How to Buy Shares on the JSE?

Whether you are a seasoned investor or just looking to get into the whole exciting experience of stock trading, understanding the ins and outs of buying shares on the JSE will get you there. This article takes you through the basics and looks to demystify the art of buying shares on the largest and most lively stock exchange in Africa. From JSE all share price to tips to help you make an informed decision about your investment.

Brief History of the JSE

At the end of the 19th century, after the discovery of rich gold deposits in Witwatersrand, a “gold rush” began in South Africa. To provide an opportunity for miners and investors to trade the main precious metal in 1887 Johannesburg organized an exchange. Thus, this operator can rightfully be considered the oldest exchange on the subcontinent (for comparison – the Indian Exchange was formed 105 years later).

Gradually, several large mining enterprises and banks were established in this region, which formed a large-scale financial and industrial complex. The Johannesburg Stock Exchange was initially used as an effective platform to serve this promising dynamically developing conglomerate. Since October 2, 1978, with the introduction of the JSE index, this stock exchange operator has gone international.

Working with an emphasis on the precious metals initially attracted solid investors, who had already made $100 million worth of purchases by 1934. Johannesburg’s stockbrokers once had a rather strong competitor – the so-called Union Exchange, which existed for 25 years, from 1933 to 1958. However, JSE nevertheless turned into an undisputed regional leader.

3 Reasons to Invest in JSE Shares

There are various reasons to consider investing in JSE shares, depending on your financial goals, risk tolerance, and market analysis. In general, there are 3 reasons why investors are constantly drawn to this exchange:

1. The JSE gives access to a broad spectrum of sectors, including financial services, materials, consumer goods, and technology. Investing in JSE shares allows you to diversify your investment portfolio geographically and across different industries. The South African economy is one of the most developed in the region, and investing in JSE shares allows you to tap into the potential for growth of this emerging market.
2. As investing in any stock exchange, JSE opens the potential for high returns over the long term. Historically, the South African stock market has delivered competitive returns compared to most other global markets. Yes, past performance does not guarantee future profit, but thorough research and strategic decisions are important to identify growth opportunities and capitalize on market trends.
3. The JSE hosts many established companies that are fundamentally stable in their income-generating abilities. Investing in such companies offers investors consistent income in the form of dividends, while also having the ability to appreciate over time. Moreover, some JSE-listed companies have a significant presence not only in South Africa but also in other parts of Africa and globally, which presents investors with a broader market footprint.

If these reasons sound good and you would like to start trading in JSE shares, let’s take a look at how to do it.

How to Buy Shares on the JSE: 4 Easy Steps

There is not much to the process: decide what to buy, open an account with a broker, buy the shares, and monitor their performance afterward. Below we go into more details about each step.

Step 1: Research

Research is the most important thing you will do before buying shares. Here are 3 basic tips to make this process easier:

• Gather information about the companies. When you buy a share, you are taking a stake in a company, you should therefore understand the business model.
• Find out about the company’s products. The competitiveness and innovative strength of the products or services offered are of decisive importance for the business success of a public company and therefore also for its stock. Imagine you were a potential customer of the company. Would you buy the products? If you answer this question in the negative, i.e. if you are not convinced of the marketability, then hand off the share.
• Look at the valuation ratios such as the price/earnings, dividend yield, cash flow, or earnings growth. This requires a certain amount of experience.

As said it is what you need for basic research. Your overall dive into the company should be thorough, otherwise, you risk losing money pretty quickly.

Step 2: Opening a Brokerage Account

To buy shares you will need an account with a reputable broker. Most of them have pretty similar instruments available, so your choice will probably come down to the fees:

1. Deposit fees. The majority of brokers now offer a free custody account. This means that a securities account can usually be managed without any additional costs, but trading is by no means free. Make sure you choose a securities account without a fixed price, as these are in no way inferior to fee-based models.
2. Order fees. Order fees are incurred for every trade – both when buying and selling shares. Low fees therefore have a double effect. However, if you hold a share in your portfolio for a very long time and tend to turn over fewer but larger volumes, the order fee is quickly put into perspective. Either way, save money on them if possible.
3. Trading fees. Even if the purchase price may be slightly more favorable, high ancillary purchase costs can offset the total amount of a supposedly worse price. Trading venue fees are incurred directly when buying or selling a share. Unfortunately, they are all too often not listed transparently in the order process.
4. Other fees. For purchases of “small” securities on stock exchanges, partial executions can be carried out by the broker. For example, if you request 50,000 shares of stock X, only 20,000 are currently available and 30 minutes later a further 10,000 are available and another 20,000 an hour later, then it may happen that three individual orders are executed. The order fee would be charged three times accordingly.

All in all, buying shares can become expensive because of the fees, so take your time to compare different brokers and find the one that suits you.

Step 3: Buying Shares

The process of buying shares will look different depending on the broker you chose, but in most cases, the basics are the same:

• Select the desired share via the search. The easiest way to do this is by typing in the name of the company, e.g. Apple, Google, etc. It may be that a company offers different shares, so pick the one you want from the list.
• Create an order. It is done with the button often called “Buy” or “Order”. You must enter the desired number of shares and the total amount is often calculated immediately. You can also set a buy order to be executed when the desired price of the share is reached, this is called a Buy Limit order.
• Depending on the broker, you may be able to choose from various trading venues, usually indicating the current prices. Unfortunately, the trading fee is often concealed here. Many new shareholders are then surprised at the high ancillary purchase costs.

After the order is complete, the shares will appear on your account and you will be able to monitor its performance or sell it.

Step 4: Monitoring Your Portfolio

Monitoring a portfolio is essential for long-term success. Periodically check on how your investment is performing and adjust the portfolio. Remember that small short-term fluctuations are inevitable.

Always keep a cool head when trading securities. Emotions such as panic, greed, euphoria, or fear are usually a bad guide. Also, avoid the herd instinct. In other words, don’t buy when everyone is buying, especially if you do not understand why they are doing it.

Many equity investors make the mistake of trying to sit out losses. This often goes wrong and the loss only increases over time. It is better to make a timely cut. Remember: a share that has lost 50 percent today could fall by another 50 percent tomorrow.

Final Thoughts

Investing is a never-ending learning. Armed with the tips from this article, you can start the journey on the JSE. Embrace the opportunities and challenges that come with investing, always emphasizing thorough research and making sure to pick a good broker. In the case of long-term wealth accumulation or capitalizing on short-term market fluctuations, the JSE offers an avenue for attaining your investment goals.