How To Buy Shares In Commonwealth Bank

Alongside most other banking institutions, CommBank’s share price took a major hit in 2020 as COVID-19 swept the globe. Shares fell by a third in value at the start of the year to around $60 per share, which is where prices sat a decade ago.

Since then, CBA shares have regained ground, and at the time of writing a single share cost approximately $101. In its mid-financial year results to December 2022, CommBank reported a profit of $5.15 billion. For shareholders, this amounted to an interim dividend of $2.10 per share, which was an increase of 35 cents on the corresponding reporting period for last financial year.

In August, CommBank posted an eye-watering cash profit in August of $10.16 billion, which represented an increase of 6% on the previous year—ironically the rate of interest most variable mortgage holders are now paying on their home loans. Unflattering parallels were drawn between the bank’s healthy profit margins and the rising number of households at risk of mortgage stress as interest rates have risen.

The cash rate has been on the rise over the past 18 months, since sitting at the historic low of 0.10% in April of 2022. The RBA has left the cash rate on hold at the last two meetings, and many economists believe the rate hiking cycle is nearing its peak. Generally, banks will increase lending rates to maintain their profits if the cash rate increases the cost of their funding. But by doing so, customers may be inclined to borrow less as interest rates soar.

CommBank details these short-term and historical movements directly on its share price summary page, which is updated in line with the ASX with about a 20-minute delay. As with all ASX-listed companies, similar data can be found directly via the relevant ASX company profile.

The CBA delivers annual reports, half-yearly results and letters to shareholders that provide a deeper dive into its performance. These are publicly available and can be compared against similar documentation from other banks for greater context.

All shareholders can also attend annual general meetings online or in-person for the most up-to-date review of performance. If you don’t have the time or inclination to attend, written leader addresses and recordings of these meetings can be accessed after the event.

All ASX-listed products are traded electronically and can only be bought and sold through an ASX participant broker, which include online share trading platforms as well as brokerage firms.

If you’re new to the world of investing, you might opt for a full-service brokerage firm that can provide you with advice, research and recommendations on buying and selling shares based on your personal financial circumstances and investment goals. If you’re confident in your financial market knowledge and comfortable making trades online, an online investment trading platform gives you access to the sharemarket without direction from a professional, but generally with a lower brokerage fee.

Related: How to Find the Best Share Trading Platform

The popularity of share trading has skyrocketed in recent years, fuelled by the accessibility and convenience of online share trading platforms. These platforms or apps enable users to make stock market trades directly, bypassing professional brokers who often charge higher fees for their services.

Since the platforms don’t provide the personalised research and recommendations of a full-service broker, you want to do plenty of research before putting money on the table. You should interrogate both the companies you’re looking to invest in and the share trading platforms you can use to make these investments.

The online investment platform market is expanding alongside demand for its services. A few popular platforms include eToro, Superhero, Tiger Brokers and the Commonwealth Bank’s in-house app CommSec. It’s important to consider how the capabilities and requirements of these platforms will impact your investment strategy. So, be sure to research them carefully and consider:

• Brokerage fees, which may be set at a flat rate or a percentage per-trade
• Monthly fees or other ongoing user costs
• Minimum and maxim investment amounts
• Access to different stock exchanges and international markets
• The usability of the platform itself
• What level of customer support they provide
• Educational resources or social platforms to connect with other investors

It’s easier than ever before to tap into the share market. But this move shouldn’t be taken lightly, whether you’re a new investor or an old hand on the share trading market. Here are the key steps everyone should consider before jumping on the investment bandwagon and bringing CommBank shares along with you.

1. Assess your Market Knowledge

Take the time to research the mechanics of sharing trading, the ins and outs of the industries you’re looking to invest in and the performance of the business you want to buy shares in. Check CBA’s investor centre for information on the bank’s share price movements as well as overall strategy, financial and operating performance.

A certified financial advisor can provide expert insight to help guide your investment strategy if you still don’t feel confident after researching solo.

2. Compare Share Trading Platforms and Brokerage Services

You’ll need to decide if you’re investing via a full-service brokerage firm or an online share trading platform. Generally, the former provides tailored investment recommendations at a higher brokerage price, while you’ll need to research independently to manage your investments at a lower cost with the latter. However, fees, features and customer service differs from provider to provider within these two categories, so it’s important to compare numerous options.

3. Open and Fund Your Brokerage Account

Once you’ve decided on the platform you’ll invest through, you’ll need to open a brokerage account and transfer money into it to start investing. Most brokerage firms or online trading platforms will require a few forms of identification and a bank account to link to your brokerage account.

4. Decide on an Investment Strategy

This is the ‘when’ and ‘how much’ of investing. Predicting share market movements is a tricky business, but you can get some insight into price trends by looking at historical data and keeping up with financial news.

Whether you want to invest a larger lump sum straight away or make smaller share purchases over time, it’s important to only ever invest what you can comfortably afford. Purchasing shares in the Commonwealth Bank or any other publicly listed company doesn’t guarantee you a profit. So, always make sure you have a buffer of emergency savings in case an investment doesn’t put you in the financial position you had planned on.

5. Place an Order for Commonwealth Bank Shares

Depending on the broker or online platform you’re using, you’ll simply need to log into your account, select the amount of CBA shares you’d like to purchase (or the amount of money you want to spend on a purchase) and make the trade. Don’t forget, you’ll need enough money in your brokerage account to cover the trade as well as brokerage fees.

The ASX is open Monday-Friday 10am-4pm (Sydney time). As long as you make trades within those hours, you should be able to buy shares at the price they’re listed at automatically. You’ll likely need to put in a limit order if you’re trading outside these times. This lets you choose a price you’re happy to purchase the shares at within a timeframe you also set. The clincher here is that CBA shares may not dip into your set price. So if you are keen to purchase at a higher price, you’ll need to log into your share trading account to purchase shares within ASX hours.

6. Review the Commonwealth Bank’s performance regularly

Share trading isn’t an entirely passive income stream. You need to be monitoring the performance of all of your investments to make the most out of them. Make it a habit to do a broad portfolio review monthly, quarterly or annually. For assessing CommBank’s performance, this essentially brings us back to the reports at the CBA investor centre.

Related: ASX Stocks to Watch in 2023

Share prices can change dramatically in just a few days or even hours. While historically the share value of big banks are more stable than less-established companies, it’s still important to keep track of these shifts alongside long-term business and industry trends. This provides greater insight into the market you’re investing in and how the business you’re planning to buy shares in is performing within this context.

Unless you monitor the market throughout AXS trading hours, it’s notoriously difficult to time trades to perfection. If you want your portfolio monitored more closely to take advantage of market shifts, contact full-service brokerage firms to see how their services could support your investment goals.

The first time you purchase shares from any ASX-listed company, you need to invest at least $500 (excluding brokerage fees). This is known as the ‘minimum marketable parcel’ (MMP) and is a rule specific to the ASX. Once you’ve made this initial investment in a company, you can buy and sell smaller amounts.

Some share trading platforms, often known as micro share-trading apps, enable you to make that initial buy-in at a lower amount. They achieve this by pooling the amount you dedicate to the investment alongside their other customers’ investments, then make the trade on your behalf. For example, you can invest as little as $100 through Superhero and $50 through CBA’s CommSec Pocket.

Keep in mind that each transaction will incur a brokerage fee, which may be a flat dollar rate or a percentage of the value of your trade. When you invest in smaller bites, this fee will make up a larger percentage of your total investment. This means it may take longer to produce a return on your investment (assuming you do make a profit), as you’re covering a larger purchase cost.

If you want to diversify your portfolio across ASX companies, you can put your MMP behind an exchange-traded fund (ETF). When you buy an ETF, you’re effectively purchasing a portion of pooled shares that could come from 20 or 200 companies. This kind of open-ended investment fund usually tracks a specific index, sector or commodity, and can be bought and sold on a stock exchange (including the ASX) just like any other stock.

Whatever amount you choose to invest in CommBank should be based on relevant market research, a well planned-out investing strategy and your own financial position.

The process of selling your Commonwealth Bank shares is similar to the purchase process—research the market, do a CommBank financial health check, decide on an investment strategy, sell the shares and continue to assess your portfolio performance.

If you’ve made a profit on the sale of your shares, you will be liable to pay Capital Gains Tax (CGT). If you’ve owned the sharers for less than 12 months, the full amount will be taxed at the rate of your applicable income tax bracket. If you hold onto the shares for more than 12 months, you may only be required to pay CGT on 50% of the profits thanks to a discount that rewards longer-term investment.

Whether you’ve sold all of your CBA shares or just a portion, it’s imperative to monitor your investments and share trading choices over time. This ensures you learn from successful choices and more costly ones, and can inform future investments.

As you buy and sell shares, keep portfolio diversification front-of-mind. By spreading your investment across numerous industries and commodities, you minimise the risk you take on should one of these decline in value.