The Different Ways to Invest?​

Overview

At this stage, we have grown to understand a little more about what it takes to become an investor.​

A crucial step is how to actually invest your money. This module will help us to understand the different ways that you can invest your money in shares.​

You could decide that you would like to hand over full responsibility to a firm or person, or perhaps you could be the type of investor who likes to be hands on. Then again you could appreciate a bit of both. By the time we are done with this module, you should have a better idea of the avenues available to you in terms of investing your shares.
 

1. Stock Brokers 

A stock broker is a member of the JSE and is essentially an assistant and facilitator to your trading activities. They arrange transactions on your behalf so that you invest your shares in a way that results in a profitable return for you.​

You can select a brokerage firm that is aligned to your investing goals, educational needs and learning style. It is important, as a new investor, to select a stock broker that fits your needs. This is why you need to be clear about your investment goals as we discussed in previous modules.​

It is important to understand that the JSE is not going to buy or sell a share directly for you. Via the stockbrokers you will place your buy and sell orders where they will be executed in the market either by doing it yourself on the broker platforms or having the stockbroker executing the trade on your behalf.​

The JSE has about 60 listed regional members, and you can access these stockbroking facilities countrywide with most of them offering online trading facilities (https://www.jse.co.za/findastockbroker).  


2. Financial Advisors

Let's say you would like to retire in 15 years or send your child to a private tertiary institution in 12 years. To achieve your goals, you may need a skilled professional to help fulfill these plans, and that’s where a financial advisor comes in.​

You and your advisor will cover many areas, including how much money you should save, the types of accounts you need, the type of insurance you should have (including disability, long-term care, and term life), as well as tax and estate planning.​

The financial advisor is also an educator. Part of their role is to help you comprehend what is involved in reaching your future goals. The education process may involve thorough assistance with financial topics. At the start of your relationship, those topics could simply be saving and budgeting. As you progress in your knowledge, the advisor will help you understand complex investment, tax, and insurance matters. This can include what shares to invest in to meet your financial goals.
 

3. Financial Service Providers

Stockbrokers are different from financial service providers such as investment managers and insurance companies. A Financial Service Provider (FSP) is a business offering financial advice and/or go-between services (such as brokers and investment funds etc).​

Financial service providers usually offer an indirect means to invest in the equity markets. This indirect form of investment generally involves leaving the decisions about where to place money to the investment professionals. ​

In fact many financial service providers still require the services of a stockbroker in order to build their portfolios and buy or sell shares that they potentially manage on your behalf in these indirect forms.
 

4. DIY via a Stockbroker

This is when you choose to invest in shares yourself via a stock broker. Knowing your strengths and weaknesses – as well as how much time and effort you are willing to commit to charting your investment course – will put you in the best position to succeed.  It is important to remember that this does not mean you can invest directly yourself, but will always need to do so via a stock broker who provides you with a trading platform.​

To succeed in self-investment, it is important to remember the below:​

  1. Make an assessment of where you currently stand in life e.g. age, your investment horizon, risk appetite etc.​
  2. Know what you own in terms of shares, cash, property etc. You also need to know how much time you have to dedicate to the management of your shares which will help you determine how many shares to own.​
  3. Assess the sources of information that are available to you in terms of share analysis e.g. press releases, earnings reports, cashflow statements etc.​
  4. Draw up a strategy including the area of the market that interests you and specific shares, and how you can gain experience in managing these.​
  5. Re-assess and adjust your strategy as you grow in your knowledge and understanding of shares.