Investing for Beginners Australia – Investing for Beginners 2021

Fact Checked by Gary McFarlane

It may come as a surprise to you that if you had invested $1000 in the S&P 500 at the start of 1970, you would have around $213,643.99 at the start of 2021, provided all dividends received during this period were reinvested. This is a 21,264 % return on investment through a relatively low-risk investment S&P 500 shares. In the meanwhile, $1000 Australian Dollar invested in the beginning of the new millennia could yield approximately 8000% in returns (or 80x) and be worth nearly $80,000 Australian Dollars. So, when done correctly, investing in shares can be one of the most successful strategies to develop long-term wealth.

If you have decided to start investing in shares as a beginner in Australia but aren’t sure where to begin, you are reading the right article. We put together a well-researched article to share different broker solutions available to the Australia region and discussed their pros and cons as well as fee structures. eToro, IC Markets and Plus500 can be attractive options for beginner investors in Australia and you can read a more detailed review on them below.

Disclaimer: There is no investment advice here. The content is for informational and educational purposes only.

Table of Contents

#1 Broker to Invest in Shares as a Beginner in Australia – eToro

1
$50Exclusive promotion
Our score10
  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

How to Invest in Shares Australia– Step by Step Guide 2021

If you’re going to invest in shares in Australia as a beginner, it’s important to work with the right broker and have the right trading tools. You can sign up to eToro in less than 5 minutes by following these steps and have access to state-of-art charting tools, trading reports, market insight and other advanced trading features.

  • Step 1: Open an eToro account: The first step of having an active trading account is the sign-up process. You can get started with eToro by just typing “eToro.com” into your browser. Once the page loads, press the “Join Now” button and fill in the required details to have an account with them.
  • Step 2: Verify your Identity: Having a verified account allows you to be able to start trading and making investments on eToro. Simply provide a photo ID (passport, driving licence) and proof of address (utility bill, bank statement) to complete the verification process.
  • Step 3: Fund your account: After your account is verified you can start depositing money to be able to trade different assets. To deposit money to your trading account just click on “Deposit Funds” enter the amount you want to invest and press “Deposit”.
  • Step 4: Invest in Shares: Having a verified account with the desired amount of money deposited will allow you to actually start making trades. You can buy or sell an asset by typing the asset’s name into the eToro search bar (for example, TSLA for TESLA), pressing “Trade”, entering the investment amount, and pressing “Buy”.

Where to Invest in Shares as a Beginner – Choose a Broker Australia

Today we are lucky to have a plethora of trading tools and platforms. But this can also mean indecisiveness and procrastination. We created a well-researched review of several competitive trading platforms, their pros and cons, and how they compare with each other.

1. eToro – Best Overall Way to Invest in Shares as a Beginner in Australia

eToro started as an Israeli Fintech startup in 2007 and they have been very successful since then. Serving more than 20 million traders online, eToro is one of the most popular brokerage solutions out there. Additionally, they are regulated by some of the strictest regulatory bodies such as UK’s Financial Conduct Authority and their Australian subsidiary holds an Australian Financial Services Licence (AFSL), number 491139 issued by the Australian Securities and Investments Commission (ASIC).

As a pioneer of the copy trading feature, eToro offers a unique opportunity to mimic the trades of the most successful traders on the platform. In addition to that, we are impressed by the quality of learning resources, trading tools, markets news, insights and analysis as well as the mobile app provided by the company.

Security & Privacy

eToro is regulated by top-tier regulatory bodies including CySEC, FCA, ASIC, SEC. Additionally, SSL encryption used by the platform protects the privacy of its users while the 2FA authentication solution makes logins a lot more secure for traders. Although you should be very careful in the sphere of investing and trading, eToro is a legit platform that has been serving clients successfully for many years.

Fees & Features

eToro has no deposit fees and no commission fees but the company charges £5 for some withdrawals. We found eToro fee structure to be quite reasonable and the brokerage platform generates revenue through the spread of the assets offered for trading. There is only £10 inactivity fee which kicks in after long periods of inactivity (12-month)

eToro Fees

Fee Type Fee Amount
Commission Fee 0%
Deposit Fee £0
Withdrawal Fee £5
Inactivity Fee £10 (Monthly)

 

Pros

  • High quality and intuitive user interface
  • Rich learning resources
  • 0% deposit fees
  • Social trading
  • Various deposit options (including Paypal)
  • Regulated by Australian Securities & Investments Commission (ASIC)

Cons

  • Although small, there is a withdrawal fee of £5 when withdrawing funds

67% of retail investor accounts lose money when trading CFDs with this provider.

2. IC Markets – Best Brokerage for Beginner Investors Australia

 

IC Markets is an Australia-based forex and CFD broker that caters to scalpers and high-frequency algorithmic traders that require low-latency and fast executions. IC Markets, which was founded in 2007, handles approximately 500,000 trades each day with a daily volume of more than $15 billion.

IC Markets’ Australian, Cyprus, and Seychelles-based subsidiaries offer a total of 291 tradeable instruments. The minimum deposit to open a live account at IC Markets is $200, regardless of the account type you choose. Trading charges differ amongst the three account types offered by IC Markets. There are two commission-based pricing (spread + commission) accounts and the standard commission-free (spread only) account.

Security & Privacy

The big question is that whether you should trust IC Markets with your money while trading. IC Markets is regulated by the Australian Securities and Investments Commission (ASIC) which means there is an increased level of security with the way this brokerage carries out its operations.

When trading CFDs in Australia, the National Guarantee Fund does not offer any protection. However, IC Markets has indemnity insurance and keeps your money in a Client Moneys Trust Account. When selecting a broker, consider criteria such as the number of years it has been in business and the scope of its regulatory licenses. Using a well-capitalized broker also decreases your possible counterparty risk.

Fees & Features

Traditional brokerages charge substantially higher brokerage fees than online brokerages. Compared with other online brokerages providing services in the Down Under, IC Markets’ fees are minimal. They don’t charge a brokerage fee for services that other brokers charge. This means you can efficiently use IC Markets even if you frequently trade, such as many times per week or a day. Generally, an online brokerage charges two types of fees: trading fees and non-trading fees. The details of these fees as charged by IC Markets are tabulated below.

IC Markets Brokers Fees

Fee Type Amount
Commission $0 (0.7 pips spread)
Withdrawal Fee $0
Deposit Fee $0
Inactivity Fee $10 (after 3 months inactivity)

 

Pros

  • Low trading and non-trading fees
  • Easy and fast registration and account opening
  • No deposit or withdrawal fees
  • Best suited for investors running automated trading strategies

Cons

  • Limited choices of asset classes to invest in
  • Limited investor protection for non-EU investors

67% of retail investor accounts lose money when trading CFDs with this provider.

3. Plus500 – Best Platform for Simplicity to Invest in Shares as a Beginner in Australia

 

Plus500 is an Israel-based, publicly-traded company listed on the London Stock Exchange (LSE) since June 2018. Its market capitalization is over $2 billion. Plus500 provides brokerage services to its clients/users. It operates through several entities across Europe and Asia-Pacific while complying with the laws of the relevant regulatory authorities.

The online brokerage solution provides access to a wide range of products, including forex, stock indices, CFDs, individual shares, commodities, ETFs, options, and cryptocurrencies, to clients in more than 50 countries.

Security & Privacy

To minimize market risk and ensure that it is not exposed to significant losses, the company serves as a principal and hedges its exposure with its parent company. Plus500 is registered with the various regulatory agencies throughout Europe and Asia-Pacific. Still, it does not provide any added deposit insurance.

As per the UK FCA’s client money rules, Plus500 is required to ensure that client funds are not commingled with corporate funds, thereby safeguarding client money and assets in case the company becomes insolvent.
It’s good to note that, when trading CFDs with this brokerage, 72% of regular investor accounts lose money. Therefore, it’s good to keep in mind that trading is a high-risk endeavour that can result in loss of funds if you aren’t on top of your game in terms of analysis and execution.

Fees & Features

Plus500, like some other brokerage firms, makes most of its profit from customer trades that get executed based on the bid/ask spread. There are no fees on any client transactions, and the spread does not change depending on the size of the deal which can be beneficial depending on your order size.

Having said that, clients who hold overnight positions may be exposed to currency conversion charges especially if they trade in a currency other than the account’s base currency. The brokers earn revenue by charging premiums, which are effectively financing charges in this case. In addition, there are fees for “guaranteed stop-loss orders” (GSLO), and inactivity penalties apply after three months of inactivity which is kind of on the short side.

The details of the fees charged by Plus500 are given below.

 

Plus500 Fees

Fee Type Fee Amount
Commission Fee 0% (for spread only account type)
Deposit Fee $0
Withdrawal Fee $0 (applies to only certain methods)
Inactivity Fee $15 per month (after 12 months of inactivity)

 

Pros

  • Easy-to-use platform
  • Quick and helpful customer support
  • Low fees and minimum deposit.

Cons

  • Limited choices of asset classes to invest in. Investors can only invest in CFDs
  • Mediocre research tools

67% of retail investor accounts lose money when trading CFDs with this provider.

Invest in Shares in Australia – Broker Price Comparison

If you are confused about different fees charged by different brokers, here is a fee comparison table between eToro, IC Markets and Plus500.

Broker Commission Deposit Fee Withdrawal Fee Inactivity Fee
eToro 0% £0 £5 £10 monthly (after 12 months inactivity)
IC Markets 0% $0 $0 $10 (after 3 month inactivity)
Plus500 0% $0 $0 – $35 $15 monthly (after 12 months inactivity)

 

What are the Different Ways to Invest in Shares in Australia?

If you have extra money just idly sitting in your bank account, you might be interested in trading or making investments to optimize your capital. When done right, investments can make your money work for you and earn profits and income. Furthermore, investing your money helps you in combating inflation. Well-researched investments can earn you high returns in a short period as well but you will have to be cautious about your risk management. Stocks, CFDs, and ETFs are some of the most common investment options that can also be beginners when chosen carefully. Let’s discuss them briefly.

Stocks

An online survey made in 2017 suggested that three out of four people had never invested in shares in Australia. Men were twice as likely to have invested in shares as women, with 35% of men saying they have tried it compared to 17% for women. Fast forward to 2020 and Australia has seen a surge in investing activities with close to 9 million adult Australians holding investments out of 19.5 million. With the development of the Fintech industry and the increase in brokerage solutions in recent years, there has also been an increase of new investors in Australia. Close to a quarter of all investors have started investing in the 2 years prior to 2020 and 45% of all new investors were women. This might mean more than 2 million people became beginner investors in Australia in 2018 and 2019 alone or a staggering 10% of the country’s total population approximately.

Stocks enable you to invest in a company’s shares. It’s fairly easy to purchase the stocks of a company listed on the stock exchange. When you buy stocks, you possess shares of the firm that issued the stock. You can earn a return by buying a stock at a lower price and then selling it when the price goes up but the opposite can also happen. Just to give a few examples, Gamestop, Veritiv Corporation, and Peabody Energy Corp., with YTD returns of 953.39%, 400.82%, and 376.53%, respectively, have been the best-performing stocks of 2021.

Most stocks also pay dividends every quarter. Dividends are payments to the stockholders from the profits of a company. If the company decides to distribute dividends and you are holding its stocks you will receive dividend payments proportionate to your holdings of the company’s stocks. Some investors specifically choose such stocks to create an additional income stream. As an Australian trader you are not only limited to stocks of Australian companies and you can also trade popular global alternative through CFD products brokerage platforms offer.

CFDs (Contract For Difference)

A contract for difference (CFD) is an agreement between a buyer and a seller. The buyer agrees to pay the seller the difference between the asset’s current value and its value at the time of the contract. CFDs enable the investors to profit from price fluctuations in the market without owning the underlying assets. In essence, CFDs allow investors to bet on whether the price of an underlying asset or security will rise or decline.
IC Markets, Plus500, XM and eToro are a few CFD brokers available to beginner investors in Australia and offer beginner-friendly features such as learning materials, charting tools and user-friendly software and webpage UI.

ETFs (Exchange-Traded Fund)

An ETF is a collection of assets whose shares are traded on a stock market. They blend the characteristics and potential benefits of stocks, mutual funds, and bonds. ETF shares, like individual stocks, are traded throughout the day at varying prices based on supply and demand. Although supply-demand is in action, Authorized Participants and Market Makers will usually make sure ETFs are priced according to the NAV (net asset value) of the underlying assets. Owning an ETF share means owning a portion of a professionally grouped portfolio of assets.

S&P 500 is a well-known financial index and serves as the basis of many ETFs. The S&P 500 gave a total return (price return + dividend return) of 18.40% to its investors in 2020. The Year to Date (YTD) total return of the S&P 500 is 22.52% as this article is being written in the last week of October 2021. QQQ and QQQM are two major ETFs that primarily target the companies in NASDAQ 100. The return on NASDAQ 100 for the year 2020 was a whopping 47.58%. The YTD return of NASDAQ 100 is 20.18% in the last week of October 2021.

Best Ways to Invest for Beginners in Australia

In this digital age, there are numerous investment opportunities for beginner investors in Australia. However, stocks, CFDs, and ETFs are some of the most fundamental and easy-to-access financial investment opportunities for beginners. Although financial markets are still strong and consist of a massive total investment volume, it’s fair to add that cryptocurrencies are gaining ground on conventional investment vehicles.

Investing for Beginners in Australia – Stocks

Investing in stocks is very straightforward. To get started, all you need is an online brokerage account. Depositing money into an online investment account, which can later be used to invest in stocks, can be a convenient way to get started with financial markets for advanced users and beginners alike. That being said, it’s important that especially beginner traders and investors do their homework and participate in the markets in a prepared manner as reckless investments can cause loss of funds.

It’s always wise to start small, test the waters, and once there is good risk management in place and you get a hold of things, you can think about increasing your investment and diversifying your portfolio carefully. Practices such as investing in the stocks of multiple publicly listed companies from different sectors can help reduce the risk of losses for beginner investors in Australia.

Investing for Beginners in Australia – CFDs

CFDs are traded in the same way as most other financial assets. You buy or sell a certain amount of your selected asset, and your profit or loss is determined by how much you buy or sell. The most important distinction lies in the instrument being traded. When investing in CFDs, you purchase and sell contracts that imitate the live prices of shares, currencies, and commodities instead of directly buying stocks, currencies, and commodities. Because of their structure, CFDs offer easy-access to various global investment vehicles in different regions such as Australia.

When investing in CFDs, beginner investors must be aware of the position sizing of their trades. Each trade should only risk a very small portion of your total wealth. Most trustworthy CFD brokers charge nominal fees for their services or don’t charge fees at all and make their profits through spreads of the assets. Beginner investors must research the CFD brokers providing services in their respective geographical locations and choose a regulated and trustworthy platform with a favourable fee structure.

Investing for Beginners in Australia – ETFs

ETFs offer a wide range of investment options. Moreover, the ample liquidity, increased diversification, low expense ratios, and a low investment threshold associated with ETFs make them a perfect investment opportunity for new investors. ETFs also offer a variety of trading and investment strategies to beginner traders and investors. You can earn good returns on your investments with relatively low risks by using different types of ETFs.

Index ETFs are usually very popular financial assets for all types of investors. Some examples of successful index ETFs with high YTD returns in recent years are Vanguard Total Stock Market ETF (VTI), Vanguard 500 Index ETF (VOO), and SDPR S&P 500 ETF Trust (SPY).

Is Investing Good for Beginners in Australia?

Investing your money prudently can help you in growing your wealth in the long run without suffering too many losses. It also provides an opportunity to get a know-how of the economic system which can be an invaluable skill in life in general.

Profits and Upside Potential

Well-researched and cautious investments can earn beginner investors good returns on their investments. If you are investing in stocks, you might even receive a quarterly dividend payment based on the revenues of the company you have invested in. Also, you can earn a higher profit from your investment by buying the shares of a company at lower prices and then selling them when the prices soar due to successful business outcomes, scientific breakthroughs, newly-formed partnerships or anticipation of any similar positive and profitable event by the markets. You will need is some financial acumen and thorough research into the company you are investing in to be able to make successful decisions in the long run.

Benefits of Having Many Asset Classes to Select From

An amateur investor has a variety of asset classes to invest in. You can invest in stocks, bonds, securities, hedge funds, venture capitals, CFDs, ETFs, cryptocurrencies, commodities and many other asset classes. However, it must be kept in mind that you must start small and simple when getting into investing as a beginner since everything will be new to you. This way, you can keep your losses at a minimum during the learning and experience-gaining stages. Amateur investors can also diversify their investment portfolios by investing in different asset classes, different companies, different countries and different sectors.

Intellectual gains about Global Economics and Business

Investing in stocks and other assets provides you with hands-on experience in knowing about the global economy as well as the specific companies and microeconomic rules. All investors do some research to identify the assets that can bring about the highest rates of return on their investments. Doing so, they gain valuable insights into different assets, businesses, technologies, management, strategies, and the global economic system. If you are someone who likes self-improvement and intellectual growth you are likely going to enjoy engaging in investment decisions in long term.

Investing as a Beginner in Australia – What are the Risks

Every investment carries some risk because the market is volatile, fluctuating up and down over time. You must know your comfort level with risk (also known as risk appetite) and your tolerance for volatility before investing in an asset.

Losses due to Markets

As the prices of different assets move up and down over time, there is always a risk of losing money on your investment. If you bought a stock at $10 and the price drops to $5 over the next couple of weeks, your investment portfolio would have taken a loss of 50% which can be very painful to endure. In some rare instances – like the stock market crash of 2008 – there is a risk that you may lose most of your investments. However, these risks can be minimized by meticulous research into the assets you are investing in and proper risk management practices.

Losses due to Specific Assets

There is a risk that the specific asset you are investing in might not offer good performance. In such a case, beginner investors can protect themselves against asset-specific risks by diversifying their portfolio. Thus, it is advised that amateur investors must not put all their eggs in one basket. For example, let’s say a beginner investor is a programmer and is interested in tech industry stocks. Let’s say this investor buys Company A stocks only in large amounts and if there was a legal issue or a management issue or an unforeseen accident involving Company A, the investor can incur lots of losses. By buying Companies A, B, C, D, E in the tech industry or investing in a tech sector ETF, the negative effects of the specific problems involving Company A in that period would be minimized.

Operational mistakes and poor risk management while making an investment also present a significant risk of losses to amateur investors. Before investing, you must identify your objectives and risk tolerance. This will assist you in making informed investments and avoiding any potential risks. It’s also crucial to be confident with the tools (such as trading software) being used and to know them and their features well. A well-planned investment portfolio constructed by a careful and experienced operator is subject to a lower risk of losses due to operational mistakes.

How to Invest in Shares in Australia with eToro

In this section, we will look at the simple steps involved with making Shares investments on a well-established platform like eToro.

Step 1: Open an account with eToro

The first step to making Share investments on eToro is signing up for an account there. eToro provides account registrations free of any charge. Just type “eToro.com” into your browser, press “Join Now” and fill in the necessary details.

67% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Verify your account

After signup is complete you will need to verify your account. This process helps to make sure that this account belongs to you. Simply, you can provide a photo ID (passport, driving licence) and proof of address (bank statement, utility bill) and get your account verified in less than 15 minutes.

Step 3: Fund your account

After the verification process is over, you will need to deposit funds in your account to be able to start trading. On eToro, just click on “Deposit Funds” and enter the amount you want to deposit. Then press “Deposit” and your funds will be transferred. eToro offers are credit/debit cards, e-wallet (PayPal, Skrill, etc), and bank transfer which is very convenient.

Step 4: Invest in Shares!

After funding your account, you will be ready to start making investments in Shares or any other stock that’s available on your broker’s platform. For example, just type the name of a Share stock into the eToro search bar, press “Trade” and proceed with the amount you’d like to invest by pressing “Buy”. Congratulations and good luck in your investment journey!

Conclusion

Investing in stocks, CFDs, and ETFs can be great ways for beginner investors in Australia to make profits and learn investing and trading as a beginner. By planning your investment journey according to your risk tolerance, you can avoid the pitfalls of investing without lots of experience and you might even earn a hefty return on your investments.

When starting trading on financial markets, you must research to find out the online brokerage that best serves your trading needs. Your trading journey will be much more successful if you use a reputed and trustworthy broker. This is because you need to have the peace of mind that your money is in good hands to make successful and sophisticated investing moves. After deciding on the amount of your initial investment, the level of risk you are okay with, and the types of asset classes you want to invest in you can consider choosing between eToro, IC Markets and Plus500 as your online brokerage.

#1 Broker to Invest in Shares – eToro

1
$50Exclusive promotion
Our score10
  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

FAQs

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About Umut Sagir PRO INVESTOR

Finance and Tech professional. Founder of HolyPython.com. In recent years, Umut helped reputable clients such as MasterCard New York HQ, Deutsche Bank, FluidAI, Danske Commodities, EvoShave and others with cutting-edge technology implementations and financial research.