Transcript How to start investing

How to Start Investing
Presenter
Ana Forssman
Date
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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?
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The price at which a particular share can be bought or sold
Factors affecting the share price
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When there are more buyers than sellers, the share price rises
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With more sellers than buyers, the share price falls
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Some share prices rise while others fall. It’s all about supply and demand.
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If a company is very profitable, a share will rise
as more people think it is a good investment
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Factors such as economic and political events also
influence share prices
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How do I know which company to invest in?
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Do research on the stock market: read financial literature, attend investment
courses, get expert advice (eg from a stockbroker)
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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?
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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
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Be committed to this objective. Be patient
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Invest for the long run, eg 5 years
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Decide how long you are prepared to wait for a return
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Invest with money you can afford to lose
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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?
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Risk is the possibility of losing part or all of your initial investment
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Different products have different levels of risk
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Lower risk investments include:
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Cash in a money market account that earns interest;
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Government bonds (too expensive for most; generally R1m each!);
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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?
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Investing on the stock market is riskier than some other investments
– Share prices rise and fall as economic forces change
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Lets talk ETF’s eg.: New Gold / Top 40 / Div +
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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?
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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
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Choose your investments from several sectors, companies and investment
products
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If you can’t afford that, choose an ETF
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Is it difficult to manage my investment portfolio?
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Certain investment products require little or no management. However, always be
aware of how your investments are performing
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Stockbrokers offer services to help you manage your investments:
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Discretionary – investment decisions made
by the stockbroker without checking
with you, but in line with agreed aim
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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?
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You don’t need a lot of money to start investing
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Some products, like ETFs, offer investment plans
– Monthly debit order (minimum of R300)
– Once-off lump sum (minimum of R1,000)
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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
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Remember: stockbrokers charge fees
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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
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Invest an amount that makes sense in comparison to the amount of
brokerage fees that you’ll be paying
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Plan your investment objective, exercise self-discipline and monitor
your investment performance
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Don’t borrow money to invest
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Be patient
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Don’t get emotionally attached to your investments. Some days they will
go up and other days, down
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Ensure that you diversify your portfolio
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JSE Liberty Life Investment Challenge
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Introduces learners to real life economics and commerce
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Enables learners to learn about investment through simulated trading
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Open to all universities
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Runs from March to September every year
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Students participate in teams
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Team creates virtual portfolio of R1 million
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Great prizes: First: R25,000 and trip to overseas stock exchange; Second:
R20,000; Third: R15,000
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Game is played online
Here’s to successful
investing!
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