As part of my quest to cover the basics of finance and the sharemarket, I thought a sensible thing to do was to create a video outlining how to buy ETFs step-by-step, and more specifically through CMC Markets. The process is the same across any broker so the knowledge can be applied elsewhere.
I will say that it’s my first video and I do say “um” a few times in the beginning, so I apologise and please bear with me! Also for some reason, when I brought the calculator up on my PC and some of the website drop down menus, they didn’t come up on the video.
Further down you will find a transcript of the video for reference.
“Hi, Marcus from Financially Frugal here. Today I’m going to be going over how to buy ETFs, it’s a question that comes up quite often on Reddit in Ausfinance and FIAustralia so I thought I’d make a little video outlining how it works.
My broker of choice is CMC Markets pretty much for no reason other than it was the broker I started with a couple years ago and I really just can’t be bothered changing for the sake of a couple of dollars on brokerage.
I definitely recommend moving to a cheaper broker if you are with one of the banks like CommSec as they often charge about $19.95 per trade. Something like SelfWealth or CMC Markets are $9.50 and $11 respectively.
Ok so this is this is the home screen, there’s just a bunch of information; biggest gainers of the day, losers, some ratings and you can do all sorts of stock screening and general broader market stuff.
What we want to be doing is finding our ETF so either you can go into ETFs and ETPs (exchange-traded products) traded products or you can just search for what you want to buy. So let’s just say for example we want to buy some VAS, we come up here and type in VAS, there’s a bunch of options here and you want to make sure you select the right one.
The one we want is VAS – Vanguard Australian Shares Index ETF ETP – the one that says ETP is important, so we click in here and we’re taken to the page for VAS and that just gives you a brief overview, you can list charts, stock price history etc. I don’t really ever use it, I mean there are better websites out there if you’re after charts and things like that so the main thing we want to do here is go to buy.
So that’s the buy and sell just above the volume, so we hit buy and then we’re given this screen. You’ve got one column to the left, it’s your order and the right column is the market depth sales for that day, your open orders and the price people are paying.
I’ve got here $2187.07 in my account so I’ll be buying as much as I can with that amount of money. Now I want to come down here, click buy which should already be selected for you – quantity I will do in a second, so you’ve got your limit price, at market and conditional order.
I’ll leave conditioner order for later because it’s an advanced style of buy order and the two we’ll be concerned with here are at market and limit price. So what is a limit price? if you come up here you’ll see the last price $76.460 which is the last price that VAS sold for as well as the change in price that day, the bid, offer, high and low volume and whatever else.
So here you’ve got your buyers depth, a limit order is basically any one of these bids – so someone has come over here and said I want to buy VAS at $76.450, I wanna buy VAS at $76.100 and so on and so forth; that’s a limit price so you actually set the price you want to buy it and your buy won’t go off until the price gets to that level.
Now that’s not a bad idea, but I generally use market order and most people use market orders for ETFs because I mean you’re buying long-term, the difference in price is one-tenth of a dollar, $0.10 or something, it’s not making a big difference in the long run.
At market will say okay who’s the most expensive, let’s just buy it for that price – so it’ll go down here and basically takes the last price, it will say alright this is $76.460, that sounds good to me, yep, let’s buy it, a bang – so you want at market.
With order expiry you can pick different options, good till cancelled means the order will stay there permanently, then you can pick I just want to buy today or expire in a week or something like that so that’s generally more used for limit prices – we want to pick at market and then it asks for a quantity.
You’re not going to know, well might know off the top of your head, how much you can buy so what you going to do is open up your calculator and we’re going to divide the funds that we have by however much we want to buy so we have $2187.87 and divide that by the last price of the ETF.. so the last price was $76.460 and I get 28.6.
Now you can only buy in whole numbers so we’re going to have to buy 28 and the reason we can’t buy 29 is that we don’t have enough funds to do it; because we just divided our available funds by the last price it’s got to be lower than 28.6, so 28 is the quantity.
You can see here in a pop up the brokerage is $11 so that’s the cost deducted by the broker for providing the service and our costs will be $2151.88 which will leave me with $36. Then you’ve got your stop loss and take profit – now again these are sort of more advanced things, you can basically say if I buy these shares and they drop down to say $75 sell them, or you know if they go up to $85 sell them straight away but if you’re looking at ETF long term that’s just something you’ll rarely use.
CMC Markets has a trading pin so we just whack that in there and hit place order. Now, why didn’t that do anything? Because I’m doing this at 9:30 p.m. and the markets closed. Whilst the markets closed you can’t actually put in an order so you’re gonna need to wait for 10 a.m. to go and put that order in, it closes at 4:30 I think or 4 so you’ve got that window during the day.. it can be a little bit inconvenient if you’ve got work or whatnot but I normally just get the app on my phone and just do it through the app – it’s pretty straightforward.
Yeah, I think that’s it, that’s all there is to it really, and then you’ll get an email transaction that it’s processed and it’s all gone through fine and just a receipt for you and that’s it – you’ve bought your ETF so happy days!
That’s it for this video, I’m generally trying to get out some articles of the most frequently asked stuff on Reddit, a website of helpful articles for beginners who are getting started in finance, in the stock market and everything that goes with that so be sure to keep an eye on those and thank you for watching.”