Why you shouldn’t invest until you have at least R10,000

Julie Brownlee, Fsp Invest, 10 Jun. 2015

Tags: invest, minimum amount to invest, stock broker, money to invest, investing,

If you’re eager to start investing and have done some research into opening an account with a stock broker, you’ll have found out there’s a minimum amount you need to deposit.

It’s unlikely you’ll be able to open an account with a stock broker unless you have a minimum amount of R10,000.

So why is this the case? And what difference does it make to you as an investor?

Read on to find out…

Why a stock broker demands a minimum amount to invest

If you don’t have at least R10,000 earmarked to invest, you may think it’s rather unfair that a stock broker won’t let you open an account.

But there is a very good reason for this. It’s because of the charges and fees you have to pay to buy shares.

On the buy leg of the share, at the cheapest rates around, this is still going to set you back over R100. This might not sound a lot, but if you only buy R2,000 worth of shares, this equates to 5% of the value of your trade.

When you invest small amounts, you need your shares to perform even better just so you breakeven, never mind turn a profit.

On top of the brokerage and other fees you pay, you’ll also need to pay an admin fee on your account.

Investing in small amounts isn’t a good idea because of this. The minimum investment you should think about making is R5,000. Ideally a larger amount. This minimises the impact of the charges you need to pay.

The larger the amount you have to invest means you can invest in different stocks, increasing your diversification too.

What if you don’t have enough money to open an account with a stock broker?

If you don’t have enough to open an account with a stock broker yet, you have two choices:

  • Put off investing until you’ve saved up enough money; or
  • Invest in unit trusts, where you can invest from R200 a month upwards.

So there you have it. Why you shouldn’t invest until you have at least R10,000.

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