Stock market uncovered: What are share instalments?

Julie Brownlee, Fsp Invest, 02 May. 2014

Tags: share instalments, share instalment, what are share instalments, what is a share instalment, how to invest in share instalments, shares, share price, invest in share instalments

If you’re looking to invest on the stock market and want a little bit more gearing, share instalments could be for you. So what are share instalments? And how do you invest in them? Let’s take a closer look at the ins and outs of share instalments…

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How a share instalment works

Share instalments offer you a way to take slightly largest positions in the stock market without having to put down extra money. Share instalments trade on the Johannesburg Stock Exchange, Gareth Stokes in Fear, Greed and the Stock Market explains.

The price of a share instalment mirrors the price of the underlying share. This means if the share price rises, you benefit from this as an investor in share instalments. Equally so, if the share price drops, the share instalment value will also fall.

By investing in share instalments, you take advantage of gearing. These products have a gearing of around 2. For example, you buy one share instalment, but get exposure to two underlying shares.

Although the gearing is much less than what you’d get from trading instruments like single stock futures, you need to manage that extra risk.

What happens once you own share instalments

You receive dividends the share pays out amounting to your full exposure while you hold the share instalment.

When it comes to the end of the term of the share instalment, you can pay the balance of the instalment to become owner of all the shares. Or you can walk away and lose your initial instalment.

Share instalments are liquid products as they trade on the JSE. This means you can sell them easily before expiry if you choose to do so.

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How to invest in share instalments

If you want to invest in share instalments, give your stockbroker a phone to discuss the product. Your stockbroker will be able to provide you more information.

So there you have it, what share instalments are.

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