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Difference between trading and investing

Trading shares on the JSE

We often refer to trading in shares when we may actually mean investing. Trading is used as a generic term for share transacting.

Trading is actually short-term share transacting and investing is longer-term buying and holding.

Tax implications

SARS will potentially tax you at a different rate depending on whether they consider you a trader or an investor.

In the latest Tax Guide for Share Owners published by SARS in February 2014, they used the three-year rule: If you hold a share for longer than three years, you will be considered an investor. When you sell, your profits will be taxed according to the capital gains tax (CGT) rate. If you hold a position for less than three years, you will be considered a trader, and you will be taxed at the marginal tax rate.​​

An individual can be both a trader and an investor in the eyes of SARS, but make sure you trade and invest in separate accounts so that the process and tax returns are simple and clean.​

JSE learning modules
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