3. Broker Basics: How to Place Orders & Manage Your Portfolio Like a Pro

Bryce: [00:01:13] Welcome to Get Started Investing feed, a podcast giving you all the basics that you need to feel confident in your investing journey. There is no jargon and no B.S. Over three episodes, we're going to be doing a broker basics with superhero crowdsourcing questions from the Equity Mates community and adding a few of our own will be covering the fundamentals, choosing the right broker. And in this episode, we're going to be discussing making your first trade and managing your portfolio. This is your one stop shop to all things brokers. We don't hear any more broker questions after this. We've brought in experts from Superhero to help us through it all. But firstly, as always, I'm joined by my Equity Mates Ren. How's it going? [00:01:52][39.6]

Alec: [00:01:53] I'm good Bryce. I'm actually going to say we're happy to hear more Broker questions after this. We are. We're not going to accept Broker questions. If you haven't listened to the three part series, if you ask a question that we answer in the three part series, we'll just direct you back. [00:02:06][13.5]

Bryce: [00:02:07] Absolutely. So to help us through this episode, final episode of the series, again with founder and CEO of superhero John Winters. Welcome. [00:02:14][7.2]

John: [00:02:15] Thanks for having me. [00:02:15][0.6]

Bryce: [00:02:16] Yes, it's been fun. [00:02:16][0.7]

John: [00:02:17] Good to chat everything, Brokers'. [00:02:18][1.2]

Alec: [00:02:19] Yes, I [00:02:20][1.1]

Bryce: [00:02:20] would hope so, given the amount of [00:02:21][1.4]

Alec: [00:02:21] revenue you've dedicated your life to brokerage. [00:02:23][1.8]

John: [00:02:24] When people ask us questions, we'll just direct them to your podcast. [00:02:27][2.9]

Alec: [00:02:28] Yes, absolutely. That's the intention. If people are going to ask a question that we haven't answered on the podcast, then full credit yet. They've done a better job than we have. Yes. [00:02:38][9.9]

Bryce: [00:02:39] So I think in this episode we're going to walk through, I guess, buying your first trade and then I guess the managing part of the portfolio. But before we do, that is the first decision. Really, what are you going to buy? [00:02:54][15.4]

Alec: [00:02:56] Absolutely, but [00:02:57][1.6]

John: [00:02:59] there's there's enough decision paralysis on choosing which broker you're going to you're going to sign up with, but when you get on to when you get onto a brokerage account, you've got you know, if you're in Australia, you've got I think Superior has two thousand seven hundred fifty two different securities that you can trade. So there's this moment of decision paralysis again. What are you going to invest in? And the same this there's even more shares available, shares in ETFs available if you if you had access to the US. Yeah. So, you know, you're probably up if you had Aussie and us, you probably up at six or 7000 in total. So it's a big number. And what do you invest in? So I think that the key thing is to have an investment strategy which goes through how do you select what companies you're going to invest in, how do you do research and what you want the outcome of your investments to be? [00:03:52][53.1]

Bryce: [00:03:53] Yeah, and I mean, we go through a lot of that in the Get Started Investing feed 12 part series that we've done. And if you want more detail on determining your investing strategy and building one out, then come across and join us on the Equity Mates Investing podcast where we have a number of interviews with experts. It's not something we're going into today, but having an investing strategy is important. [00:04:13][20.9]

Alec: [00:04:14] Yep. Yes. Yeah. So let's let's take it as a given that you've waded through those 2000 options and chosen that one gem that you want to buy all the time, or I mean, you've just chosen an index and you've decided you're going to buy an ETF that has a bit of everything in it, then I guess how does it work in practise? Let's let's use Afterpay as the example. How do I actually go about finding it on the platform and buying it? [00:04:43][29.3]

John: [00:04:44] So there's a couple of ways I can talk. I can talk about Superieure and I can talk in general. So Super Hero has categorised the entire market through our invest our invest page where we've broken individual shares into a category. So think of think of Netflix's action and adventure movies. We've we've created different categories like by now pay later, Aussie dividends, different themes. So whether it's it's tech heroes, you've got exposure to to ETFs in there. There's one called I Love Gold and yeah. Austin Powers. Yes. It's got a bunch of the leading Australian gold mining companies. There's a couple of ETFs in there as well. So to help to help you through that process or you can search so you can search for the company or for the ticker. So that would be that would be pretty standard across all online brokers. [00:05:39][55.2]

Bryce: [00:05:40] And what is the tik-tok for? [00:05:42][1.9]

John: [00:05:44] What is what is the ticket? Generally, it's a code that the ASX uses to identify individual companies. Yeah. So for BHP, it's BHP Commonwealth Bank, it's CBA for ZIP, it's a Z, one P. So every every company has their own, their own individual ticker or their own individual ASX code. And same in the US, they would have their own individual ticker as well. [00:06:08][24.8]

Alec: [00:06:09] Yeah. So for Afterpay it's Apte and if you if let's you superheros an example. But it really is the case for most brokers. There's a search function I can search typing in the word Afterpay or typing in Apter [00:06:26][17.2]

John: [00:06:27] so you'd be able to find, you'd be able to find that that stock relatively easily and that would pull up more detail on that company. So you'd be able to see share price. You'd be able to say open high for the day, low for the day, high for the year, low for the for the year. [00:06:45][17.3]

Alec: [00:06:46] And when we talk about high and low remain highest price and lowest prices in that period. Yeah. [00:06:51][4.8]

John: [00:06:51] The average price for the day, the market cap of the company, like what is the entire company valued at. I think Afterpay is up about 30 billion now, which is extraordinary. There's there's a range of information. There's a chart that shows you the price movements over over a period of time, whether it's for the day or for the year. So there's a there's a whole bunch of information that you can find on that particular company and then you've got the choice to buy the shares. So should we start walking through the process? So if you if you chose to buy Afterpay, there would be on superhero. There's a requirement that you have to have the money in your account that you want to invest before you can place a trade. So if you wanted to buy your one Afterpay share, you would have to have give or take a hundred bucks in your account. You click buy, you can enter either a market order or a limit order so you can choose to buy your shares at the current. Bryce, or you can select the price that you want to invest in and the number of units you want to buy. So if we just said you want to put in. You wanted to buy. You did it as a limit order and you said, I want to buy one Afterpay share at one hundred two dollars, you would you would put those details in. It would say your total order is going to cost you one hundred and two dollars plus brokerage in the case of superior to be five dollars. So your total order value is one hundred and seven. You wouldn't be able to place that trade unless you had one hundred and seven dollars in your account. When you do click, when if you do have the money in your account, you can click confirm order. We have security measures in place that require Two-Factor authentication of your order. So you'll get sent a text message with a six digit code. You have to put that six digit code in for your your order to be completed and processed through to the market. So when you when you when you put in your your tuffet code and you hit confirm, it's milliseconds from from that click to your order going into the market in most cases. So so yeah. Your order will be straight into the market at one or two. [00:09:08][136.7]

Bryce: [00:09:09] So I just want to touch on there. You've mentioned buying one unit of Afterpay at one hundred and two point. Let's assume that you had a thousand dollars. Could you say I want a thousand dollars worth of Afterpay or do you have to put the units in every time? [00:09:24][14.9]

John: [00:09:25] You know, you could put in a thousand dollars worth of Afterpay and in work and it'll work out to the nearest whole unit so it will never go above a thousand dollars. It will always round it down to the nearest whole unit. [00:09:36][11.0]

Bryce: [00:09:37] So it's pretty straightforward, I mean, you're not going to get too much divergence amongst brokers when it comes to that sort of process and really it's very much the same when it comes to the sell side as well. You can either say you want to put in a sell at a limit order or at the market order, and you can determine if you want to sell 500 dollars worth or five units of a product of a stock. So the buy sell is very similar. But what happens once the order is placed? You mentioned that it's milliseconds to go in. Is it is it executed immediately? Can I do this at any time of the day? [00:10:09][32.0]

John: [00:10:10] So it depends on the price around execution of the order. It depends on the price. If the market is where your price is, yes, it will trade that. But if you if you think about it as far as goods and services, if you're if you're at a market, I always like giving the fruit analogy. Have I told you the fruit analogy? [00:10:29][18.5]

Alec: [00:10:29] Sorry, I think you're about to. [00:10:31][1.4]

John: [00:10:31] So if you if you were to go to a fruit market and there was someone selling bananas and the bananas were to Dollars. And you said, OK, I'm going to buy I'm going to put in a limit order at a dollar ninety. You wouldn't buy any bananas because the seller is at two point. So you've got a limit order at 190. It's not going. So the seller, a new seller, may come down to 195. You're still not going to trade, so so the guy next door may have bananas at 195 and you say, OK, I'm going to try, I'm going to buy my banana at 195. So you've lifted your order price. So that's when your transaction goes through. So it's the same in the market. If if Afterpay is trading at one one or two and 50 cents and you go in at one or two, it's not going to trade. So so that's that's why your order wouldn't execute straightaway. If you put in a market order, it would buy the banana at two bucks straight away like that. That's how it works. In terms of timing around the market, the market does have open and closed times, [00:11:39][67.5]

Bryce: [00:11:39] craziest times as well. [00:11:40][1.2]

John: [00:11:41] That's not a time before it's better. It's better than yeah. Yeah. It's been on the back [00:11:47][5.5]

Alec: [00:11:47] of some markets have lunch breaks. Let's start trading on. [00:11:50][3.4]

Bryce: [00:11:51] How good is that little. [00:11:53][2.1]

Alec: [00:11:55] Yeah, yeah, yeah. [00:11:55][0.8]

John: [00:11:56] I'm sure the Mediterranean companies would have the same sort of thing [00:11:59][2.9]

Alec: [00:11:59] if I ever saw an exchange. It's going to be one hour open flurry of activity. There was shot for the day [00:12:04][4.9]

John: [00:12:05] and a three day workweek. Yeah. So now the market hours are actually from seven a.m. till I think seven pm. So there's there's different open and closing times throughout throughout those that those hours. But the actual trading trading time is it's a it's a staggered open from 10 o'clock, so it opens alphabetically from ten o'clock for about ten minutes. [00:12:30][24.8]

Alec: [00:12:31] And I never knew that. Yeah. Did you know that. Oh, there you go. [00:12:34][3.7]

John: [00:12:35] So I think it's that the last group is 109 really. So minus 15. So you can pick. [00:12:41][5.5]

Alec: [00:12:41] And so BHP is off to the races before Zippy's. Yeah. [00:12:44][2.9]

Bryce: [00:12:44] And some of them open a little bit before ten on the [00:12:47][2.4]

John: [00:12:47] I think it might be a minute or or fifteen seconds or a minute and fifteen seconds. I should probably know that but yeah it's call it a minute either side. So, so that's the open and then the close. It doesn't officially close at four o'clock, so four o'clock it goes into what they call a pre open period for 10 minutes and it's called the final action. So you can put and so trades in and it works out what the average across all the buyers and sellers are going to be. And at four, 10, give or take a minute, it will close. So we say the latest closing time is 411, right. There you go. [00:13:29][41.3]

Bryce: [00:13:29] So it's but can you place orders at any time of the day? You say you're at work, you've missed it. You can't place an order during the day. Too busy. I come home at ten o'clock at night. I really want to buy BHP or Afterpay [00:13:42][13.3]

John: [00:13:43] because technically, technically, the ASX won't accept the order. So where our system. Well, so we'll hold orders until the morning and then and then place them into the market when the market's open. So we've got that that user experience on our side. So. So, yes, you could place an order at 10:00 pm at night for the next morning, but it will only trade if it's in the market price of the stock, it'll only trade between 10 and. Eleven minutes past four. [00:14:11][27.9]

Alec: [00:14:12] Yeah, yeah, I think that's the important thing for the in the end user sitting at their computer or on their phone, they can put an order in at any time. Yeah. And it's that's especially the case. Well, especially important for people that are trying to buy direct stocks overseas. You know, you don't have to wait until midnight, one a.m. whenever the US market opens to put a trade in, you can put your trading at seven p.m. go to bed. [00:14:37][25.6]

John: [00:14:38] And the the one the one thing I would caution, though, is if you're putting in a market order at 10 o'clock at night, you don't actually know what the market's going to be tomorrow. Yeah. So in that instance, I'd probably suggest a limit order. Just so you've got certainty, it may mean that you miss out on the trade, but if you put in a market order at 10 o'clock at night and Afterpay just announced that they've taken over the world, then [00:15:03][25.6]

Alec: [00:15:04] that [00:15:04][0.0]

John: [00:15:05] the world is taking them or something, then then, you know, the price that you end up paying could be significantly more than you expected. [00:15:12][7.2]

Alec: [00:15:13] Let's just to make that very clear, if the Afterpay closes a hundred dollars, let's say, and then they make that announcement overnight, the first trades the next day won't be at one hundred dollars. It's not like it will just go in a line up, it'll jump up and the first trade might be at one hundred and ten dollars rather than one hundred the night before. And that's where the price starts. So that's what you're buying if it's a market order. [00:15:37][24.3]

John: [00:15:38] And that has implications across all sorts of things, stop loss orders and all sorts of things as well. If you put in a stop loss it at ninety nine dollars. It closed at one hundred yesterday. It could open at eighty tomorrow. Yeah. So you're not always guaranteed to get that stop loss value. [00:15:55][17.0]

Bryce: [00:15:56] So let's move on to the great debate, which we often hear in our community around chess. And first Custódio. And so we'll try and keep this at a higher level. There are a number of different ways that brokers can hold shares on your behalf or that they say that it's, you know, an ownership issue. Are you able to talk us through chess, versed in what they mean, this acronyms that are always thrown around. And, you know, some brokers say that custodial and people will be like, don't go with them if they go past you. Yes. Shares. So let's try and unpack all that. [00:16:37][40.3]

John: [00:16:37] So to start off, what is chess? Yes, chess is and I had to look this up just to make sure that Iran is the ASX clearinghouse Elektronik sub register system. That is what chess stands for, chess is currently being replaced by the ASX as well. [00:16:57][19.3]

Bryce: [00:16:57] And in layman's terms, that really just means a record book correction of who owns what shares. [00:17:03][5.8]

John: [00:17:03] Yeah, it's a it's a that's exactly right. It's the books and records of the ASX who owns what. Then there's two way. So chess basically settles all trades. So all trades are routed through chess. And that is what that's how money flows and shares flow. So, you know, cash will sort of swap hands, shares will swap hands. The chess system has his'n numbers to identify people that hold shares. So HYN is a holder identification number. So that says that that's in the name of an entity and that entity holds. X, Y, Z shares. You're one Afterpay. Yes, yes. Then then there's another type of of Holder as well, there's a shareholder register. No. So an SRN or shareholder register number is held by a share registry. Which act on behalf of a company so the company or the share registry can hold your shares [00:18:06][62.8]

Bryce: [00:18:07] or [00:18:07][0.0]

John: [00:18:08] chess can hold shares. Those are the two structures in Australia. Then there's so that's sort of the higher level, so Chess's at the top, then you've got a HINH or SRN. Then underneath that you've got the different entity types that sit with those with those shares or those those identifying numbers. So a hint can be held in the name of an individual in the name of a company, trust MSF or a custodian. So a custodian, so to start with the individuals and and other entity types, those are held in your name, it's held in the name of your self managed super fund, or there's there's a custodian that can hold them on your behalf. Now, if you look across the universe of custodians, every single share that's held in an ETF is held by a custodian. Three trillion or three trillion dollars less, most self managed super funds is held in a custodian account, Huub, 24 net wealth premium. They managed funds. They all use custodians and custodians, a multi-billion dollar international companies right down to two local companies that that run Kassidy services. So they hold the shares on a hen with access for Australian shares. But instead of chest running the records, the custodian runs the records and to allow a custodian to do that. There's obviously a huge amount of regulation. There's rules, there's regulatory capital that's required checks and balances to make sure that that those assets are safe. In my career, in my lifetime, I've never seen a custodian go out of business. So, yeah, this is technically a chance for that to happen. There's there's some pretty big. Names and cases of businesses going out of business, particularly through the GFC Storm Financial, which was triple leveraging old people's houses to go into shares, and they were all held on Storm financials balance sheet, Opes Prime was one of them. They weren't a broker. They were securities lending company that had massive debts racked up with ANZ. So completely different to to what a custodian is. So a custodian is really just a business, a regulated entity that holds assets on your behalf and. And that's that's how superhero works, we work with with a custodian, all of your shares do sit on chairs so the ASX knows what shares are held under superhero and some of the other examples of brokers like Superhero that use these sorts of structures. Vanguard's personal investor app or account. There's Oggi uses custardy eBay uses custody stake. There's stake, there is self wealth's. US business also runs on custardy. So pretty much every single country other than Australia runs on a custody system. Yeah, the whole his'n system is unique to Australia. So there is and we get asked the question a lot as well. What happens if superhero goes bust? What happens to my shares? Don't you own them? No, we don't own them. They're all held in the custody account. Now, what if a custodian went bust? Yeah, I kind of get that, but there's some there's like regulatory capital that back them up. There's no other it's not like they're selling used cars out the back that could impact the custody business. Right. There's no other operations other than than, you know, the custodian holding those assets. So so the risk is pretty low. And I don't see a huge difference between a hidden structure and a custody structure. There's actually outside there's actually more benefits out of a custody structure than a hidden structure. [00:22:06][237.7]

Alec: [00:22:07] Well, just around about maybe doing a flesh that out. What are the benefits? [00:22:11][3.5]

John: [00:22:11] You say paperwork is one. So the custodians that the lucky one to get all of the paperwork. And if you think you get a lot because you've you know, you've bought and sold and bought and sold, you want Afterpay share, you'd get a piece of paper every time you do that. The custodians getting that for every time anyone sells rights. It's just it's just insane. [00:22:34][22.9]

Alec: [00:22:35] Just so send it to a P.O. box and never show that. [00:22:37][2.5]

John: [00:22:39] So paperwork would be one of the big ones. So, wait, so we've managed to get rid of paperwork at Super Hero. Yeah. And we are also able to run all of that, all of those consolidated tax reports that we spoke about on on the platform as well. So there's a huge benefit around reporting that you get through through custody structures, that you don't get through a hidden base structure. And there's also there's also some some efficiencies that are provided on our side. And we passed those those cost savings onto customers. [00:23:11][32.5]

Bryce: [00:23:13] So to kind of put a ribbon around all of that, I think it's important just to recognise that around the world, the custodian structure is not unusual and it is something that is proven to be safe in Australia. [00:23:27][13.4]

John: [00:23:27] It's not unusual in Australia. [00:23:28][1.2]

Bryce: [00:23:29] It's not unusual. The same rules and regulations apply if you're a custodian, broker or if you are allowing to go direct to the exchange. The only difference is that if you do go with the broker who's custodian, you are unlikely to receive your own NHIN because the director custodian themselves runs that high end. And so there are small differences there. But I think personally, for me, if if you are not going to be going with the custodian structure, you are significantly reducing the options you're giving yourself when it comes to the brokers in Australia. And if someone can show us where the custodian model has failed or [00:24:13][44.2]

John: [00:24:14] we get so many people because people people right on our social system are we just sponsored. The actual answer to that is yes, we are. Do you get an individual here? No, you don't. And we get a lot of people coming and going. What's what's a hint of what is what's chess? Which. It shouldn't really matter. It doesn't matter. It doesn't really make a big difference at all. [00:24:37][23.1]

Bryce: [00:24:37] So at the end of the day, the ASX still has a record of who is aligned with what stock and when. And that's really what matters and whether it's through custodian or direct. And I would say don't really worry about it too much, because, as I said, you're going to really reduce the options available to yourself. [00:24:56][19.2]

Alec: [00:24:57] Yeah, OK. I think we've we've covered that debate. I think I think the long and the short of it is we don't consider chess for chess as a factor when deciding what broker. So I think one question that comes out of that, though, is let's say I buy shares through superhero and I don't have those shares aren't tied to my personal in my personal holder identification number. And then later on down the line, I, you know, move brokers and I want to transfer that. Can I transfer those shares to a personal. [00:25:34][36.2]

John: [00:25:35] Yes, you can. So there's. There's obviously two directions to transfers. You can transfer your shares from Comsec to superhero. Comsec, you'd have a hidden superhero, you wouldn't you can still transfer the shares to your account and vice versa. So we we we are trying to make the process of transfers better than it is at the moment. At the moment, it's paper based forms you go to fill and you're going to do signatures provided it's it's a mess. So we're trying to make that better, so we haven't actually opened up the transfers in yet. We've done a couple just to test the process, but transfers out way. You know, we use the old school system of the forms and and, you know, the transfers now transferring shares is a pool is a pool process. It's not a push. So you can't come to a superhero and say, transfer my shares to Comsec. Now you have to go to Comsec and say, I want to transfer my shares from superhero to my Comsec account. You'd you'd sign a broker transfer form with Comsec and they would transfer Comsec would then initiate the transfer from your superhero account? Yeah, the same way as if you came to superhero and you wanted to transfer you. Comsec shares superhero initiates the transfer from Comsec to superhero. That's just the way that OSX works. [00:27:00][85.3]

Alec: [00:27:00] Yeah, yeah. But I mean, the main thing is it can't be done. [00:27:03][2.4]

John: [00:27:03] Yeah, it can be done. Yeah. We're just trying to make it more efficient before we start rolling out paper forms. [00:27:07][4.1]

Alec: [00:27:08] Yeah. So I think on that point around the ability to transfer in and out of, you know, stocks to a personal end, to a different broker, all that stuff. I mean, I take it then that moving your whole portfolio between brokers is just as easy as well. No, no real difference to moving just one stock. [00:27:30][22.8]

John: [00:27:31] No, you can do you can do one or multiple at a time. [00:27:34][2.5]

Alec: [00:27:34] Yeah. Again, it's just a reminder that you don't want to let the perfect be the enemy of the good, that you can transfer these things between brokers. The switching costs aren't that high. [00:27:44][9.5]

John: [00:27:44] So just get started. You know, there's usually no switching costs. Yeah. [00:27:49][4.8]

Bryce: [00:27:51] Nice work, John, that kind of brings us to the end of our broker basics with Super Hero. It has been hopefully able to answer everyone's questions on Bryce because I'm sure there are still so many of them. But that is fine. Feel free to hit us up with any of your questions. And if you want us to directly shoot them through to John, we can pepper him as often as we can. But I guess in terms of some finalising comments, concluding comments for for the Equity Mates community to help them think about Brokers' if they're at the start of their journey or midway through or whatever it may be, what would you kind of say? [00:28:29][38.3]

John: [00:28:30] Well, just to round it off, I think I think the things that you should be looking at for when you're deciding on a broker is obviously looking at the face, looking at the investments that you have access to know CFD, NAFTA, [00:28:43][12.6]

Alec: [00:28:44] that's a big, good [00:28:44][0.5]

John: [00:28:45] bet. But really, the key takeaway is just just get started and you can always transfer your shares. You can transfer your cash somewhere else. You can you can you can move once you've got you know, once you've got an idea around what you want to invest in and once you've started. But the case just just gets started. Yeah. So yeah. Don't don't get too hung up. Don't let the decision on on on signing up in account cloud your cloud your, your, your judgement and put you off. Just, just get going as soon as you can. Yeah. [00:29:17][32.4]

Alec: [00:29:18] I love that. It's very on brand for the Get Started Investing feed podcast. The concluding thought is just get started. [00:29:23][5.2]

Bryce: [00:29:24] I couldn't agree more John. So thank you for your time over the last three episodes. It's been awesome. If anyone wants more information on superhero head to superhero Dotcom Dorda, you, as we've heard the sign up process, [00:29:35][11.2]

Alec: [00:29:35] very easy to test test out. How is the sign process processes if you think it could be made easier, a superhero social media. [00:29:43][7.6]

John: [00:29:45] Thanks for having me. It's been really fun now. [00:29:46][1.4]

Bryce: [00:29:46] It's good. We appreciate your time. [00:29:48][1.1]

Alec: [00:29:48] Yes, guys, I think it was great. I learnt something I'm sure our listeners did to her. And hopefully people take advantage of five dollar brokerage and free brokerage firm ETFs. That's a [00:29:59][10.9]

Bryce: [00:30:00] beautiful song. [00:30:00][0.8]

Speaker 3: [00:30:03] This podcast is a production of Equity Mates media, any views expressed by the podcast hosts or any guests on their own and do not represent the views of Equity Mates media or any other employer or associated organisation? Always remember, all information contained in this podcast is for education and entertainment purposes only. It is not intended as a substitute for professional financial label or tax advice. The hosts of this podcast are not financial professionals and are not aware of your personal financial circumstances before making any financial decisions. You should read the product disclosure statement and if necessary, consult a licenced financial professional for more information. Head to our disclaimer page, where you can find resources to search for a registered financial professional near you. [00:30:03][0.0]

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