Question re: Purchasing shares online

Hello all,

I have a question in relation to purchasing shares online. I am new to share investing and am planning on starting with an initial investment of about 5k in an ETF (STW or similar) and then with a regular savings plan purchase more shares. My question is; if i purchase 5k worth of an ETF and then a month later buy another 1k worth of the same ETF will I end up with two separate entities? (open orders) or will the additional purchases be amalgamated into the first purchase?.

Any and all assistance is appreciated,
Cheers,
Luckypig.

Hi, not quite sure if I understood your question but for example
You buy the first parcel of shares, worth 5k, and pay (depends on your broker) $15 brokerage.
Next month you buy a parcel worth 1k but most certainly pay the same $15.
You do that four more times and then sell the whole lot. For this example you would have paid $90 brokerage for buying and $15 for selling the shares.
Hope that helps.

Your broker and the share registry keep track of how many shares you own. If you bought say 2000 shares one month and 3000 shares the next, you have 5000 in total and they are considered a single holding. So you will only get one set of shareholder letters, annual reports etc.

When you sell you can sell any number of shares you own. So for example you can sell 2500 shares in 6 months, and remaining 2500 shares in 12 months.

There are capital gains tax implications depending on when you sell so best speak to your accountant if you are unclear.

depends on the broker, but all the brokers i've ever used have amalgamated them into a single entry on the "my portfolio" or similarly titled section when you log into their online trading website. some, such as IB, will identify the individual parcels for you, but you have to run special reports to get it to do that.

but i would recommend you get into the habit of keeping records of your trades (eg. in an Excel spreadsheet) and record them as two separate parcels anyway. because they are in fact two separate entities when it comes to tax purposes. when you do a partial sell you are allowed to nominate which parcel(s) the units you are liquidating come from (http://www.ato.gov.au/corporate/con...htm&pc=001/001/038/002/003&mnu=0&mfp=&st=&cy=).

for eg. if i bought 1000 BHP at 30 and another 1000 at 35, then i sell 1000 at 40 and want to take the capital gains hit this year because i believe that will provide the best overall tax outcome, i can opt to dispose of the 1000 that were bought at 30. but if i had bought the parcel at 35 in 2011 and parcel the 30 a few months ago, generally (but not in every situation) i would opt to dispose of the ones bought at 35 as those are eligible for the CGT discount.

if you do not have the details of the individual parcels, and you get questioned on it, the tax office may force you to use a first in, first out method, or an average cost method. either of which may, depending on your circumstances, produce a suboptimal tax outcome.

minimising the tax hit is a very important part of trading, if you haven't discovered that already, you soon will!

PS. this is not tax advice. i am not a qualified tax accountant. speak to one if you are unclear on any of the above.

Sharkman said:

depends on the broker, but all the brokers i've ever used have amalgamated them into a single entry on the "my portfolio" or similarly titled section when you log into their online trading website. some, such as IB, will identify the individual parcels for you, but you have to run special reports to get it to do that.

Click to expand...

I've only ever used Etrade but with them you can choose which way you want to view your portfolio, i.e.
average view which will give you an average price over however many parcels you have bought, or individual buys. You can personalise it to show whatever you want.

Julia said:

I've only ever used Etrade but with them you can choose which way you want to view your portfolio, i.e.
average view which will give you an average price over however many parcels you have bought, or individual buys. You can personalise it to show whatever you want.

Click to expand...

you know what?

i can't believe i've missed this. i've been using IB for 4 or 5 years and me, blind as a bat, have never noticed this before i read your comment, then on a hunch logged into my IB account to check something.

if you go to activity statements and generate any sort of report, then go to either the long open positions or short open positions sections, and click on one of the cream coloured lines, a bit of javascript triggers and expands it out to show all the parcels that comprise that position.

never realised that. in all the years i've been trading thru IB

i had previously thought one needed to run an activity statement over the entire lifetime of the account, then pick thru the "trades" section (which would be hundreds, if not thousands of entries for most IB users) to pick out the details of the parcels one is after.

thankfully i have been practicing what i preached above and kept the details of every single parcel i have on my books, so it's not as if this is groundbreaking info that i've been missing all these years. but still is handy to have that available for cross checking, to be sure.

just putting this out there in case there are any other IB users here who are as blind as i am and haven't noticed this before!