Investing 101: How to invest in the stock market

Julie Brownlee, Fsp Invest, 07 Apr. 2014

Tags: invest in stock market, investing in stock market, how to invest, buy shares, buy shares, buy stocks, stock broker, stockbroker, stock market

If you want to invest in the stock market, where do you start? You essentially have two options. You can open an account with a stockbroker and buy shares. Or you can buy into a unit trust, which invests your money for you. Let’s take a closer look at these two options…

How to buy stocks with a stockbroker

This is the route many people take when they want to invest in the stock market. So what does it entail?

You need to open an account with a stockbroker. You then pay money into your stockbroking account. You have two choices over the type of account you open:
  • You either instruct your broker which shares to buy (and sell) for you.
  • Or you give the stockbroker your cash to invest for you. This is the more expensive option and you’ll need a large starting amount.
Why would a tiny South African stock in the tech sector to rise 515.85% in 40 months?

I don't know. And to be quite candid, I don't care!

The only thing I care about… the only thing worth knowing… is whether a certain stock is going to rise – and when.

Here, let me show you what I mean…

Most people will probably opt for the first option as it’s the most accessible way. But this also means that you have to decide which shares to buy. This can be a daunting process. You need to do your homework and research all your picks before investing your hard-earned cash.

You can generally open an account with a stockbroker with about R10,000. With online brokers, this can be less.

How to buy shares with unit trusts

If you don’t have a large amount to start investing with or you don’t feel you have the expertise to pick stocks, you can buy into a unit trust.

You can do this through your bank or a fund management company. With unit trusts, you can invest with a small amount on a monthly basis or with a lump sum. This makes this option an affordable option for most.

Another advantage of buying into a unit trust is you gain instant diversification. When you invest in a unit trust, your money is pooled with lots of other investor. The fund manager then takes this money and invests it in lots of different shares.

So there you have it, how to invest in the stock market.

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