More Information
What determines the price of a share?
Demand for and supply of shares: if you have more buyers than sellers, prices usually rise and when you have more sellers than buyers, prices usually fall. If a company makes good profits, a share in that company will become more valuable because more people will want to buy a share in such a company. Outside factors like the economic and political environment also influence share prices.
What does a stockbroker do for you?
Only an authorised trader/stockbroker in a stockbrokerage who has the relevant qualifications buys and sells shares on behalf of clients. A stockbroker who has the required qualifications can also give advice to clients. Many stockbroking firms have research departments that publish regular reports that give advice on buying or selling shares.
What makes the JSE a good place to trade?
- The JSE protects its investors through rules and regulations and guarantees all trades transacted on the JSE.
- The JSE has a variety of companies and products, which gives you a wide choice when it comes to investing.
- The JSE has got an active and liquid market (typically more than R6-8billion worth of shares change hands every day).
- The JSE is a convenient and efficient place to trade: information is readily available from stockbrokerages that have experienced brokers to help you decide on what to buy or sell.
Risk
Yes, there is always a risk in investing. Investing in shares is riskier than some other investments such as bank deposits. Share prices rise and fall as economic and market forces change. The higher risk involved means that you have an opportunity to make more money through trading on the JSE than in many other forms of investment. You can also lose more, which is why it is important to realize that share trading normally does not make you rich overnight, but usually works over a longer period.
How can I minimise the risk of my investment?
You can minimise your investment risk by diversifying your investment. This means that you should avoid putting all your eggs into one basket. Consider spreading your investment in a variety of sectors, companies and products.
You can minimise your investment risk further by enhancing your knowledge of the securities market though regular reading of financial literature, attending investment courses and seeking qualified experts’ advice.
Make use of the stockbroker’s advice. However, remember that the final investment decision lies with you.
Be committed to your investment objectives. Learn to be patient. However, determine the length you are prepared to wait for a return on investment. If a share does not perform, you may need to review your intent to keep it. Do not be over attached to a share if it does not fulfill your expectation of return.
You may also wish to consider investing in Exchange Traded Funds that are less risky and give you an exposure to a number of shares with just one unit.
Lastly, when making any investment, in this case shares, do so with money that you can afford to lose i.e. money that remains after all your basic needs have been taken care of (disposable income). Although investing your money usually gives you the opportunity to make a good profit you still run the risk of losing your money.
How to start
Although you might not realise it, you are probably already investing indirectly on the JSE through owning amongst others insurance policies, retirement annuities and unit trusts.
Contact a stockbroker to start investing directly. Click here for a list of stockbrokers or here for a list of ETF providers with investment plans.
How much do I need to start?
If you are a beginner in the world of investing or not experienced yet in the researching of individual companies, you can invest in an Exchange Traded Fund(ETF) which is a product that tracks a basket of shares within an index bonds, or a commodity. An index is a single number showing the performance of a group of shares normally made up of the top companies in their respective categories.
ETFs are traded like shares on the exchange and track the performance of a basket shares or basket of bonds or a single commodity like gold.
Investment plans offered by most ETF providers allow you to invest either a R300 monthly debit order or R1000 once off lump sum. Stockbrokers do not have a set minimum amount that investors need to invest however investors need to consider the costs in relation to the amount that they invest.
Investing in ETFs is easy and inexpensive yet offers you a great return on your investment.