05 Apr How to start investing: The first steps
The JSE is not a casino. Investing and trading is not gambling.
To be a successful investor you need to do the hard yards, which means educating yourself and reading a lot. You can start by taking the Shares Made Simple educational course at no cost on the Sanlam iTrade website.
There are modules on the ABC of investing, fundamental analysis and how to use P/E ratios as a valuation tool. It’s all online so you can do it in the comfort of your home at a time that suits you. JustOneLap also provides many excellent educational webinars that you can access for free and study in your own time at home. The International Markets Trading Institute (IMTI) provides face-to-face educational courses over 5 evenings in Johannesburg, Cape Town and PE which includes 6 months’ mentoring, find them on intertraderinstitute.com. Register as an iView client with Sanlam iTrade and you get access to the Learn centre, market commentaries and much more. It only costs R200 per year and you can use the Virtual Trade Simulator to practise and gain experience as well.
- Beware of the tips you hear around the braai or at the hairdresser. Many a trader has burnt his or her fingers acting on that “advice”. Sanlam iTrade provides in-depth research on more than 100 JSE-listed companies to help investors make their own decisions. There are many good sources of information – here are just a few that will assist you:
- Newspapers: Business Day, Business Report, Beeld / Die Burger Sake.
- Magazines: Financial Mail (with Investors Monthly), Finweek (English and Afrikaans).
- TV: BD TV, CNBC, Bloomberg.
- Radio: Bruce Whitfield on Radio 702, Lyndsay Williams on Fine Music Radio
- Internet: Fin24, Biznews, Investopedia, JustOneLap.
Social media: @JustOneLap, @RationalHill, @iSayiTrade and of course Sanlam iTrade Online.
If you are new to investing and do not have capital, a good idea is to start by investing 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. The Satrix 40 for example invests 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. Also, not many unit trusts outperform the Satrix index tracking funds consistently. The iManaged General Equity fund did outperform the JSE (see below). Once your capital is big enough, you can start investing directly on the JSE. We suggest at least R20 000 in order to diversify into 3 or 4 shares. Bear in mind that an account with a broker will cost you about R57 per month and the minimum broking fee ranges from R50 to over R100 per transaction, which makes it expensive to trade less than R5 000 at a time.
If you have a capital lump sum you can invest in one of the iManaged portfolios on Sanlam iTrade. iManaged portfolios are individual share portfolios, not unit trusts. The minimum investment is R150 000, and there is a maximum of 10 shares in each portfolio to minimise trading costs plus a very small cash component. The iManaged General Equity portfolio has an excellent performance, with a return of 18% over the 12 months to February 2017 compared to the JSE All Share Index (ALSI) return of only 6%. Over 5 years the portfolio returned 16.5% per year compared to the JSE’s 11.5%. This performance is before costs as trading costs will vary from client to client.
When you are ready to invest directly in shares, you’ll need to open an account with a stockbroker on the JSE. You can register as an iTrade or iTradePro client on our website. The registration process is now fully digital – no need to print, sign or mail anything. You scan your FICA documents and sign with a digital pin sent to you. 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 ETFs, comprehensive charting with technical analysis tools and one of the best trading systems with direct market access to the JSE. Please have a look at Our Costs, About US as well as Products & Services on the website.
Once you are registered and your account is open, you can deposit funds and start trading. It’s not only young people who are learning to invest directly, but many retired persons are turning to online trading as a rewarding hobby or new career.
The JSE looks daunting, but many people have broken the ice by taking the first steps to successful investing.