How to get started
If you want to invest in shares, you first have to open an account with a registered stockbroker. Investors do not buy shares directly from the JSE, but through a stockbroking firm which is a member firm of the JSE. When you approach a member firm, one of its stockbrokers will discuss the proposed investment with you. It is highly likely that he or she will also give you advice. You need to decide which shares to purchase and how much to invest, preferably with a view to a medium- or long-term investment of not less than three years. On instruction from your stockbroker, a dealer at the JSE executes your order at the price agreed upon. Alternatively, you may impose certain price limits, within which the dealer must buy or sell your shares, but these limits should be reasonable with regard to time and price.
Basic rules for investing in shares
- Share prices go up and down. Shares are therefore riskier
than investing in a bank or in an investment policy.
- If you choose a successful company in the first place, the value of your shares is more likely to continue
growing.
- Never borrow
money to buy shares and never use money you many need soon. Only use money that you have set aside specially for long-term investment.
- If your share portfolio
loses value, get professional advice, don't panic! Shares are for the long term - ideally, five years or more.
- A good investment plan is to put a regular monthly amount into a special savings account
. As soon as you have enough in your account, you buy shares in the company of your choice. Do this year in and year out, and your wealth can grow.
- If you don't have specialist knowledge, don't chop and change between companies
. If the general share market goes down, ride it out. If your particular company's shares go down ask your stockbroker to explain why. If the company is doing badly, it may be wise to sell, and buy shares in a better company.
- Remember, there are also costs involved in buying and selling shares.
- Never buy shares in unlisted companies or through a person who is not a stockbroker or a registered intermediary. Be especially careful if a person calls on you or advertises, encouraging you to buy shares.
- Remember - in the stock market "your word is your bond". Be very clear in what to say to your stockbroker. Your verbal instruction is a binding agreement between the two of you!