Should I buy shares or invest in Satrix?

2012-05-26 13:22

Sphele writes:
I have always had a dream of trading shares and investing in the stock market.

I am taking it one step at a time, but I am not sure whether to trade shares or invest in Satrix 40. Can I do both?

Maya replies:

It depends on how much money you have to invest and also how much time you can commit to researching shares.

If you have a real passion to learn about the stock market and read up regularly and attend company presentations, then having your own share portfolio is a good idea.

But because of the fixed costs of trading on the stock market, you ideally need R5 000 to purchase one share.

This increases your risk as you are exposed to the fortunes of a single company.

In comparison, if you invested R5 000 into an exchange-traded fund, such as Satrix 40, you automatically have exposure to 40 of South Africa’s largest companies and your risk is lower.

A good strategy would be to build up savings in Satrix and in the meantime go on some courses and read up on share investing.

Once you are familiar with the market and are ready to invest, you can diversify by buying individual shares.

Having a core holding in an exchange-traded fund with additional investments in individual shares is a good approach to managing a share portfolio.

You can also invest in exchange-traded funds managed by Satrix and Absa through an investment platform that allows you to contribute R300 a month rather than having to start with a lump sum.

If you want to buy individual shares, both Standard Bank and FNB offer a great online service for investors who are just starting off and want to test the waters without committing large sums of money.

Standard Bank’s Auto Share Invest allows you to invest with a R500 monthly debit order.

Every month you invest R500 or more and on the 25th of each month Standard online will buy the shares you have chosen from their range of selected shares, which includes the 40 largest companies listed on the JSE.

The costs are about R25, which works out to 5% on a R500 investment. This means that the share price must first increase by 5% before you start making money.

FNB’s share builder gives you access to 22 of the most popular companies on the JSE. You do not have to be an FNB client to access the service.

FNB provides detailed, easy to understand information on each share. You can invest for R500, but given the minimum and annual fees, you want to invest a minimum of R2 500.

There is an upfront fee of 2%, which includes all your costs. But there is a minimum fee of R50 – so you will pay R50 for any trade up to R3 000.

There is also a monthly management fee of R17.

Once you are comfortable investing, you can migrate to FNB’s Share Investor Platform, which allows you to invest in the full range of shares.


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