Getting Started in Shares Brought to you by: JSE Limited & Online Share Trading
Why are we providing free education? 2 • A study found that people do not invest in shares when they do not understand them. • An educated investor is more likely to be a successful investor and hence a long term investor. • We want our clients to be successful so that they continue to invest with us. • If you lose money you stop investing and we lose you as a client! • The more people invest with us the lower the fees can be – Our brokerage fees have fallen over the last 4 years
Saving vs. investing 3 • Saving is putting your money in the bank and receiving interest. – The capital is not going to grow and the rate of return is modest and largely predictable – Storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies. • Investing is putting your money to work for you – This offers capital growth (with risk of capital loss) and a share of the profit in the form of dividends – Is taking a risk with a portion of your savings such as by buying stocks in hopes of realizing higher long-term returns.
4 Assets Classes
How risky is each asset class? 5 isk R Shares Reward Property Cash Fixed Investment
How risky is each asset class? 6 Reward isk R Blue Chip e. g. Anglo American Mid Cap e. g. SPAR Small cap e. g. City Lodge Derivatives e. g. Warrants, instalments and Futures
7 Why the share market?
Why the share market? 8 • Wealth creation • Long term financial planning • Retirement planning • Children's education
Why the share market? 9 • Different types of return: – Growth (reinvests profits to grow the business) – Income (distributes most of profits as dividends) • Liquidity – Ease, speed and cost of buying/selling • Accessibility – 24/7 Online access • Transparent pricing – You know exactly what the costs will be
Why the share market? 10 Source: JPMorgan
Why the share market? 11 • An investment of R 5000 in Standard Bank in 1990 when the share price was R 1. 77 is now worth R 305, 000 now at a share price of R 108. 00, a return of over 6, 000% excluding dividends (386 c in 2007 financial year). • Merafe; 131 c in March 2007 to 319 c in April 2008 • Note that one can also experience extreme losses e. g. – Didata (lost 90% from the highs of 2000) – Nasdaq
Managing risk 12 + 0 BIG PROFIT Small Profit Break Even Small Loss - Cut Your losses early Make sure you do not lose money and you are half way there! BIG LOSS
13 Develop an investment strategy
Develop an investment strategy 14 • What stage of life are you at? – Single – Married with children – Retirement • What knowledge stage are you at? • Know your risk profile and risk tolerance – Being able to master risk is being able to master the markets. • What is your investment time frame? • Success depends on ensuring that your investment strategy fits your personal characteristics and goals.
15 Understanding the Share Market
What is a share? 16 • A share gives you a ‘share’ of the assets and profits of a company. e. g. with Pick ’n Pay you own a small part of every store. • If a company does well (is growing its profits) then its share price should rise. • Likewise if a company is not doing well (is making losses) then its share price should fall. • Owning a share means that you can profit from share price movements and share income (dividends). • You get to vote at the AGM
What is a share market? 17 • Like any other market. • Requires buyers and sellers. • Stock is bought or sold when buyers and sellers agree on a price. • Companies gather to issue shares in return for cash in order to expand grow their business (e. g. Pick ’n Pay may issue shares to grow the number of supermarkets it has).
What are share indices? 18 • “The market performed well today” – what do they mean when they refer to the “market”? • An index is a way of measuring the performance of a selection of shares across the market. • When an index is up it means that on balance the share price of most of the shares in that index have increased that day. If the index is down then on balance most share prices of the shares on the market have decreased that day. • Indices can be used as market barometers for the market as a whole. Examples of well know indices are: All Share 30 323 +87. 1 Nikkei 12 433 +387. 7 Dow Jones 12 100 +25. 9 5 693 +56. 5 FTSE-100
How to make money in the stock market 19 You can make money with shares in two ways: 1. Buying a share at a low price and selling that share at a higher price at a future date. This is referred to as capital growth – e. g. buying Sanlam on 02 Jan 2007 for R 19. 00 per share and selling on 02 Jan 2008 for R 22. 81. A profit of R 3. 81 per share or a return of 20% over that period of time. 2. Receiving dividends from owning a share. This is referred to as income. – e. g. Sanlam paid a dividend of 77 c in 2007, which is a 4% tax free yield
What is a dividend? 20 • Dividends can be seen like tax free interest earned. • Dividends are distributions of a companies’ earnings to shareholders. The dividend earned on shares depends on the profits earned by the company and payment is decided by the company. • The return that you receive from dividends can be expressed as % and is referred to as the dividend yield (like interest). • e. g. if you purchased Sanlam on 02 Jan 2007 you would have received a divided payment of R 0. 77 per share. This is a return of 4% per share. (R 0. 77 / R 19. 00 = 4%) • Income stocks DY 3 -8, growth stocks DY less then 3
Dividends returns 21 In 1990 Standard Bank was trading at R 1. 77
22 Choosing companies to invest in
Choosing companies to invest in Technical Analysis Fundamental Analysis 23 • “The story”- what the company does & what its outlook is (e. g. Pick ’n Pay is a supermarket chain. The outlook could be good for the economy and hence for personal spending could lead to more purchases at Pick ’n Pay hence the profits could be up and hence the share price could go up as well) • “The numbers” – review the financial statements of the company to see how healthy it is. (Look at the income statement to see the profitability of Pick ’n Pay. Look at the balance sheet to see how financially secure it is). Look at the Price Earnings (PE) Ratio. • “The picture” – look at the history of the companies share price in a price chart (e. g. look at the past performance to see if the share is rising or falling, what is its trend? )
The story (e. g. Pick ’n Pay) 24 From the Standard Online Share Trading Website
The numbers (e. g. Pick ’n Pay) 25 From the Standard Online Share Trading Website
The Picture (e. g. Pick ’n Pay) 26 From the Standard Online Share Trading Website
The website (e. g. Pick ’n Pay) 27 We help you by providing a research report that covers: • the numbers • the story • the picture. From the Standard Online Share Trading Website From the Standard Bank Online Share Trading Website
The website (research) 28 We help you by providing a range of research reports that covers: • Fundamentals • Stocks • Technical's • Currencies • Economics From the Standard Online Share Trading Website
The Website (Profile consensus forecast) 29 From the Standard Online Share Trading Website
Share filter (searching for income) 30 From the Standard Online Share Trading Website
Share filter results (results for income) 31 From the Standard Online Share Trading Website
32 How do you buy shares?
How do you buy shares? 33 • Shares are purchased and sold through a Stockbroker • There are two types of brokers, online (discount) and full service brokers: – Full Service stockbrokers: • Give advice and trade over the phone • Have high fees and minimum investment amounts (e. g. 1. 3%-1. 75% and R 300 K- R 1 m) – Online Stockbrokers: • Trade via a website (like internet banking) • Provide telephonic support • Give buy and sell recommendations online • Have low fees (0. 6%) and no minimum investment amounts. • Have many tools that help you to manage your share portfolio
34 Costs
Online Share Trading Costs 35 • Brokerage is charged at 0. 6% of the trade with a minimum fee of R 70 plus statutory taxes (detailed below). • Monthly fees of R 50. 00 (incl VAT). This fee waived if you trade 3 or more times in a month. Worked Example
Exchange Traded Funds (ETF’s) 36 • SATRIX 40 is an example of an ETF: is a share that tracks the performance of the top 40 shares listed on the JSE without actually buying all 40 shares. – Satrix 40 purchased on 02 Jan 2007 for R 22. 80 could be sold on 02 Jan 2008 for R 26. 60. This is a capital return of 16. 6%. – You would have also received dividends of R 0. 5526 or a dividend yield of 2. 4% (paid quarterly). • Good “starter” share as it gives you general exposure to the stock market. • Much like a unit trust but cheaper with better performance. • Other ETF’s (db x-trackers, Prop. Trax and New. Gold)
37 Why Standard Online Share Trading ?
Why Standard Online Share Trading ? 38 • Lowest minimum brokerage (0. 6% with R 70 min) • The biggest online broker in South Africa • Education is our differentiator • Buy and sell recommendations and research. • All the information needed to make your investment decisions • High interest paid for any cash kept in the share account. As at Jan 2008 the rate starts at an effective 9. 83%. The money is available on demand. • Lots of tools e. g. SMS / email share price alerts to keep you in touch with the market. • Online charts • You do not need to have a Standard Bank account!
Educate yourself! Free courses 39 Name Introduction to investing Duration 5 hours When Saturday morning How to use the website 2 hours Mid-week evening Technical analysis (Part 1) 5 hours Saturday morning Market truths and trading skills 1. 5 hour Mid-week evening Investing using fundamentals 1. 5 hours Mid-week evening Introduction to share installments 1 hour Mid-week evening Half day detailed warrants course 4 hours Saturday morning Technical analysis (Part 2) 5 hours Saturday morning 1. 5 hours Mid-week evening Futures (single stock & currency) Company announcements & fundamentals JSE Investment outlook These courses can easily cost around R 10, 000
Online courses 40 • We also have online courses on our website: – Basics of investing (80 page 5 unit PDF document) – Technical analysis (the picture) – Derivatives • Warrants • Share installments • Single Stock Futures • Currency futures – Fortnightly educational newsletter
41 Next Steps?
Register Online at www. securities. co. za 42
Attend Free Introduction to investing presentation 43 All courses can be booked online From the Standard Online Share Trading Website
Free educational newsletter 44 7 Pages packed with; – Articles on economics, markets, investing & trading. – Reviews on books, websites & podcast. – Up coming event reminder. – And more, much more. • Sent out fortnightly in PDF • To subscribe send an email to securities@standardbank. co. za with the subject “subscribe educational newsletter”
Auto Share Invest (ASI) 45 • For Online Banking Clients • Monthly purchase of shares • R 500 minimum per purchase • Low cost structure – R 20 + 1% per transaction • Pre-selected companies – 27 well known companies • Can sell once per week • Can stop purchases at any stage
46 Advise vs. Research
Advise vs. research 47 • Common sense • Research is easier then you think – It’s already part our regular life • How much time is enough ? – How much time did you spend when you bought your last house or car ? • Hot tips are not a strategy – They tend to be a “self fulfilling prophecy”
Disclaimer 48 • The information and opinions stated in this document are of a general nature, have been prepared solely for information purposes and do not constitute any advice or recommendation to conclude any transaction or enter into any agreement. It is strongly recommended that every recipient seek appropriate professional advice before acting on any information contained herein. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or representations. All information contained herein is subject to change after publication at any time without notice. The past performance of any investment product is not an indication of future performance. Online Share Trading is operated by Standard Financial Markets Proprietary Limited Reg. No. 1972/008305/07, a subsidiary of the Standard Bank Group Limited and authorised user of the JSE Limited. .
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