- Wesfarmers is a diversified business operation with stakes in retail, chemicals, fertiliser, industrial and safety products.
- The company saw its revenues rise during 2020 and 2021 while profits dropped.
- Wesfarmers is a dividend-paying stock and the dividends payments have risen beyond pre-pandemic levels.
Wesfarmers Limited (ASX: WES) is an Australian conglomerate predominantly operating in Australia and New Zealand.
It was founded in 1914 and is headquartered in Perth.
If you’re wondering how to buy Westfarmers shares, this guide has everything you need to know.
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Wesfarmers' diverse business operations include home improvement and outdoor living, general merchandise and apparel and office supplies. The Industrials division has businesses in chemicals, energy and fertilisers, industrial and safety products. The company is one of Australia's largest employers.
Wesfarmers subsidiaries include Bunnings Warehouse and Kmart Australia among others.
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Step 1: Choose a broker
When you buy shares online, you do it through an intermediary called a broker. There are many online brokers available, offering various options and features.
These are some of the key features to look for when choosing an online broker.
Some online brokers will offer free trades. This is quite widely available now, but generally not for shares listed on the ASX.
Ease of use
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 where you can practise without consequence, and educational guides (preferably in video format).
Research and reporting
Look for a platform with solid research and reporting on each company. Apart from charting, look for things like share price history, market analyst recommendations, price forecasts, company announcements, earnings reports, etc.
Step 2: Fund your account
You need to add money to your account with your online broker before you can trade. It's a good idea to start with a small amount. You can expand your horizons when you become more confident at trading, but never invest an amount you cannot afford to lose, because share prices can be very volatile.
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 Wesfarmers'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 (Exchange Traded Fund).
Some consider ETFs 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 which own shares of Wesfarmers include Vanguard Australian Shares High Yield ETF (VHY), iShares S&P/ASX High Dividend Index Fund (IHD), and SPDR MSCI Australia Select High Dividend Yield Fund (SYI).
Step 5: Decide your order type
Orders are how you tell online brokers what sort of trades you'd like to make, and decide how you'd like your money to behave.
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 Wesfarmers shares at $59.22. You place an order but by the time it executes the share price has dropped to $59.05. 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.
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 Wesfarmers shares at $59.20 or lower. Once the price drops to $59.20, your limit order will kick in.
This is when you nominate a price range within which you want to buy or sell your shares. The stop price activates the order and the limit price indicates the highest price at which you are prepared to buy or the lowest price at which you are prepared to sell. Your order is only executed if shares can be bought or sold within your nominated price range.
In this case, you nominate a price at which you decide to sell your shares. If the share price drops significantly, for example, the stop loss means you ideally automatically sell out before your shareholding suffers too much damage.
You might decide to set a stop loss at $59.00. If your Wesfarmers shares hit this price, the order executes for your shares to be sold at the next market price. Keep in mind in a fast-falling market your shares may sell well below what you had hoped.
Step 6: Place your order
Once you're happy with your strategy and with funds in place, it's time to get going with trading. On most platforms, you can place your order with the click of a button.
Step 7: Monitor your investment
Regardless of whether you are investing to speculate on share price movements or to hold shares as a long term investment, you need to watch for both company performance and its share price movements.
Track Wesfarmers’ performance
Keep an eye on the company’s business performance and financial fundamentals in addition to its share price movements. Wesfarmers is a dividend stock. So you also need to watch for the trends in dividend payments.
Watch for developments in the diversified industrials sector
When you invest in diversified industrial firms like Wesfarmers, you need to keep an eye on developments in all of the sub-sectors in which it has an interest. The benefit of investing in diversified operations is that your risk is spread across sub-sectors which may each be affected in different ways during times of stress.
Wesfarmers’ key subsidiary Coles has a number of competitors in the supermarket sector, including Woolworths, Aldi, and Costco. Wesfarmers’ hardware operation Bunnings controls about 50% of the Australian hardware market, with its key competition coming from Mitre 10 and Home Timber and Hardware. But being a diversified operation, the company has more specialised competitors in each of its distinct business segments.
Disclaimer: We put our customer’s needs first. The views expressed in this article are those of the writer’s alone and do not constitute financial advice. Advertisers cannot influence editorial content. However, Finty and/or the writer may have a financial interest in the companies mentioned. Finty is committed to providing factual, honest, and accurate information that is compliant with governing laws and regulations. Do your own due diligence and seek professional advice before deciding to invest in one of the products mentioned. For more information, see Finty’s editorial guidelines and terms and conditions.