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