Often, when a company floats it shares on the stock exchange for the first time, it does so via an initial public offering (IPO). In this instance, you are able to invest in the shares of the company by completing the application form and making necessary payments. This was common during the stock market boom of 2006-2008.
At regular times, shares are purchased through a stockbroker. Typically, this would involve opening an account with the stockbroker – this entails completing a set of forms and providing identification documents. Once the account is opened, a couple of options become available:
- Online Trading – If your stockbroker has an online platform, you will be given login details to the online portal. You can then log-in and place your orders.
- Broker-Assisted Trading – In this instance, you will have to send a trade mandate/instruction to your stockbroker via email or a physical letter. This is recommended when it’s a large transaction that can impact the market.
- Discretionary Trading – This is typically offered only to high-net worth individuals. With this hands-off approach, the investment professionals make all the decisions on what to buy or sell.
In addition to these, there’s the option of indirectly buying shares via a managed funds (Mutual funds, Exchange Traded Funds and Index Funds). This managed funds pool resources from several investors and then use the proceeds to buy shares. Now, because this funds are managed by investment professionals, this is the most advisable for small and first-time investors. To invest this way, you will have to reach out to a mutual fund provider and complete a subscription form.