choosing an online broker, consider the following features.

Low-cost brokerage

Due to the introduction of online share trading, brokerage costs have plummeted.

Shop around and you will find online platforms that offer very competitive brokerage rates.

Consider the costs of brokerage versus other services an online trader may or may not provide.

Free trades

When you sign up with some online brokers, you may be able to take advantage of free trades — usually limited to a certain period of time or capped per month. Consider this when buying your National Australia Bank shares.

Most online brokers charge a fee to buy shares listed on the ASX. Shop around since they vary.

Easy-to-use trading platform

If you want to trade shares, look for a platform that is simple to use.

New investors can also benefit from demo trading accounts so they can practice without consequence and education guides (preferably in video format).

Research and reporting

Find a platform with a research and reporting section that can provide important information about NAB, such as company overviews, price histories, recommendations, and price forecasts.

Step 2: Fund your account

To become fully active, share trading accounts need money. But when you are just starting out, you should be cautious with how much you add.

Step 3: Decide how much you want to invest

Always plan your investments based on what you can afford. Take a look at NAB's current share price and make your decision, remembering that you can always buy more when the price drops.

Step 4: Shares or an ETF?

ETFs (Exchange-Traded Funds) are considered to be a less risky option since they invest in a group of companies or market indices rather than relying on the performance of an individual company. There is less volatility, and you win if the market wins, but it is less interesting for investors who want to actively manage their investments.

ETFs with exposure to NAB include Betashares Australia 200 ETF (ASX: A200), iShares Core S&P/ASX 200 ETF (ASX: IOZ), and The Vanguard Australian Shares Index ETF (ASX: VAS).

Step 5: Decide your order type

Orders are your way of telling your online brokers what type of trades you want to make, and how you want 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 NAB’s shares at $28. You place an order but by the time it executes the share price has dropped to $25. 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 National Australia Bank shares at $28.50 or lower. Once the price drops to $28.50, 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 National Australia Bank shares if they drop to $27, but hang onto them if your order can't be executed before they fall below $25. Once the price reaches $27, the order executes if they can be sold at a price higher than $25.

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 $25. If your National Australia Bank 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.

You may invest in shares as long-term investments or to benefit from share price fluctuations. Whatever the motive, you need to watch for both company performance and its share price trends.

Track NAB’s performance

Besides keeping track of business fundamentals and its stock price trends, you want to also watch for NAB’s dividend trends as a dividend paying stock. NAB reduced its dividend payments in 2020 due to the drastic decline in revenues and profits. However, the company still remained profitable.

NAB's competition

The Australian banking and financial services sector is highly competitive. NAB and other traditional banks have to compete with each other online and offline. They must also compete with financial technology (fintech) startups like Revolut and large tech companies like Apple (NASDAQ: AAPL) and Alphabet (NASDAQ: GOOG) who are encroaching into consumer finance.

NAB is competing with the other top banks in Australia including Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Bank (ASX: ANZ), Westpac (ASX: WBC), Macquarie Bank (ASK: MQG) and Bank of Queensland among others.