Before you dive in and buy your first share, a quick recap for you on what shares are, and where and how they are traded. If you're a newbie to buying and selling shares, read on. If you know your shit and just want to buy…scroll on down to the bottom half of the article.
OK, here we go…
What is a share?
Simply speaking, a share is literally that, a "share" in either a company or a fund.
When you buy a share in a company, you buy that company's stock and get a unit of ownership in that company. An example of this is buying 100 shares in Canopy Growth stock.
While you own that stock in the company (and own a part of the company) you are entitled to a proportional right to any distribution (dividend) that the company makes to its shareholders. Most importantly, you also get the potential exposure to an increase in its price (but also the exposure to any potential decrease in its price).
This is the primary reason people buy shares, hoping they will go up in price and value!
If you buy a share in a fund, you are also entitled to any distribution that fund makes while you hold that share and have exposure to the price changes in that fund (in exactly the same way as holding a company's stock).
Shares and stock markets.
A share is first listed on a public stock exchange when a company undertakes an Initial Public Offering (IPO) and after that, these shares are traded between buyers and sellers on the stock market with its price fluctuations based on the perceptions of those buyers and sellers. Given the change in sentiment between buyers and sellers, this is when share prices move.
You can see how it's moved for Canopy Growth over the past 3 months. Given the potential for share prices to increase, a lot of investors (or traders) buy stocks with the intention of selling them at a later date for a higher price.
The investor may not be interested in the dividend to be paid (or the company may not pay a dividend) but believes that the company will trade at a higher price in the future and will want to profit from this occurring.
It's worth noting that when you buy a share with the intention of selling it at a higher price, you are also exposed to the risk that the share price falls.
Although there have been periods of market falls, the world's largest share market index (the S&P 500) has on average increased in value by approximately 12% each year (since 1923).
How are shares traded?
Shares are traded on a stock exchange and this is mainly done electronically. Buy and sell orders are sent electronically via a broker (see below) and are matched together at the exchange.
For example, if someone wants to buy 100 shares of Canopy Growth for $65, and at the same time there is a willing seller for 100 shares at $65, a trade is consummated and the buyer becomes the owner of 100 canopy Growth shares.
You buy shares through a broker. The most common form of broker is an online brokerage, who accepts your order online and arranges for the order to be sent to the stock market. Digital brokerages have been around since the 1990s and have quickly replaced phone brokers (who you call up), who tend to be much slower and more expensive. You may pay brokerage on your order, but there is a movement towards $0 brokerage fees as the market gets more competitive (see below).
So, where to start?
To buy your first share, you will need to set up an account (all online) and this can take 5 minutes with a good broker and a lot longer with a slow one. Setting up an account requires you to enter some personal details so the broker can confirm your identity and meet their regulatory obligations in regards to money laundering etc.
Your account then gets verified – this can be anywhere from instantly with a new online broker who uses digital verification services, to up to 5 days with a slower broker.
Once verified you need to deposit your investment funds into the platform or broker you are using so you can buy your first share. Once again this can take a few days for your funds to clear. However, some brokers have focused on partnering with other banks and payment gateways to make this faster.
If all that sounds complicated, don't fear, we've found a new-age broker that will have you in the market in just a few minutes.
So we get asked this all the time…
I really want to get into the market, but do not know how. Can you help?
In this case, yes, we can.
To buy and sell the world's biggest marijuana stocks, we use an online broker called Stake.
Stake is an Australian regulated broker that focuses on giving customers access to the US share market. The US stock market is one of the largest, and some of the biggest marijuana companies on the planet are listed in the US.
Stake has a web and accompanying iPhone and Android apps, and have partnered with established financial institutions like Macquarie Bank, OzForex and Sanlam to bring the US market to the rest of the world.
We know what you're thinking. And…no, we don't. Not a thing.
We don't take any kickbacks or get paid by Stake, we just really love what they are doing, and the way they're doing it. They're making it easy to open an account and join the green rush. This is the biggest investment opportunity of our lifetime, and along comes a platform that makes buying your first pot stock as easy as buying a cup of coffee.
When we looked around, they were by far the fastest, simplest and cheapest on every measure.
Why we love them…
With Stake, setting up an account takes less than 5 minutes, and they do the verification digitally, so it's immediate if you provide the correct details (have your driver's license handy for super fast verification). You can fund via card (debit or credit, POLi or by bank transfer) and if you elect "same day funding" your funds will be waiting for you to place your first trade on the same day as you opened your account.
Stake does not charge for brokerage but charges on the FX fee when you move your money into USD. You can leave it in there as long as you like and trade for free. So if you want to buy 10 marijuana stocks for your portfolio, you can without paying 10x the brokerage. And when you sell your shares, you won't get stung again with brokerage. As we said, it's the best we've seen and it's what we use for our trades into the US.
And they told you money doesn't grow on trees.