An investor’s guide to buying ASX stocks in Australia

Looking to add Australian companies to your portfolio, but not sure how to buy ASX stocks? It’s time to find out why many investors add ASX exposure for diversification and income, as well as a step-by-step action plan on placing your first trade. 

What is the ASX? 

The Australian Securities Exchange (ASX) is Australia’s largest stock exchange. It traces its roots to six state-based exchanges that merged in 1987, with the modern ASX taking shape in 2006 following a merger with the Sydney Futures Exchange. 

Today, the ASX is a fully electronic marketplace for trading ASX shares, exchange-traded funds (ETFs), listed investment companies (LICs), bonds and derivatives. 

With more than 2,000 listed companies, the ASX has a robust market infrastructure and a well-regulated framework overseen by ASIC and ASX compliance rules. One benchmark you might already be familiar with is the S&P/ASX 200 Index, which tracks the 200 largest companies by float-adjusted market capitalisation. It’s a good way to gauge the performance of the Australian market at-large. 

Why invest in ASX stocks? 

Diverse sector exposure 

ASX-listed companies cover all of the major industries in the country – think materials (e.g. BHP Group), banking (e.g. Westpac), healthcare (e.g. CSL, Neuren Pharmaceuticals), energy (e.g. Santos), consumer, industrials, technology and more. Having such a breadth of sectors available means investors can diversify their portfolios with Australian investments, as well as complement their international holdings. 

Income potential 

ASX-listed companies are well known for paying franked dividends, and the S&P/ASX 200 has tended to provide relatively high dividend yields compared with other major markets. For the most recent yield data, visit the S&P Dow Jones Indices’ page for the S&P/ASX 200, bearing in mind that yields will vary over time. 

Economic resilience and governance 

The Australian economy has, for the most part, demonstrated resilience across cycles, supported by resource endowments and a well-regulated financial system. Plenty of ASX-listed companies operate around the globe and have a mix of domestic and offshore earnings streams. 

ESG and evolving disclosure 

Australia is starting to phase in climate-related and broader sustainability disclosures for larger entities. Strengthening reporting standards could be a way to improve the consistency of ESG data that investors use to evaluate ASX companies. 

Accessible diversification via ETFs 

ETFs let you invest in many Australian companies at the same time by tracking an index like the ASX 200. It’s a simple way to get diversification across the local market. Just make sure to always read the fund’s PDS and factor in things like fees, tracking method and your risk appetite before investing. 

How to buy ASX stocks in Australia: Step-by-step guide 

Whether you’re buying your first blue chip or building a diversified portfolio, here’s the simplest process for how to buy ASX stocks with CMC Invest: 

1. Open an account with CMC Invest: Create your account and start investing with CMC Invest. You can jump straight into the ASX or take a look at international markets, all in one place. Expect detailed charting information, company profiles, watchlists and portfolio reporting. 

2. Research ASX stocks: Build a watchlist and read the latest announcements about share investing, results and broker research summaries on the platform. When deciding what to invest in, look at sector trends (rates, housing, commodities, healthcare pipelines), valuation metrics (P/E, dividend yield), risk factors (debt levels, cyclicality) and more. 

3. Place your order: Search the company code and choose your order type (market or limit). Enter the quantity you want to purchase, then submit your order. For a quick walkthrough on research and order entry, watch our platform guide video. 

4. Monitor and review: Track your holdings, corporate actions (e.g. dividends) and portfolio diversification to stay on top of things. Also, make sure you revisit your goals every so often, especially around earnings seasons or if there’s major sector news. You can then decide whether to hold, add, trim or exit. 

Prefer a gradual approach for how to buy ASX stocks? Some investors build positions with monthly buys rather than going all in at once. 

Risks and considerations when buying ASX stocks 

Market volatility 

ASX share prices can move with company updates (earnings surprises, capital raisings), sector events (commodity cycles, bank margins) and macro factors (interest-rate expectations, employment data, China demand). During periods of higher volatility, share prices may move more sharply, which can increase both risks and potential rewards for investors. But at the same time, you need to be disciplined and select a suitable time horizon. 

Picture this scenario: a diversified miner’s share price could rally on rising iron-ore prices but then suddenly fall if commodity prices reverse or costs rise. Alternatively, a bank’s valuation could benefit from stable credit losses yet be pressured if funding costs increase. 

Alignment with investment goals 

Determine whether you’re seeking income (dividends) or growth (capital gains), or a blend of both. Your goals, time horizon and risk appetite should all play a part in determining the size of your position and your mix of sectors. 

Regulatory and reporting changes 

Shifts in regulation can influence operations and disclosure requirements. Australia’s phased climate-related reporting regime, for example, is expected to improve ESG transparency across the market, which is especially relevant for mining and energy companies. 

Exchange-rate fluctuations 

A large chunk of ASX companies earn revenue offshore (e.g. BHP, CSL). Movements in AUD/USD can impact reported earnings and, by extension, share prices. A stronger AUD could reduce the value of foreign-currency revenues, whereas a weaker AUD can have the opposite effect. 

Fees, tax and other costs 

Consider brokerage, potential subscription fees for data and any custodial charges. And if your dividends are franked, that can have tax implications for you. Your personal circumstances matter, so get expert advice whenever it’s appropriate. 

Next steps

ASX shares can diversify your exposure to major industries in Australia. But they also involve risks, from market volatility and regulatory shifts to currency effects and more. So find the right tools and processes, do your research and stay on top of your ASX positions as much as possible. 

Start investing in ASX shares today with CMC Invest by opening an account. 

This article provides general information only. Past performance is not a reliable indicator of future results. It is not to be construed as a solicitation or an offer to buy or sell any financial instruments, or as a recommendation and/or investment advice. It does not intend to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any financial instruments. CMC Invest believes that the information in this article is correct, and any opinions and conclusions are reasonably held or made on information available at the time of its compilation, but no representation or warranty is made as to the accuracy, reliability or completeness of any statements made in this article. CMC Invest is under no obligation to, and does not, update or keep current the information contained in this document. Neither CMC Invest nor any of its affiliates or subsidiaries accepts liability for loss or damage arising out of the use of all or any part of this document. Any opinions or conclusions set forth in this article are subject to change without notice and may differ or be contrary to the opinions or conclusions expressed by any other members of CMC Invest.