Many followers have asked us how they start on the road to become investors themselves. I will try to give some guidelines in this post.
It is important to note that the JSE is not a casino and investing or even trading is not supposed to be gambling, that is looking for trouble. To be successful you need to do the sweat, which means read a lot. Beware of the tips you hear around the braai or at the hairdresser. Start by reading financial newspapers and magazines as well as their online websites. I recommend Business Day (especially the Investors Monthly supplement), Sake 24 and Fin 24, Finweek as well as Financial Mail. Twitter is a great way to get news very quickly, even before it appears on the Internet. Follow me on Twitter (@iSayiTrade) and look at who I follow. Most of the time a story will break on Twitter first. Summit TV and CNBC provide good financial viewing and on radio it is worth listening to Moneyweb radio on SAFM and RSG as well as Bruce Whitfield on 702, mostly just after 5pm.
If you are new to investing and do not have capital, a good idea is to invest through Satrix in one of their ETFs (Exchange Traded Funds). You can start with a small lump sum (R1,000) or a monthly debit order of R300. Satrix invests the funds in a basket of shares on the JSE. In the Satrix 40 for example they invest in the 40 biggest shares on the JSE, also known as the Top 40 Index. This gives you exposure to the JSE without paying portfolio management fees as is the case with unit trusts and not many unit trusts outperform Satrix consistently. Once your capital is big enough, you can start investing directly. I suggest at least R20,000 in order to diversify a bit, although we have clients trading with less than R10,000. (Bear in miond that an account with a broker will cost you about R57 per month and the minimum broking fee is R99 which makes it expensive to trade less than R5,000 at a time.)
While your capital is growing you can start the learning process. Register as an iView client with Sanlam iTrade (free for our Facebook fans for this year) and you get access to our comprehensive Learning Centre. There are modules on the ABC of investing, fundamental analysis, how to use P/E ratios and technical analysis. There are also some recommended books to read. Another good source for definitions is the Investopedia website. We also have links to other education providers like JustOneLap and Share Direct as well as advanced technical analysis courses.
When you are ready you will need to open an account with a stockbroker on the JSE, called a BDA account. You can register as an iTrade or iTradePro client on www.sanlamitrade.co.za. There is a mandate available online and we will also need FICA documentation. Your monthly account cost of R57 includes administration costs, 150 free live prices and full use of the website and its’ information which includes daily market commentaries, research, live JSE SENS news, fundamental data on every listed share and ETF, comprehensive charting with technical analysis tools and one of the best trading systems with direct market access to the JSE. Dealing costs start at 0.7% with a minimum of R99, but quickly drop to 0.5% on bigger trades. Active and bigger clients can get up to 25% of their broking fees back with iBonus.
Once you are registered and your account is open you can deposit funds and start trading. Not only young people are learning to invest directly, but we find many people who retire are turning to online trading as a rewarding hobby or new career.
The JSE looks daunting, but many people broke the ice by taking the first steps to successful investing.
Head Sanlam iTrade.