Publications
Partners
THERE was a time when it was quite hard for the small investor or saver to invest in the JSE Limited (what used to be called the Johannesburg Stock Exchange), the biggest stock exchange in Africa, and, with a market capitalisation of about $903bn, the 14th largest in the world.
Now, however, there are options for people with only a little available cash to get in on the business of being a shareholder, a person who owns a portion of a company, however small.
“Shareholders may receive cash flows (dividends) if a
company’s board of directors declare that the company has performed well and
has enough profit to distribute to its shareholders.
"A share in the company gives you the right to vote on decisions affecting the company,” explains the JSE in its beginner’s guide.
An investor must open a brokerage account with a stockbroker
or an investment consultant at a bank to invest on the JSE.
The stockbroker charges a brokerage fee and will also ask you for duties and VAT on any investment made on your behalf.
There are two kinds of relationships with stockbrokers:
* Discretionary – you discuss with the stockbroker what your investment objectives are and then trust him or her to make decisions about what to buy or sell to meet those objectives.
* Non-discretionary – the stockbroker may advise, but you make all the decisions about what to invest in and when to sell your shares.
There are some products that give access to the person with less cash to invest. You can invest just about any amount on the stock exchange through the internet and you can approach a stockbroker and ask what minimum amount they’ll work with – some don’t ask for minimums. (But do bear in mind that you need to pay fees and tax and duties – be sure your investment is worth this outlay.)
Exchange Traded Funds (EFTs) is another option; you don’t
need a brokerage account for this, you can contact an EFT provider directly.
An EFT is a product which tracks the performance of a basket of shares, bonds or commodities. You can invest through a monthly debit order of as little as R300, or a once-off payment of as little as R1 000. However, you will not have voting rights at the AGM’s of shares in which your EFT invests.
This may be a good way for a novice to get started, venturing onto the JSE with small amounts at first.
Investing in the stock exchange carries with it a fair
degree of risk and the less you know about the market, the asset classes and
the companies, the greater your exposure to risk, which is why consulting one
or more financial advisors or stockbrokers is a good idea before taking a big
plunge.
The JSE, like other stock exchanges, has a ‘guarantee fund’ to which investor may apply for compensation in cases of fraud by stockbrokers, but there’s no compensation for funds lost in a bad investment.
- Fin24
Consider yourself a savings hero? Or just have something on
your mind? Add your voice to our Savings
Issue:
* Write a guest post
* Share a personal story
* Ask the experts
