What is a share?

Description 

A unit of ownership of a company, normally entitling the holder to vote on important corporate matters and to receive dividends if dividends are paid.

Explanation 

If you own a share, you own part of a company. Someone who owns one or more shares is called a shareholder.

Shareholders may receive dividends if a company’s board of directors declare that the company has made sufficient profits and that some of these profits should be returned to shareholders.

A share in the company gives you the right to vote on decisions affecting the company.

You can also call a share an equity or stock.

What is the share price?

Description 

The share price is the price at which a particular share can be bought or sold. The share price is determined by supply and demand.

Explanation 

When you have more buyers than sellers, prices usually rise because shares are in demand.

When you have more sellers than buyers prices usually fall because it is easier to buy these shares.

If a company is very profitable, a share in that company will become more valuable because more people think that it is an investment.

Factors such as the economic and political environment also influence share prices.

How do I know which shares to buy?

Description 

Enhance your knowledge of the stock market through research

Explanation 

Do research on the stock market through regular reading of financial literature, attending investment courses and seeking qualified experts’ advice.

This will enable you to make educated decisions on which stocks to invest in.

Are there different types of shares and investment products?

Description 

There are various types of shares and investment products to suit different individual needs, for example conservative or “safe” shares versus riskier shares.

Explanation 

A list of basic share investment products is included below:

Ordinary Shares  
B-Ordinary Shares    
N-Ordinary Shares    
Preference Shares   
Exchange Traded Funds  

Is there a risk involved when investing in shares?

Description 

Investing on the stock market is riskier than some other investments

Explanation 

Share prices rise and fall as economic and market forces change which means that there is always a risk involved.

The higher risk involved means that you have an opportunity to make more money through trading on the Johannesburg Stock Exchange than many other forms of investment. Conversely, you can also lose money.

It is important to realise that share trading normally does not make you rich overnight, but that it is a long term investment.

Can I minimise the risk of my investment?

Description

You can minimise your investment risk by diversifying your investment

Explanation

You should avoid putting all your eggs in one basket. Consider choosing your investments from a variety of sectors, companies and investment products.

Do research on the stock market through regular reading of financial literature, attending investment courses and seeking qualified experts’ advice.

Be committed to your investment objectives. Determine the investment period you are prepared to wait for a return on investment and be patient. If a share does not perform you may need to review your strategy.

Determine your risk profile and look for products that you are comfortable with. Consult a stockbroker if you need additional advice.

Invest with money that you can afford to lose, ie. your disposable income after all your needs have been taken care of. Although investing allows you to make a good profit you should also be prepared for the risk involved in losing your money.

Is it difficult to manage my investment portfolio?

Description 

Certain share investment products require little or no management

Explanation 

Inexperienced investors can look at share investment products that offer exposure to a group or basket of shares, such as Exchange Traded Funds (ETFs) .

These products are hassle free as they don’t require active management and will help investors who are not yet experienced at researching individual companies.

Exchange Traded Funds do not offer you direct voting rights, however ordinary shares do.

Do I need a lot of money to start investing?

Description 

You don’t need a lot of money to start investing as there are products available to retail investors at affordable prices.

Explanation 

Some products, like Exchange Traded Funds (ETFs) , offer investment plans where a monthly debit fee or once-off lump sum investment can be paid.

It is best to consult with a stockbroker about the relevant transaction fees involved.

For a list of stockbrokers that deal with retail investors, click here.

Can I invest directly on the Johannesburg Stock Exchange?

Description

To buy or sell shares on the Johannesburg Stock Exchange (JSE) you need to go through an authorised trader / stockbroker. You cannot trade directly on the JSE.

Explanation 

The role of the Johannesburg Stock Exchange:

The JSE provides a regulated trading platform where buyers and sellers trade.
The JSE protects investors through its rules and regulations and guarantees all trades transacted on the JSE
The JSE provides a wide choice of companies and products for you to invest in
The JSE provides an active and liquid market