This is a comprehensive guide for beginners on how to buy and sell publicly-traded shares on the JSE. We include valuable information on how you can buy and sell South African shares on the JSE, best options for beginners and how to get started.
Choose your quick section of our How to buy JSE shares for Beginners below.
Our Best Handpicked tips on How to buy JSE Shares for beginners Revealed:
- ✔️3 main ways to buy and sell shares in South AfricaAsset manager/investment manager
- ✔️What kind of investor are you?
Shares of public companies are listed on a stock exchange. In South Africa, the majority of retail share trading is done through the Johannesburg Securities Exchange (JSE).
For almost 130 years, the JSE was the only stock exchange in South Africa that the public could access to for buy and sell company shares. There are now four other competitor stock exchanges in the country: ZARX, A2X, 4AX and EESE. The JSE is the dominant stock exchange in South Africa, although the other four exchanges are nibbling away at its market share.
The average man-in-the-street cannot deal directly with a stock exchange. They have to go through a middleman. This will either be an asset management company, an electronic trading platform hosted by an independent broker or direct through a stock broker who buys and sells publicly-traded shares on your behalf.
3 main ways to buy and sell shares in South Africa
Retail investors can access the JSE or the other four stock exchanges in South Africa via the following:
Asset manager/investment manager
An asset management company manages assets/investments on behalf of clients. The most common way to invest in shares through an asset management company is investing in one of its unit trust funds. This is a basket of different publicly-traded put together as a fund.
Examples of the top asset managers in South Africa are Investec, Coronation, Allan Gray, Stanlib and Sanlam.
Stock trading platform
A stock trading platform is legally-registered electronic software that allows traders and investors to access the JSE, place orders and monitor their trading or investment accounts online. Trading on a stock broking platform is easy and cheaper than going direct to an asset manager or a stock broker.
- Select a licensed and regulated online broker or bank that offers a stock broking platform
- Register an account and go through the FICA-registration process
- Deposit funds in your trading account
- Set up your trading platform and place your first order
Large banks in South Africa such as Standard Bank and FNB offer popular share trading platforms and have their own proprietary trading platforms.
Licensed and regulated forex and CFDs brokers offer trading platforms like MT4 and MT5 to access the stock markets to trade shares in commodities, precious metals, energies and big tech companies.
A stock broker buys and sells publicly-traded shares on the stock exchange on your behalf. It may be an independent stock broker or someone working for a brokerage that is a registered financial services company.
The way it works is you instruct the stock broker on what securities to buy and sell on your behalf. These brokerages usually have a financial advisory department that provides advise on what to buy and sell, and how long to hold onto the share or how quickly to sell. This service usually comes at a price in the form of a commission fee.
You can also open a discretionary account with a stock broker. This means you effectively give the broker permission to make buy and sell shares without getting your consent. This type of account is usually available to higher net worth individuals who would like the broker to trade on their behalf.
Best option for beginners who want to buy JSE shares
Stock trading platforms hosted by forex and CFDs brokers are the best option for beginner traders and investors. It’s a more affordable option and the trading platforms are easy to use. It does mean you trade for yourself but there are more than enough resources available to help you analyse stock market trends and help you pick the best shares to buy on the JSE.
Choose to trade JSE shares with a reputable company that offers an advanced trading platform with a user-friendly interface. Only use a brokerage that is licensed and regulated by a Top-tier authority, preferably the FSCA in South Africa.
Register for an online share trading course and use all the resources available to gain knowledge and experience trading shares on the JSE. When you use a broker’s trading platform, you pick what shares you want to buy and sell, and how long you want to hold onto them or how quickly you want to sell them. You need to develop a sound trading strategy before you start buying and selling individual shares on your own.
You can buy and sell individual shares on a stock broking platform or invest in exchange traded funds (ETFs). ETFs are a basket of securities that trade on an exchange like the JSE and contain all types of investments, including stocks, commodities or bonds. ETFs are recommended for beginner traders because they offer good exposure to top-performing companies.
Choose a broker that supports one of the popular trading platforms. Avoid proprietary platforms until you are a more experienced share trader. MetaTrader4 (MT4) is the most popular electronic trading platform in the world and the best stock trading platform for beginners.
Advanced traders and investors can use MetaTrader5 (MT4). Almost every large and reputable forex and CFDs broker offers one or both MetaTrader platforms.
Do your homework and start trading JSE shares on the right footing. Beginner traders with little to no experience can lose a lot of money trading shares on the JSE. Limit the risk by choosing the right broker to partner with who has the best trading platform and offers good customer service.
Large banks in South Africa such as Standard Bank and FNB offer popular share trading products for retail traders and have their own proprietary trading platforms.
EasyEquities is South Africa’s best low-cost investment platform and is a good broker for beginners who want to buy and sell JSE shares. EasyEquities is a subsidiary of JSE-listed Purple Group Limited (PPE), an online platform which allows anyone to buy shares in publicly-traded shares on the JSE.
What is the FICA registration process?
Whatever option you choose to buy and sell shares on the JSE, you have to go through the FICA registration process. It’s the same as what you have to do to open a bank account in South Africa.
The FICA registration process is required by law in order to prevent money laundering or any activity that contravenes South Africa’s financial trading laws.
For the FICA registration process, you need to provide your broker with:
- proof of identity
- proof of address
- proof of banking details
What kind of investor are you?
The first question you must ask yourself if you are buying and selling shares for the first time is, “are you a trader or an investor?”
What is the difference?
Trading is a method of holding publicly-traded shares for a short period of time. Traders hold stocks based on short-term high performance.
Investing is a method of holding publicly-traded shares for a longer period of time, for a few years or decades. This approach works on the “buy and hold” principle and is best for people saving for their retirement or putting their money into a share portfolio that hopefully will grow.
Traders go for short-term gains on share price movements with hope of making a profit. Investors ride out the calm and stormy waters until they are ready to ‘cash in’ their investment, and hopefully what they get out is much larger than what they originally invested.
Best place for a beginner to start trading JSE shares
The best place for a beginner to start buying JSE shares is trade with an Exchange Traded Fund (ETF). An ETF is a basket of securities that tracks an underlying index, sector, commodity or other assets. ETFs are bought and sold on a stock exchange the same way you would a regular stock.
ETFs give you good exposure to a range of top listed companies in South Africa. You can trade ETFs through a reputable broker and monitor its performance on the trading platform.
Once you feel comfortable using a stock trading platform and are a more experienced trader, you can start trading individual shares on the JSE and build up your own share portfolio. A good place to start is follow the top 20 publicly-listed companies in South Africa or invest in the JSE Top 40 Index.
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Forex Trading Africa annually reviews financial instruments, brokers and trading platforms and provides information on the global financial markets that you need to know about to become a successful trader. It’s important that you trade asset classes with caution and manage your risk with the tools and resources available to you.