Want to invest on the stock market? Here are your three main options…

Julie Brownlee, Fsp Invest, 31 Oct. 2014

Tags: stock market, how to invest on the stock market, shares, etfs, unit trusts, stocks, investing on the stock market, investing

If you want to invest on the stock market, what are your options?

There are shares of course. But what if you don’t want to invest in specific companies?

Let’s take a closer look at the three main ways to invest on the stock market…

Your first option: Buy shares

Shares (also known as stocks or equities) are one way to invest on the stock market. Through buying shares, you’ll own a slice of that particular business.

Through research you’ll have to decide what shares to pick and how much to invest into each one.

If you want to buy shares, you need to do it through a stockbroker. And you’ll need to invest a minimum of R5,000 to R10,000.

What about unit trusts?

If you want exposure to the stock market, but you don’t want to pick specific shares yourself or deal with a stockbroker, you have another option. That is unit trusts.

By putting your cash into unit trusts, a fund manager picks the shares for you. Depending on the mandate of the fund, the manager will select certain shares.

Unlike investing directly on the stock market, you’ll have to pay annual fees for your unit trust.

Unit trusts are easy to invest in. And you can invest on a monthly basis if you want from as little as around R300.

ETFs: The benefits of unit trusts direct from the stock market

Exchange traded funds (ETFs) work a bit like unit trusts in that you buy into the performance of many shares. ETFs tend to track an underlying index and try to replicate its performance.

For instance, you can buy an ETF based on the 40 biggest shares on the Johannesburg Stock Exchange.

You have to use a stockbroker if you want to invest in ETFs, but there are no ongoing fees to pay like with unit trusts.

So there you have it, your main options if you want to invest on the stock market.

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