Those who go to the Johannesburg Stock Exchange (JSE) are either investors or traders. Investors want to make money by owning part of a company. On the other hand, traders want to make money from the performance of the company’s share on the market. Whichever the case, if you are looking for a way to get into Africa’s largest stock exchange, this article will inform you how to do it.
Ways to Invest in the JSE
To trade in the Johannesburg Stock Exchange (JSE), you need to go through a JSE registered broker. Only registered brokers and listed companies can exchange on any of the world’s exchange markets. An exchange in finance is buying and selling financial assets on an exchange market. Exchange markets facilitate the trade that goes on between traders or investors, and companies. With the help of brokers, they make it easier to buy different financial assets on the exchange. These financial assets can be shares (also called stocks), indexes, bonds, or derivatives. This article focuses on shares (stocks) and one derivative, the Exchange Traded Fund (ETF). ETFs are explained later in the article under the topic “Making Trades and Investments by Yourself.”
Registering with a Stock Broker
The easiest way to get a secure and reliable stockbroker to buy shares on the Johannesburg Stock Exchange (JSE) is to use JSE’s official website. This way, you can also be sure that the broker is registered with JSE, and so it adheres to the strict JSE regulations. The steps in this process are:
- On the JSE website, click on the menu at the top left corner of your screen.
- Select “Trade” in the options.
- Select “Find a Broker” in the drop-down menu that follows.
- The next page is titled “Find a Broker.” There are five steps on this page with five questions to answer each. The answers you give will help generate a list of brokers that match your needs as a trader or investor.
- The first step asks whether you prefer being contacted on call or whether you’d like to use an app.
- The second asks whether you need guidance in placing trades.
- Step three asks if you’re interested in a tax-free savings account.
- Step four asks whether you have any other wealth management requirements. Wealth, in this case, means your money, trade, or investments. Also called your portfolio.
- The last step, step five, asks how much you would like to contribute. How much you would like to use in your account for investment or trade as a start, and how much you would like to use annually.
- The next page will show you “Brokers matching your needs,” as well as links to their official websites and emails.
- By clicking the link to your preferred choice for a trader, you will go to the registration page on their website.
- Regardless of your choice, all of the stockbrokers will ask you for personal details and contact details. They will also ask that you configure your account settings and upload your FICA (Financial Insurance Contributions Act) documents to complete your account registration. FICA documents are usually a copy of your Republic of South Africa ID Document, proof of residence, bank account details, and income tax numbers. Depending on the broker, some or all of these may be required.
- Complete the process and you’ll have your broker’s account after a short while.
When choosing a stockbroker, it is advisable to compare the different brokers. First, find out the broker’s price for the transactions you want to make. There might be a commission on stocks per share or trade, withdrawal or transfer fees, and maybe a minimum amount you must always have in the account. Which tools does the broker’s trading platform have? Do they have candlestick bars, and do they save your trendiness and markups in case you close the platform for later? Does their platform let you put a stop loss (a point at which the broker closed an open position automatically to prevent excess losses) before you buy or sell? Do they offer educational facilities if you need them? Check for these qualities and answer these questions or individually for all your recommendations. Comparing them this way will help you decide on the best one to go with.
Who Makes the Trade
After you have registered with a stockbroker of your choice, you will then have the prerequisites for buying a share on the Johannesburg Stock Exchange (JSE). Next, you have to decide the shares you want to buy. Everyone who trades wants to make a profit. These are called returns. You should make good trades or investments so that your position gives you a return. A position in investment and trading is an ongoing trade or investment. The term “investment portfolio” is sometimes used instead of an investment position. Due to the fact that the JSE does not make trades and investments on your behalf, there are two ways you can do it:
- Making trades and investments by yourself, or
- Employing a financial service provider to do it on your behalf.
Making Trades and Investments by Yourself
You can also choose to get hands-on with your transactions (trades or investments) by trading on your own. While starting, you will get acquainted with the JSE market and how it works. At this point, it would be wiser to trade using a demo account. Almost all stock brokers provide a demo account to help beginner traders and investors. As you progress, you will realize how to make successful trades or investments. At which point, if you have not yet established whether you are a trader or an investor, you will find out which of the two is best for you. The common criteria that define traders should help you get a rough idea of what trading and investment are about to decide which kind you would like to be.
Some buy and hold positions for short periods to gain small returns that cumulatively amount to a big return. Conversely, some hold their positions for longer periods to make significant returns when they close. The shortest trades are made by Scalp traders (also called scalpers). They only hold their investment positions for minutes or seconds in a day, never going past one day. Day traders hold their positions a little longer than scalpers but never go past one day. Day traders can hold their position for hours in the day to realize returns. Swing traders hold their positions for days to weeks. Unlike scalp traders and day traders, they hold their positions “overnight.” Position traders hold their positions for months or even years. By the working definition, position traders are investors whole scalp traders are traders.
As a trader or investor, you can also take a variety of approaches to gain returns. With more practice on your demo account, you will slowly come to realize what your approach to trading or investing is. There are two main kinds of traders depending on research and analysis: the fundamental trader or the technical trader (also called noise trader). Fundamental traders analyze the data of a company that impacts its share price and make trading decisions based on that. Technical traders focus on the immediate market trends and decide the direction a company’s share price will take based on that.
Investors can be traders, but traders are not usually investors. The key difference is that investors buy part ownership of companies (shares) while traders buy and sell financial assets for profit. Therefore, trading is often cheaper to start than investing. Although some financial assets make it easier for investors to buy at low prices, smaller portions of shares or even index (the collective performance of a group of shares) tracking funds are also available on the Johannesburg Stock Exchange (JSE). Since they are cheaper than buying full shares and actual indexes, they provide investment opportunities to low-budget beginners. The most common investment in tracker funds on the JSE is the Exchange Traded Fund (ETF). Buying ETFs is highly recommended for beginners.
Employing a Financial Service Provider
Making good share purchases by you has a steep learning curve which is time-consuming. If you do not allocate most of your day to it, you will have difficulty growing your portfolio. However, if you cannot manage by yourself, there are other options you can explore. One of these options is to get a financial advisor to help you decide which shares to buy. The role of financial advisors is to ensure your financial well-being. You inform them about your earnings as well as your spending, and they show you how to budget, then how to save, and finally how to invest. At any one of these stages of growth, a financial advisor can help you get opportunities to earn more. You can grow your portfolio at the investment stage without learning how to trade or invest.
The other ways to employ a financial service provider are to use your broker’s portfolio management services or to buy a unit trust. When you register, a stockbroker may ask you whether or not you want to opt into portfolio management service. If you accept, your trading account will be managed for you by the broker at a fee. Unit trusts, on the other hand, are managed by fund managers. They are finance professionals who know where to look for market information, crucial and company financials. They also know how to navigate the JSE. You can buy one through your stockbroker or use your bank (contact them for more information).
Company shares are listed in two places on the JSE:
- The mainboard, and
- The AltX.
Listing means that a company is included in the exchange so that its stock can be bought or sold.
Here you will find the well-established South African companies listed. On the mainboard:
- You’ll find JSE’s top 40 stocks.
- You will find Exchange Traded Funds (EFTs).
- Almost a fifth of the companies are dual-listed (they are listed in two or more stock exchanges).
- The JSE regulates all companies with a primary listing on the JSE.
AltX board is for high-growth SMEs (small and medium-sized companies). It provides an alternative place for SMEs to sell shares to raise capital for growth and expansion. However, it is not advisable to invest in these companies unless you have researched and found out more about the owners and managers.
- The JSE has strict rules and regulations. For this reason, buying on an exchange is safer than buying shares directly or privately.
- Transactions on the exchange are guaranteed.
- The exchange also instantly provides up-to-date market information about shares for the companies listed on it. You cannot get market information of this kind elsewhere.
- On the JSE, there is a guarantee that transactions will be cleared and settled.
- The JSE has a legal responsibility to protect your interest as an investor.
This article has informed you how to buy shares in the Johannesburg Stock Exchange (JSE). It has two aspects. The first aspect is the direct process that includes a step-by-step guide, while the second aspect is an informative read about how shares and the exchange work. In addition, the JSE exchange has also been explained, and its benefits highlighted. This useful information on the JSE should help you as a futures trader and investor.