Last week I gave you a primer on buying shares. This week I’ll take you through how to sell shares.
[Ed Note: You can now download the entire ‘How to Buy and Sell Shares’ six-part series for FREE. To download your copy right now go here.]
As you might guess, the process isn’t that different. So a lot of what we wrote last week will be repeated this week.
I’ve received a number of related questions which I’ll cover next week in a Q&A session. So, if there’s anything you feel I haven’t covered and you have any questions, just send them to email@example.com and type ‘Questions about buying and selling shares’ in the subject line.”
And as a reminder, if you become a member of one of our paid advisory services – Australian Small-Cap Investigator, Resource Speculator, Tactical Wealth or Total Income – you’ll receive the free e-book “How to Buy and Sell Shares for Profit”.
There you’ll discover all the ins and outs of buying and selling shares in an easy-to-read format, with helpful examples.
Plus, each of these services is obligation-free so there’s no requirement to stay on as a subscriber if you find it doesn’t suit you.
Anyway, until you do that, here’s a simple explanation about selling shares once you own them. And just to avoid confusion, I’m not talking about short-selling, that’s something completely different…
So, let’s say you subscribe to Australian Small-Cap Investigator, Resource Speculator, Tactical Wealth or Total Income.
And let’s say you bought a share based on a recommendation a few months ago. In that time the price has gone up, and we’ll say you’re now sitting on a $1,000 profit. Pretty good if you only invested $2,000 to begin with.
Well, now let’s say you’ve received a sell recommendation from your advisory service. Or maybe you’ve just decided for yourself to cash in your profit.
What do you do?
Simple. Here’s an example of a typical sell ticket you’ll get with an online broker:
Source: CMC Markets Stockbroking
Or, it could look something like this:
First you’ll need to confirm the ASX Code. In our example the code is XYZ. For BHP Billiton it’s BHP, for Commonwealth Bank it’s CBA and for Foster’s it’s FGL.
All share trading sites have a search function to help you find the stock code. But the easiest way to sell is to select the “sell” button next to the stock in the list of your holdings.
If we look at a sample portfolio on the Comsec trading site you’ll see what I mean:
Clicking on the red circle would take you straight through to a sell order ticket with the stock code pre-populated. Although you’ll still need to manually enter the number of shares you want to sell.
This is just in case you don’t want to sell all your shares. When a share price doubles, some punters like to take their initial stake off the table and leave the rest in the share market as a “free” bet.
Others sell a quarter or a third, knowing that even if the share price halves they’ll still likely get out at no worse than break even.
Others prefer to sell the whole lot and enjoy their winnings.
But whatever strategy you choose, that’s entirely up to you.
Next, just as with buying, you need to figure out what price you want to receive. If you’re happy receiving the current price on the stock market then you select “At Market” or just “Market”. This means the trade will go through at the highest price on the bid (or buyers) side of the stock market.
What does bid mean? Let me explain. I’ll show you what’s called the market depth:
Source: CMC Markets Stockbroking
This shows you the number of buyers and sellers with limit orders in the share market (I’ll explain limit orders again in a moment).
The bid side of the stock market just means you’ve got a bunch of people bidding to buy shares at a particular price. So in this case, if you want to sell 1,000 shares at the market price you would accept the highest bid and receive $2.17 per share.
This would make you $2,170.
Just think of it like people bidding at an auction. Except in this case, rather than just one seller, there’s a whole bunch of sellers. Each vying to get the best available price for their shares.
Of course, you don’t have to sell at the market price. An alternative to a market order is a limit order. That simply means you want to limit the price you’re prepared to receive. If you want to sell but you’re not prepared to receive less than $2.20 per share, you would enter a limit order to sell your shares at $2.20.
This means you’ll wait in a queue on the “sellers” or “offer” side of the share market – that’s the right hand side in the market depth above.
As a limit seller your order will remain in the queue until the share price rises to your level of $2.20 or until you cancel the order.
Getting Your Money After You’ve Sold Your Shares
Once the trade has been completed your share broker will email a confirmation statement to you.
Now all you’ve got to do is wait for the money to arrive. That bit should be easy. Providing you’ve set up a direct debit, your share broker will pay the money into your bank account in four days without you lifting a finger.
You may see reference to a term called “T+3”. This simply means the trade settles three days after you sell the shares.
However, in reality, the money won’t appear in your bank account until the fourth day. That’s because even though the trade settles on the third day, the share broker still needs to transfer the money into your bank account. That will take overnight.
As you know from last week, all regular share trades are settled T+3. Sometimes you may come across something called deferred settlement. But that usually only occurs with initial public offerings (IPOs) or other special situations, such as a share reconstruction.
That means rather than a T+3 settlement, the settlement date could be a fixed date in the near future. But don’t worry about this too much as it’s an irregular occurrence.
And that’s it. Once the money is in your bank account you can either spend your winnings on a treat, or you can use the cash to put towards your next trade.
Like last week, I hope that’s helped.
Don’t forget to drop me a line to firstname.lastname@example.org if there’s anything else on buying and selling shares you’d like me to cover. Just type “Questions about buying and selling shares” in the subject line, and I’ll select some of the questions and print them – along with the answers in Money Weekend next week.
For Money Morning Australia
P.S. This is just one, of a six-part series written by Money Morning Kris Sayce. For your convenience we’ve bundled the whole series into a brand new report titled ‘A Beginner’s Guide to the Stock Market: How to Buy and Sell Shares’. In it you’ll find easy–to–read and jargon free instructions on the steps you need to take to jump into the market TODAY and buy and sell your first lot of shares.
If you’ve got an interest in the share market, but completely new to the whole deal and don’t know where to start… download Kris’ new report today and he’ll show you everything you need to know to get started. Go here to download your free report today.