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Financial planning

Overview

Learning Centre

Get access to expert advice in creating, growing and protecting your wealth, with the right answers that will guide you to make a sound decision about your investment goals.

Top investing tips

Spread your investment across different companies and over different sectors. The biggest risk in investing is putting all your eggs in one basket. The easiest way to diversify share investments is through exchange traded funds (ETFs).

All about shares

Before you decide to invest in shares it's important to understand what shares are, how you can buy and sell shares and to familiarise yourself with basic stock market terms and concepts.

Owning shares

The ups and downs

What costs to expect

Where you fit in

  • As a shareholder, you are a part owner of the company, which means that you have a right to share in the company profits (called dividends).
  • Dividends are paid at the discretion of the company's directors. Many companies don't declare dividends but rather use the profits of the company to grow the business.
  • Shareholders make money in two ways: by selling shares at a higher price than they paid for them and receiving dividends.

Rights of shareholders

  • Attend and vote at the company's annual general meeting (ordinary shareholders) and vote on subsequent corporate actions undertaken by the company.
  • Receive annual reports and interim reports.
  • Receive a share of profits (dividends).
  • Share in the underlying assets should the company be liquidated, after all other creditors have been paid.
  • Shareholders have limited liability which means as a shareholder you are not personally liable if the company is unable to pay its debts. As a result the maximum that you can lose on a share investment is the amount that you paid for the share.
  • The fundamental rule is: The higher one's risk, the greater the expectation of receiving a high return. The opposite is also true however: the higher the risk, the greater the chance that the return will be zero or negative.

Short term

Events that can trigger share movements:

  • Company news (e.g. high customer satisfaction reports, top executives buying aggressively, etc.).
  • Publicity for the industry.
  • Global trends and events.
  • General economic conditions could affect the price:

    Inflation rate: A high inflation rate may result in more investors resorting to buying shares, thus increasing the demand for shares. Generally, shares are still a good risk minimiser against inflation because a company's earnings should theoretically grow at the same rate as inflation over time.

    Interest rates: High interest rates attract people into making investments in interest rate-bearing investments and not in shares, thus decreasing demand for shares.

  • Political uncertainty and international conflicts e.g. terrorism: Foreign companies do not put money into troubled countries, thus decreasing demand for shares.
  • Rumours and speculation: A rumour of prosperity can increase a share price and a less-favourable rumour can decrease a share price.
  • Acts of nature such as tsunamis or hurricanes.
  • More buyers than sellers can influence the price of shares to drop (and visa versa)

Long term

Expectations of buyers and sellers, concerning how much profit will be made, plays an important role in price behaviour in the long term. If a company does not perform well, 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 exceed supply and investors are happy to pay a higher price.

Industry fixed costs

Fee type

  • STRATE charges settlement costs
  • Investor Protection Levy (IPL)
  • Securities Transfer Tax (STT) Tax on shares transferred on the stock exchange
  • Value Added Tax at 15% (payable on brokerage, IPL and STRATE)

Broker's costs

These are costs that you cannot avoid, although the broker's cost varies between brokerages.

Fee type

Brokerage fee paid to the broker who does the buying for you.