Investing in shares can be fun and rewarding. But where do you begin and who should you call to get the correct information? We spoke to the experts to get some sound advice for the beginner investor.
Before considering where to invest your hard-earned money, Brett Duncan, head of equity derivatives at Standard Bank, suggests you spend time educating yourself on the basics.
“Standard Bank offers free introductory investment courses to the public. It is best to learn the basics to avoid pitfalls along the way,” says Duncan.
Gerhard Lampen, head of Sanlam iTrade, says investors need to conscientiously absorb information.
“The best ways to get this information is to read business and companies’ pages and listen to the business shows on radio stations,” says Lampen.
Open an account
The first step is to open an account where you can execute your transactions. According to Louis Jansen van Vuuren, stockbroking portfolio manager at Nedbank Private Wealth, various banks and stockbrokers offer this service, and it is for you to decide whether you require ongoing advice or just a means of transacting.
“Should you want ongoing advice, open an account with a reputable stockbroker. If you are going to fly solo then open an account with an online stockbroker. To open the account you will need to submit a copy of your ID, proof of residence, proof of banking and a tax number,” says van Vuuren.
At First National Bank (FNB) a Share Investing account can be opened via Online Banking within minutes and is a quick way to invest in the JSE and in Krugerrands.
Start investing early
According to Duncan, 94% of South Africans won’t be able to retire comfortably because they did not invest their savings early enough.
“Ideally you should start investing 15% of your salary from the age of 25 years. For every five years you delay investing for retirement, you will need to save 5% more,” said Duncan.
This means that by the age of 35 you will have to invest 25% of your salary to retire comfortably and by the age of 50 years this increases to 40% of your salary. It is virtually impossible to start investing for your retirement when you reach your late 50’s.
Consult your financial planner/advisor
Jan-Carel Botha, certified financial planner at Ultima Financial Planners, says it is important to walk the path with a trusted financial planner/advisor, preferably one registered with the Financial Planning Institute (FPI); a SAQA approved professional body.
Decide which shares to invest in
Duncan advises consulting the Exchange Traded Funds SA (eftSA) website. Eftsa keeps track of the market and provides this information to investors. For more information, click here
Pay close attention to the Johannesburg Stock Exchange News Service (SENS)
According to Lampen, all breaking news and share prices must be released on SENS first. This includes items like trading updates, company results, mergers, etc.
“Because Sanlam iTrade provides its clients with live SENS, they will be privy to breaking news at exactly the same time as stockbrokers,” he says.
Understand the investment process
According to Gusta Binikos, CEO of FNB Share Investing, you need to familiarise yourself with what is offered on the Share Investing Platform.
“We have found that the majority of our customers are between 24 and 35, which shows that young people are taking the initiative to invest in shares. FNB conducted research into customer behaviour and we found that many people know that investing in the market is a good way to build wealth but they were not confident to pick their own shares or don’t have a lump sum available to invest,” said Binikos.
Lampen adds that when it comes to investing, we would all like to pick “best buy” investments and beat the market. “What is more important, however, is the investment process, the steps involved in developing a robust investment strategy, structuring an investment portfolio accordingly and managing it effectively over time,” he says.
For first-time investors, Duncan says it is best to start small and be consistent with a basic investment plan.
“Avoid over-exuberance. A plan where you can double your money is likely a big risk,” says Duncan.
Avoid investing your money based on hearsay
Duncan adds that it is risky to take investment advice based on rumours in the market.
Don’t be tempted to gamble
Trading shares online shouldn’t be likened to gambling. Lampen suggests you use the tools available to help you manage your online share portfolio.
Try going on a short investment course before getting started.
When it comes to market tips, avoid placing all your bets on what your friends say. Always consult your financial advisor.
Start small and be consistent with your investment plan.