The JSE. Listed shares. Index Tracking. Equity and ETFs. That’s a lot of complex terms, right?
Buying shares on the Johannesburg Stock Exchange can deliver attractive returns for individual investors but investing on the JSE can be daunting for beginners.
The complexity and the additional fees charged by stockbrokers or fund managers can also be off-putting.
On the other hand, ETFs can provide a simple and low-fee alternative for direct investors.
Ready to learn more? Good! Let’s get started with this simple beginner’s guide to investing on the JSE.
The JSE, or Johannesburg Stock Exchange, is Africa’s largest stock exchange and is also ranked as the 16th largest exchange globally. The JSE is regarded as one of the most sophisticated stock exchanges in the world – and as of August 2020, its market capitalisation was USD1,005 billion. The role of the JSE is that of regulator, to ensure the market operates in a transparent manner thereby protecting the interests of investors.
As the ‘engine room’ of the South African economy, the JSE provides convenient access to investors to buy and sell multi-asset shares, also known as securities.
Basically, companies list on the JSE to raise capital by selling shares via public offers or rights issues. These listed shares can then be bought and sold by personal investors or traders, professional investors or traders and companies. In recent years, the JSE has become more accessible to personal investors through its online platform, providing a convenient means to buy and sell on the stock exchange.
However, what’s crucial to understand is that unlike depositing your savings into a bank account where your capital is guaranteed, when you buy shares through the JSE (or any other stock exchange), you not only stand to gain, you also run the risk of losing some – or all – of your capital if the market or the company you have invested in takes a bad turn.
That’s why it’s important to understand your tolerance for risk and make informed decisions when choosing your investments. A good financial advisor can help you navigate these hurdles and assist you in building a risk-balanced portfolio.
If you want to invest on the Johannesburg Stock Exchange, there are three common ways you can go about it. You can:
When it comes to buying shares, there is no ‘best’ way because each method has its merits and fulfils different objectives.
However, for first-time individual investors, index tracking funds offer a simple, low-fee option that is worth consideration.
There are two options you can choose from when buying an index tracking fund:
An Exchange Traded Fund (ETF) provides a basket of shares that are benchmarked against a certain market index.
ETFs are traded on the stock exchange, and are easily bought and sold at any time of the trading day, just like shares.
With ETFs you will also always know what the underlying assets are that make up the fund which is not the case with index tracking funds.
And your ETF will never underperform against the benchmark because the ETF tracks indices such as the JSE Top 40.
An Index Tracking Unit Trust tracks an index, like an ETF, but the key difference is that the trading is only done once a day, so there will be a lag between the time at which a buy or sell order is submitted and when that order is executed.
1nvest offers the widest range of index tracking Exchange Traded Funds (ETFs) and Unit Trusts in South Africa.
Our award-winning solutions are backed by Africa’s largest financial institution, the Standard Bank Group (comprising Standard bank, STANLIB and Liberty).
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Collective Investment Schemes (CIS) are generally medium- to long-term investments. The value of participatory interests may go down as well as up. Past performance is not necessarily a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and maximum commissions is available on request from the manager. The manager does not provide any guarantee with respect to the capital or the return of a CIS portfolio. These portfolios are third-party-named incubator portfolios. The manager retains full legal responsibility for these portfolios.
1nvest Fund Managers (Pty) Ltd is an authorised financial services provider (FSP), FSP No. 49955, under the Financial Advisory and Intermediary Services Act (FAIS), Act No. 37 of 2002. The manager of the Schemes is STANLIB Collective Investments (RF) Pty Ltd and registered in terms of CISCA. For the basis and information on awards and rankings, please contact [email protected].
