You are currently viewing our desktop site, do you want to visit our Mobile web app instead?

What should I consider before investing in shares?

The first step is to determine what your investment objective is.
There are several stockbrokers and online trading platforms to choose from. Image: Shutterstock

I am very interested in buying shares (such as RH Bophelo). I want to know from which broker can I purchase shares, and if there is a minimum amount needed for me to buy them? What other factors should one consider, such as fees, tax, being scammed?

  Profile      Follow      Mail
  

Dear Reader

Investing in shares is definitely a good idea – however, there are a few things you should take into consideration before you make the investment.

Investment objective

This is the starting point of any investment. Investment objectives vary from person to person. Some people want to invest in order to receive income from their investment, while others are investing as part of an overall portfolio (for diversification). Some people want to invest to save for a deposit for a house in 12 months. So it’s a good idea to determine your investment objective upfront.

Risk profile

If you use the service of an advisor, they will normally have you complete a risk profile questionnaire. Your risk profile determines your risk tolerance and risk appetite, which is important when considering which shares to buy as well; for example, an investment into a mining company carries a different risk to investing in a banking stock. 

Is this investment part of your overall investment portfolio, or the only investment?

You must determine how this investment will fit into your overall portfolio. Will it be the only investment? Or will you invest as a form of diversification? After all, shares are classified as high-risk assets.

Investment for long-term capital growth or purely for speculation

The equity market can be very volatile, therefore there might be large short-term fluctuations in the price of the shares. Holding them over the long term might yield better results compared to holding them for the short-term.

Long-term commitment is required when investing in a share portfolio.

If you are investing with the intention of speculating on a particular share, then invest an amount you can afford to lose.

It is very risky to invest all your savings in one share, especially when you consider how much shares like Tongaat and Steinhoff have fallen. These stocks were once darlings of the stock market. Do your research thoroughly! You can find a lot of information on the internet. And remember – if it sounds too good to be true, then it probably is.

Do you want advice on this investment, or do you want to manage it yourself?

If you want advice on which shares to buy, sell or hold, then using the service of a stockbroker will be beneficial. But if you want to manage your own portfolio then using an online trading platform is another option you can explore.

Which broker is good to buy those shares from?

There are several stockbrokers and online trading platforms available that you can choose from. Online trading platforms are offered by most large banks. Choosing a stockbroker will depend on how much you want to invest, and what service you like to receive, as stockbrokers have different minimum investment amounts and service levels offered.

What is the minimum investment amount?

Minimum investment amounts vary with each institution. Stockbrokers usually have higher minimums when compared to online trading platforms. The banks usually have a low minimum investment amount.

Fees

Both a stockbroker and an online trading platform will charge a brokerage fee. Online trading platforms tend to be cheaper when compared to a stockbroker, who traditionally offer a more personalised service. With an online trading platform, there is no human interaction; when it comes to advice on which share to buy, hold or sell, you would use all the available resources found on the website to guide your decision, but it is entirely your decision to make.

Tax

Your investment into shares is not tax-deductible. Therefore, the gains from the disposal of shares will attract tax – whether that be income tax, where you hold shares for a short period and tend to buy and sell frequently, or capital gains tax, where you hold each share bought for a minimum period of three years before selling them. The gains will form part of your assessment in the tax year in which you dispose of the shares.

Being scammed

It is always advisable to deal with an institution with a good reputation and that is registered with the appropriate regulatory authorities.

I wish you all the best on your investment journey! May it yield great rewards.

  

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

ADVISOR PROFILE

Thulisile Nkomo

NFB Private Wealth Management

COMMENTS   6

You must be signed in to comment.

SIGN IN SIGN UP

The financial advisers are trying all they could do to relaunch this career that was destroyed by their greedy and wicked predecessors that were trained by the like of oldmutual like institutions. Unfortunately, they have lost it. Massive educational promotion, hypothetical articles would not do the repair. The millennia are different from the boomers who relied on the greedy advisors before making decisions.
Your career is dead in western countries, in ICU in South Africa. As for me and my family, we would not have a bizness with any group of licensed scammers that should called themselves a financial destroyers rather than an advisors.
Stealth wealth, money web got better informations than any advice you could offer.
NEVER AGAIN WOULD I BE A VICTIM OF GREEDY AND NON GREEDY FINANCIAL DESTROYERS

OK. No problem. So…..you are trying to say something. What was your point again?

I think he is trying to say that he will never use a financial advisor. Neither will I but that is because I chose to educate myself in these matters. However, the latgest part of the population do not have even the beginning of a clue about finances. Even if they are wealthy. So, there will always be people out there really needing this service.

If you’re interested in equities – the online trading company called – Easy Equities is the lowest trading platform by far. Lowest brokerage costs, no monthly fees and you can invest into the TFSA (tax free savings account option). Plenty of ETF’s to choose from which gives you diversification instead of risk in one share only.
Alternatively head to Satrix and look at the ETF options they offer.
Good luck and remember the saying “it’s not how you time the market, it’s the time spent in the market”… meaning the longer you stay invested the better chances you have of seeing your investment grow.

You forgot most important part – USD share and share trading!!

Consider what country to invest in.

Some countries are run by long retired freedom fighters and is headed one way. And its not the right way.

Its easy to invest anywhere in the world. Spread your wings.

Don’t let these ………..”PEOPLE”………. Invest your money for you in the likes of ESKOM, SAA or SA INC.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: