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PresenterDate

How to Start InvestingAna Forssman

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What is a share?

• If you own a share, you own part of a company

– Your slice of the company pie!

• Someone who owns shares is called a shareholder

• Shareholders may receive part of the profit (dividends) if the

company performs well

– Check the company dividend policy

• Shareholders can vote on company matters

• You can also call a share, ‘equity’ or ‘stock’.

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What is the share price?

• The price at which a particular share can be bought or sold

Factors affecting the share price

• When there are more buyers than sellers, the share price rises

• With more sellers than buyers, the share price falls

• Some share prices rise while others fall. It’s all about supply and demand.

• If a company is very profitable, a share will rise

as more people think it is a good investment

• Factors such as economic and political events also

influence share prices

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How do I know which company to invest in?

• Do research on the stock market: read financial literature, attend investment

courses, get expert advice (eg from a stockbroker)

• Assess the company’s financial wellbeing: read their financial statements or

newspaper articles and analyst reports

– This will enable you to make educated decisions

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How do I know which company to invest in?

• Decide how much risk you want to take on, how much return (profit)

you expect and which products meet your needs

– Get advice from broker

• Be committed to this objective. Be patient

• Invest for the long run, eg 5 years

• Decide how long you are prepared to wait for a return

• Invest with money you can afford to lose

• Although you can make a profit, remember the

risk of losing money in the short run

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Are there different types of shares and investment products?

• There are various types of shares and investment products to suit

different individual needs, eg

– conservative or “safe” shares

– riskier shares

• Basic share investment products

• Ordinary shares

• Preference shares

• Exchange Traded Funds

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What is RISK?

• Risk is the possibility of losing part or all of your initial investment

• Different products have different levels of risk

• Lower risk investments include:

• Cash in a money market account that earns interest;

• Government bonds (too expensive for most; generally R1m each!);

• ETFs (Exchange Traded Funds)

• Higher risk securities include:

• Shares, warrants, derivatives and corporate bonds

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Is there a risk involved when investing in shares?

• Investing on the stock market is riskier than some other investments

– Share prices rise and fall as economic forces change

• Lets talk ETF’s eg.: New Gold / Top 40 / Div +

• Share trading normally does not make you rich overnight

– Treat it as a long term investment

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Can I minimize the risk of my investment?

• You can minimize your investment risk by diversifying your investment

– This means to invest in a variety of different investments

– When one investment doesn’t perform well, another’ s could

• Choose your investments from several sectors, companies and investment

products

• If you can’t afford that, choose an ETF

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Is it difficult to manage my investment portfolio?

• Certain investment products require little or no management. However, always be

aware of how your investments are performing

• Stockbrokers offer services to help you manage your investments:

• Discretionary – investment decisions made

by the stockbroker without checking

with you, but in line with agreed aim

• Non-discretionary – investment decisions

made by you, after stockbroker has given advice

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Is it difficult to manage my investment portfolio?

• Managing a portfolio can be tricky for many people

• Inexperienced investors can use a single investment product

that offers you exposure a ‘basket’ of shares

• This product is known as an Exchange Traded Fund (ETF)

• ETFs offer lower costs and can spread risk across a variety of

shares

• Note: ETFs do not offer you voting rights

• Note: you don’t always get cash dividends

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Do I need a lot of money to start investing?

• You don’t need a lot of money to start investing

• Some products, like ETFs, offer investment plans

– Monthly debit order (minimum of R300)

– Once-off lump sum (minimum of R1,000)

• Stockbrokers don’t always require a minimum investment amount

– Through online share trading, and ETF platforms you can invest any amount via

the internet

– Approach your bank for details

• Remember: stockbrokers charge fees

• The JSE website has a list of stockbrokers, list of all ETF’s & ETF Issuers

dealing with individual investors

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How do I gain access to the stock market?

• To buy or sell shares on the JSE, you need to open a brokerage

account with a stockbroker

• To find out how to open a brokerage account, see our website

• You don’t need a broker to buy and sell ETFs. Contact the ETF

provider directly or ETF platforms (ETFSA / iTransact)

• Owning a brokerage account allows you to

invest in all investment products, not only ETFs

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Some things to consider

• Invest an amount that makes sense in comparison to the amount of

brokerage fees that you’ll be paying

• Plan your investment objective, exercise self-discipline and monitor your

investment performance

• Don’t borrow money to invest

• Be patient

• Don’t get emotionally attached to your investments. Some days they will go

up and other days, down

• Ensure that you diversify your portfolio

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JSE Liberty Life Investment Challenge

• Introduces learners to real life economics and commerce

• Enables learners to learn about investment through simulated trading

• Open to all universities

• Runs from March to September every year

• Students participate in teams

• Team creates virtual portfolio of R1 million

• Great prizes: First: R25,000 and trip to overseas stock exchange; Second:

R20,000; Third: R15,000

• Game is played online

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Here’s to successful

investing!