Stock market basics: Here’s how to invest in shares…

Julie Brownlee, Fsp Invest, 30 Jan. 2015

Tags: shares, how to invest in shares, stock broker, stock market, unit trusts, investing in shares,

If you want to invest in the stock market, you have a couple of options open to you.

One route involves going through a stock broker. The other involves going through a fund manager.

Let’s take a closer look…

How to invest in shares through a stock broker

If you want to build a portfolio of individual shares, you’ll need a stock broker.

To do this, you have to open an account with a stock broker. Once you’ve done this and deposited funds, you’ll give him instructions on what shares to buy and how many you’d like.

To invest in shares this way, you’ll need a reasonable sum of money to start off and continue to invest so you build up a decent sized portfolio.

You’ll need a minimum of around R10,000 to start off. And due to the fees and commissions involved, it’s not worthwhile investing any less than R5,000 in each share.

To build a diversified portfolio, you’re looking to buy shares in around ten to 20 companies, in different sectors and industries.

If the idea of picking shares doesn’t appeal or you don’t have a large amount of money to start investing with, unit trusts are perhaps better suited to you…

How to invest in shares through unit trusts

You can buy units in unit trusts through fund managers and banks.

When you buy into a unit trust, you gain instant diversification as the fund will contain exposure to many different shares. You can opt for a unit trust that concentrates on the biggest shares on the stock market, for example, or particular sectors, like mining.

What’s great about unit trusts is that you can invest in them from a few hundred rand a month. Through setting up a debit order you can gradually invest and build up your holding over time.

You can also invest with a lump sum.

You can easily find out more about different unit trusts online. Each unit trust has a fact sheet which details what shares it invests in, how risky the investments are and its performance over recent years.

So there you have it, how to invest in shares.

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