How to start trad­ing on the JSE

Neesa Mood­ley-Isaacs looks at the many ways to start build­ing a share port­fo­lio and make your money grow

CityPress - - Business -

First you need to un­der­stand that in­vest­ing in the stock mar­ket is not about mak­ing a quick buck. You should be in­vest­ing with a three- to five-year goal, tak­ing your time to build wealth in­stead of look­ing to make easy money. Rid­waan Moolla, the head of on­line trad­ing and in­vest­ing at FNB Se­cu­ri­ties, says one of the things many clients for­get to take into ac­count is their costs as a per­cent­age of their in­vest­ment.

For ex­am­ple, if you in­vest R1 000 and the cost of the in­vest­ment is R100, your in­vest­ment has to grow by at least 10% for you to break even. Moolla says ide­ally your costs should be less than 5%. As trad­ing fees are in the re­gion of R100 per trade, you would need to in­vest at least R2 000 to keep your costs man­age­able.

If you are in­vest­ing less than R2 000 a month, you should con­sider en­try-level stock mar­ket in­vest­ment tools such as the FNB Share Saver or Stan­dard Bank Auto Share In­vest. BUY LOW, SELL HIGH

In­vest­ment guru War­ren Buf­fett re­peat­edly ad­vises that you should al­ways buy low and sell high when you in­vest in shares. The prob­lem is that all too of­ten, your emo­tions can get the bet­ter of you. This is more so the case when in­vestors see me­dia head­lines scream­ing that a share has plum­meted and then sell their in­vest­ment in a panic. This emo­tional re­ac­tion of­ten re­sults in in­vestors sell­ing when the mar­ket is at a low point and scram­bling to buy when shares are over­priced. Keep a check on your emo­tions and ride out mar­ket fluc­tu­a­tions. If you main­tain a steady port­fo­lio, you will be re­warded in the long term with growth in the value of your in­vest­ment. DI­VER­SIFY

Di­ver­si­fi­ca­tion sim­ply means you should in­vest in dif­fer­ent types of shares across dif­fer­ent sec­tors so that you min­imise your risk of los­ing money. For ex­am­ple, if you in­vest in tech­nol­ogy stock such as Mi­crosoft, you should also in­vest in re­sources stock such as BHP Bil­li­ton. If the tech­nol­ogy sec­tor goes through a slump, the money you have in­vested in Mi­crosoft will de­crease, but the re­sources sec­tor could very well be go­ing through a peak at the same time and the money you make via your BHP Bil­li­ton in­vest­ment could even out your loss.

In order to have a di­ver­si­fied port­fo­lio, an ideal start­ing amount would be R20 000 in­vested across four or five dif­fer­ent shares. Al­ter­nately, you can in­vest in an ex­change­traded fund (ETF), which gives you a di­ver­si­fied port­fo­lio through the pur­chase of a sin­gle share.

There are sev­eral dif­fer­ent ap­proaches that you can use to in­vest on the JSE: 1. ETFs

These are in­vest­ment funds that track an in­dex of shares. For ex­am­ple, if you in­vest in the Sa­trix Top 40, you are in­vest­ing in the top 40 com­pa­nies listed on the JSE. Be­cause ETFs are not ac­tively man­aged by a fund man­ager, they carry lower fees. The av­er­age ETF fee is about 0.45% a year com­pared with as much as 2% for an ac­tively man­aged unit trust fund. ETFs also of­fer you di­ver­si­fi­ca­tion. 2. Your bank

Sev­eral banks now of­fer low-cost, easy to un­der­stand in­vest­ment ve­hi­cles you can use to in­vest on the JSE. For ex­am­ple, you can in­vest from R300 a month in FNB’s Share Saver, which gives you ac­cess to the top 100 shares on the JSE. The costs are quite low at 0.4% a year, which makes this an ideal en­try-level in­vest­ment ve­hi­cle.

If you can af­ford to in­vest R500 a month, you could con­sider Stan­dard Bank’s Auto Share In­vest. This prod­uct al­lows you to choose from a range of pre­s­e­lected shares that in­clude the top 100 shares on the JSE. The cost is R25, which works out to 5% of your in­vest­ment if you are in­vest­ing R500 a month. 3. Stock­bro­ker

One of the cheap­est ways to in­vest on the JSE is via an on­line stock­bro­ker. Bro­ker­ages typ­i­cally of­fer you a trad­ing plat­form and ac­cess to on­line re­search and sup­port. You can ex­pect to pay a min­i­mum bro­ker­age fee per trade rang­ing from R75 to R100 and a monthly ad­min­is­tra­tion fee of R50 to R100.

If you want to deal with an in­di­vid­ual stock­bro­ker, this ser­vice is avail­able to high-end clients and you would need a min­i­mum in­vest­ment port­fo­lio of R1 mil­lion.

San­lam’s iTrade is the on­line share trad­ing plat­form of San­lam Pri­vate In­vest­ments.

Ben­e­fits in­clude on­line ed­u­ca­tion and in­ter­ac­tive train­ing cour­ses.

You can also make use of a Vir­tual Trade Simulator, which makes use of a fic­ti­tious R1 mil­lion share port­fo­lio.

PSG On­line has a strong fo­cus on client ed­u­ca­tion and pro­vides free on­line tu­to­ri­als.

It also of­fers a 30-day free trial, which in­cludes ac­cess to its trad­ing simulator, re­search tools and watch lists. This en­ables you to learn about trad­ing with­out tak­ing any risks.

Af­ter 30 days, you have the op­tion to reg­is­ter and con­tinue un­til you have enough con­fi­dence to start trad­ing with your own cap­i­tal.

PSG On­line also of­fers in­vest­ment clients the op­por­tu­nity to re­ceive a free bi­monthly news­let­ter called The In­vestor, in which it high­lights one share with its pros and cons.

It pro­vides bi­monthly we­bi­nars that cover a range of topics – from fun­da­men­tal and tech­ni­cal anal­y­sis to in­vest­ment and trad­ing strate­gies.

For the more ad­vanced in­vestor or trader, PSG On­line of­fers face-to-face trader fo­rum meet­ings in Joburg, Pre­to­ria and Cape Town.

FNB Se­cu­ri­ties is FNB’s stock­broking divi­sion that of­fers full ed­u­ca­tional sup­port.

Sev­eral years ago, FNB’s wealth divi­sion merged with on­line stock bro­ker Barnard Ja­cobs Mel­let, so there is a wealth of ex­pe­ri­ence avail­able to guide you.

The web­site (www.fnb­se­cu­ri­ of­fers you ac­cess to reg­u­lar news­let­ters, mar­ket re­search, a full on­line ed­u­ca­tional cen­tre, as well as tech­ni­cal anal­y­sis of dif­fer­ent shares.

Stan­dard Stock­broking has been in the on­line share trad­ing space for 15 years. The bank’s bro­ker­age of­fers na­tional ed­u­ca­tional road shows for clients as well as we­bi­nars, YouTube videos and in­ter­ac­tive on­line tu­to­ri­als.

Ned­group Pri­vate Wealth Stock­bro­kers of­fers ac­cess to ed­u­ca­tional ma­te­rial, global and eco­nomic anal­y­sis and JSE mar­ket in­for­ma­tion in con­junc­tion with Pro­file Me­dia. Visit www.ned­bankon­line­trad­

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