A Fin24 user wants to know about online investment platforms and investing on the JSE by himself. He writes:
I currently invest in unit trusts through a reputable investment company.
I am looking to invest in some JSE-listed companies, but my investment company does not offer this type of brokerage.
What I have been able to ascertain is that I can approach various online investment platforms to purchase such shares.
The question I have is whether this is sensible, as most platforms require a monthly subscription fee of R49 to R80 and then will charge a minimum of R80 per transaction.
If I am only looking to invest a small amount each month of say R2 000, going this route would mean I lose 6.5% of the value immediately due to the administrative costs.
What is the most cost effective way to go about purchasing shares on the JSE and can I do this myself?
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From your question I can see that you have done the right research with regards to costing. It is always very important to look at the cost as a percentage of your investment.
Unfortunately, every broker will charge you a fee, either a monthly or an annual fee based on the value of your portfolio.
However, you need to look at what value you will be getting from the broker you choose. And as you rightly ask, is R2 000 enough?
Ideally you need to keep your cost as a percentage below 5%. As you have rightly stated, this means your investment has to grow by more than 5% to cover these costs.
The stock market has afforded many people the opportunity of consistent double digit growth over the long term. Unfortunately, there is no easy answer here and it’s a decision that you have to make depending on your investment goal, risk apetite and investment horizon.
Remember to look at what your goal and strategy is and decide from there. One key point to note is that Absa Stockbrokers and others do offer you interest on your cash balance from the first rand at a rate of above 4%, so you can use your trading account to save your R2000 every month until you are ready to invest in shares or ETFs (exchange traded funds).
To answer your second question “can you do this yourself?”: More and more people are looking at investing in the stock market themselves as it is cheaper and offers them better control of their investments. It also helps one to take charge of your future.
The key when investing by yourself is to understand the risks and what you are investing in. Education and research are also very important before you place your first trade or investment in the stock market.
You need to understand what investing is all about, what the reason for your investment, what the risks are and your risk profile.
You need to establish a strategy. For instance, making a quick buck is not an effective strategy.
Always remember that you have to diversify your investment as this helps to reduce risk. This sounds like a lot of work, but if you do this right at the beginning it becomes easier as time goes by and you will reap the rewards over time.
You can access education and research by visiting the site of Absa Stockbrokers. All the education is available for free on the website.
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