Online platforms have made share trading easy and accessible. Let’s take a look at how easy it is to buy shares in Woolworths (ASX: WOW), and walk you through the steps one by one.
About the company
Best known for its supermarkets and mini metro stores, the Woolworths Group portfolio also includes finance companies, hotels, merchandise and liquor interests.
Australia’s largest supermarket operator, it has almost 1,000 stores across the country with more than 115,000 supermarket employees.
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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 hundreds of online brokers available, offering various options.
Here are some key features to look for when choosing an online broker:
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.
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 Woolworths 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 practice 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 Woolworths, including company overview, price history, recommendations and price forecasts.
Step 2: Fund your account
Most accounts need money added to them to become fully active, but at this stage, it's a good idea to be cautious with 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 Woolworth Group'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 Woolworths incude iShares MSCI Australia ETF (EWA), Fidelity International Index Fund (FSPSX), and Vanguard Total International Stock Index Fund (VGTSX).
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 Woolworths shares at $40. You place an order but by the time it executes the share price has dropped to $38. 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 Woolworths shares at $39.50 or lower. Once the price drops to $39.50, your limit order will kick in.
This is when you nominate a price at which to sell your shares. When that price is reached, your sell order is executed. For example, you decide you want to sell your Woolworths shares at $43. Once the price reaches $43, the stop limit executes.
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 automatically sell out before your shareholding suffers too much damage.
You might decide to set a stop loss at $35. If your Woolworths 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 get going! On most platforms, you can place your order with the click of a button.
Product launches, major announcements and shareholder meetings are big news and can affect your share price, as can world events and other news. And remember, not all bad news is bad for business. A sudden fall in price is a great chance to grab more shares in anticipation of a rebound, averaging down your position.
It would be sensible to monitor the performance of competing businesses. Since Woolworths operates across a number of sectors, their competition includes companies such as Coles (ASX: COL) and Kogan (ASX: KGN) in consumer goods and groceries to Commonwealth Bank (ASX: CBA) and National Australia Bank (ASX: NAB) in financial services.
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