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What is a Share
Companies issue shares to raise the money they need. Shares of most of the biggest companies in South Africa are listed on the Johannesburg Stock Exchange (JSE) This means they are public companies. Anyone has the right to own a part of a listed company.
All you have to do (if you have the money) is go to a stockbroker and ask him or her to buy you some shares in Company X. And there you are, you own a bit of that company!
However finding a reputable stockbroker is not always easy. That’s why investinfiance has made this as simple as filling out a form. We will then match you with a broker that specialises in fulfilling your needs. Fill out the form on the right. IT’S THAT EASY
It works like this ...
A listed company issues shares to the public - usually many millions. These are then traded on the JSE.
Because the company sometimes does well and sometimes not so well, the price of the shares can fluctuate from one day to the following day. Other factors, such as the overall economy, also affect share prices. As a result, next month or next year, the shares you bought may be worth more (or e less) than what you paid for them.
While you own the shares, you receive any dividends that the company declares. Dividends are the way companies reward shareholders by making distributing certain parts of the company’s profits. Some people have grown wealthy by buying shares when they were cheap and then selling them when prices went up.
Advantages of shares
Forget that second house. Shares offer an affordable, safer, more efficient and hassle free-way to achieve the same aim. Ask most people to describe shares and "risky" will be one of the first responses. Press on and you'll get words like quick profits, tips, inside information, way-above-my-head........Hmmm, not the best endorsement is it?
For me, the best way to understand shares is to compare them against a property that's intended to produce rental income in your old age. After taking away the traders who try scalping a few cents either side the price, what shares really offer is an opportunity to secure exactly the same thing as that second property - ongoing and increasing revenue into the future.
Instead of getting paid rent by a tenant, the income stream from shares comes via dividends earned out of profits made by the business you've bought into. It's really that simple. At the end of the year, the boards of directors decide how much of the profit to keep in the business and how much to give back as a dividend to everyone who owns shares in the company.
And dividends offer major advantages over rental income. For one thing, they're tax-free. Then provided you have invested wisely, that dividend cheque will arrive exactly when promised and it will grow every year. No stress of negotiating yearly rental increases or having to squeeze your rent from an unwilling tenant.
Oh, and the all-in cost of buying and selling a share costs around 2% of the capital, not the 10% plus you're in for after the property agents' commission, legal and transfer duties. And should the need arise, unlike a second property, shares can be sold in an instant.
When to buy shares
Obviously the best time o buy shares is when the market is low or when the particular share you are interested in is trading at a low price. Determining if the market or share is at a low price is however problematic. The best way to determine this is to look at the shares history and using some kind of trend analysis decide whether now is the correct time to buy.Expectations of buyers and sellers, with reference to how much profit will be made, plays an important role in price behavior in the long-term. If a company does not achieve, shareholders start to sell and look for other shares. On the other hand; when a company performs well and declares good dividends, demand for shares surpass supply and investors are happy to pay a higher price.