What are shares?

Companies have three choices when they want to raise money to grow their business: to borrow from a bank, issue bonds or issue shares. The key advantage of issuing shares is that the company doesn’t need to pay back the capital amount or make interest payments. Funds received from the selling of shares are used by the business to expand and finance projects etc.

If you own a share, you own part of the company. Someone who owns one or more shares is called a shareholder. Shareholders can receive dividends if a company’s board of directors declares that the company has made sufficient profits and that some these profits should be returned to shareholders. A share in the company gives you the right to vote on decisions affecting the company. You can also call a share an equity or stock.

Who can invest in shares?

Anyone can purchase shares on the exchange and any amount can be invested. Note however that trading can only occur via a stockbroker. Stockbrokers are licensed members of the stock exchange who trade securities on behalf of clients as investors cannot invest directly on the exchange. They also provide advice on stock exchange investment issues. The fees charged on share transactions include brokerage charges, VAT on brokerage charges, securities transfer tax and settlement fees. Transaction costs also include an Investor Protection Levy (IPL).

Why invest in shares?

  • Shares have shown the highest returns in the long term, outstripping other assets such as bank deposits and property.
  • Investing in shares gives one a good chance of beating inflation. South Africa’s inflation target is between 3% and 6%. To make a profit, the return on investment should, therefore, be greater than 6%. Research done indicates that the return on shares on the JSE has in most cases exceeded this percentage for the last hundred years.
  • The value of shares would in the longer term often increase. Generally one would sell shares for more money than you paid for them.
  • Some companies pay a portion of their net profits (return) to shareholders – this is called a dividend.
  • Investing is a good way of providing for retirement or unexpected expenses.

When buying different companies shares you are diversifying (getting a variety) your collection of shares and also limiting your risk of losing your money.

Are there Risks

Investing allows you to make  good profits if managed correctly, but you must be aware there is the risk of losing  money in any investment.  Markets can be unpredictable and volatile, and you will lose money on some trades, it is the nature of the game. Economic & political events can also influence the share prices.

  •  Only invest money that you don't need.

  • Determine your risk profile:
    • Investing or speculating
    • Long term or short term investment horizon
    • Objective of investing in the stock market
    • Conservative, moderate or agressive investor
  • Educate yourself on the stock market and do research on the companies that you would like to invest in.
  • Speak to a stock broker

Managed Accounts

We offer our clients the opportunity to have their share portfolios managed by one of our experienced portfolio managers. The minimum amount to invest is R200 000.

Should you have enquiries, please contact us on 011 214 7250  or marketing@sastockbrokers.co.za

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