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Owning shares


  • 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.
  • Speculators (traders) can manipulate a share price.
  • 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.

What types of shares you should have


Risk is part of investing. It is the price you pay for a potential reward. The greater the risk the greater the potential reward should be. Every investor needs to find the level of risk that is comfortable while still offering the potential of return necessary to achieve financial goals.

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 that the return will be zero or negative.

Generally, as a beginner, you should start your share portfolio with less risky shares or exchange traded funds.

Shares in large blue chip companies


In general, the lower risk shares of large companies produce lower returns than their small company counterparts, but because of their size and stability, they tend to be more predictable and they also pay regular dividends.

Exchange Traded Funds


An Exchange Traded Fund (ETF) is an investment fund that is traded on the Securities Exchange and holds assets such as shares, commodities or bonds. ETFs are attractive as investments because of their low costs, tax efficiency and share like features.

As you become more experienced and comfortable with investing in shares, you may wish to start investing in medium to high risk shares, found in medium and small companies.

Accounting


The two disciplines that play an important role in understanding the performance of a company's shares are: Accounting and Economics.

Accounting

Under accounting we find two kinds of analysis. They are:

  • Fundamental analysis

    An analysis of a company that involves looking at its financial statements, management, competitors, markets where it operates, competitive advantages etc. Refer to Analysing a company for a detailed discussion on this subject.

  • Technical analysis

    In contrast, technical analysis primarily uses charts (often complex) to study past share prices, volumes and indices to predict future share price trends, and to assist with the timing of purchase and sale decisions. Note: Technical analysis is not covered on this website.

Economics


The two disciplines that play an important role in understanding the performance of a company's shares are: Accounting and Economics.

Economics

The share market and economics work hand in hand. Factors that influence the one will always influence the other. This is valid for good and bad influences. Factors that influence the market (Keep these in mind when analysing shares):

  • Inflation rate: A high inflation rate results in more investors resorting to shares.
  • Interest rates: High interest rates attract people into making investments in interest rate-bearing instruments and not in shares.
  • Political uncertainty : Foreign companies do not put money into troubled countries (stock exchange included).
  • Rumours and speculation: A favourable rumour can increase a share price and a non-favourable rumour can decrease a share price.
  • Government actions, taxes, laws and regulations: All of these have an effect on the market

Asset classes


The term asset class refers to a set of related investments that have similar risk and return characteristics. For example, the cash category (money market accounts, bank deposits etc.) represents a group of investments that have the same characteristics, subject to the same laws and regulations; have similar levels of risk and respond similarly to market conditions. The same thing is true for the other asset classes.

 
Asset class Brief description
Cash Cash includes investments such as money market accounts, bank deposits and fixed deposits
Shares The investor buys a part of a company and can expect to receive a part of the company's profits.
Bonds A bond is a loan made by an investor (bondholder) to a company or to the country's government (bond issuer). The bond issuer promises to pay regular interest to the bondholder and to repay the original investment on a set date in the future.
Property Property investment could be in the form of your own home or through a buy-to let property.

Generally, the best time to learn about investments is when you're young. Investments grow with time and the earlier you start, the better. A young person usually has a higher risk tolerance (an ability to handle declines in his or her portfolio) and can tolerate volatility in his or her investment portfolio in the short-term; therefore a young person should keep a large percentage of his or her investments in shares for best returns.

Whereas...
Generally, when you start to approach retirement the focus moves towards protecting your investments. Therefore, an older person should keep a large percentage of his or her investments in less volatile investment vehicles such as cash, bonds etc. or balance share investments with other less volatile investments.

Industries


Industry classification benchmarks

The JSE classifies listed companies into sectors that take the company's core business activities into account and groups companies that share general industrial and economic themes together.

The broad economic sector (industry) categories are:

  1. Basic materials
  2. Oil and gas
  3. Industrials
  4. Consumer goods
  5. Consumer services
  6. Telecommunications
  7. Financials
  8. Exchange Traded Funds

When analysing the industry, you may ask yourself the following questions:

  • Who are the leading companies in the industry?
  • Are the industry products or services in demand?
  • Is the industry growing?
  • What does the industry growth rely on?
  • Is the industry greatly affected by Government intervention?
  • Is this industry dependent on another industry?

Indices


The market is measured on a daily basis, during the exchange working hours. Indices give a basic idea of how well (or badly) the overall market is doing and these are good to use as a benchmark.

JSE indices

For every sector on the JSE there is an index, listing all the companies in that sector. If the prices of the shares comprising the index increase during the period; that particular index will increase.

The popular indices are:

All Share Index (Alsi) In simple terms, the Alsi includes the average of the largest companies (market leaders) listed on the JSE. It Includes approximately 160 shares that represent approximately 80% of market capitalisation (market value).
FTSE/JSE Top 40 Index Tracks the share price performance of the 40 largest companies on the JSE by market capitalisation, irrespective of whether they are resources, industrial or financial companies.
JSE Resources 20 RESI Tracks the performance of the 20 largest mining companies by market capitalisation (market value).
JSE Financial 15 FINI Tracks the performance of the 15 largest financial companies by market capitalisation (market value), and includes the top
JSE Industrial 25 INDI Tracks the performance of the 25 largest industrial companies by market capitalisation (market value).
JSE Dividend+ Index Tracks the performance of the 30 higher yielding shares within the JSE Top 40 Index and the JSE Mid Cap Index, excluding real estate companies. Shares are weighted by a one-year forecast dividend yield as opposed to market capitalisation.

Where to look for information


Doing the research

The best place to look is the company's annual report. Annual reports are also referred to as 'Financial statements'. All companies listed on the JSE are required by law to send their shareholders a copy of their financial statements once a year and most companies also post their financials on their respective websites.

 
Name Close (cents) Day move (cents Day move (%) High Low Volume traded (000) 12 mth high 12 mth low Market Cap Dividend yield P/E ratio
ABC Trading 1187 51 4.5 1189 1112 44511 1774 1056 66922.4 6.09 7.18
Column Meaning
Company This is the company name, it may be abbreviated
Close (cents) This is the last price at which the share was traded the previous day in cents. The JSE closes at 17h00
Day move (cents/%) This is the variation between the closing price on the previous day and the closing price on the current day expressed in cents; or as a percentage
High/Low This is the highest and lowest prices that the share traded at during the day
Volume traded This is the number of shares traded on the day, in thousands
12m high/low This is the highest and lowest price that the share have traded at in the past 12 months
Market cap Refer to Investor Ratios
Dividend yield Refer to Investor Ratios
PE ratio Refer to Investor Ratios

Financial ratios and shares


How does it all work?

When reading newspapers and most financial reports about a company, journalists use the terminology that we'll be discussing in this section. Financial ratio analysis makes use of historical financial data of a company to determine whether it is worthwhile to invest in its shares.

Ratio analysis uses different numbers from the balance sheet, income statement, and cash flow statement to calculate ratios that can be compared to previous years, or other companies in similar industries. There are different types of ratios that give different types of information.

They are:

  • Investor or shareholder ratios
    These ratios look at how the company is performing from a shareholder perspective, as long term investors buy shares of a company expecting future profits. The common ratios used by investors are discussed in detail under Investor ratios
  • Profitability ratios
    These ratios look at how well the company is performing taking profitability and return on assets into account
  • Liquidity ratios
    These ratios look at whether the company has enough cash to repay debt
  • Activity ratios
    These ratios look at how the company has utilised its assets
  • Financing ratios
    These ratios look at how the company is financed, its debt and its equity

Important ratios


Important Ratios

After evaluating the Income Statement (profitability), Balance Sheet (financial position) and the Cash Flow Statement (cash flow) based on the numbers, you may support the analysis of the numbers by using ratios. Only the most common ratios used by investors will be discussed.

Earnings per share (EPS) = Profit attributable to ordinary shareholders / Total Number of ordinary shares in issue

The EPS shows the company's profits (earnings) allocated to each share in issue. The higher the company's EPS, the better. This ratio allows you to determine at a glimpse whether the company is doing better or worse compared to the past year/s or versus its competitors. A high and growing EPS is an indication that the company is growing and doing well for its shareholders, a low and decreasing EPS is a sign that the company might be struggling.

Dividend Yield (DY) = Dividend paid per share (D) / Current Market Price per share (P)

Remember that there are two ways to benefit from investing in shares: capital growth and dividend income. The dividend yield refers to the % of the purchase price that will return to the shareholder in the form of a dividend.

P/E Ratio = Current Market Price per share / Headline Earnings per Share

A PE ratio of 15 for example means that it will take 15 years for the company to recover the money originally spent to buy the share. In reality this is not usually the case, as companies can earn the same profits in a much shorter time (profits change year to year).

Dividend cover

Dividend cover calculates how many times the dividend is covered by earnings as follows:

Dividend cover = Earnings per share / Dividend per share

The lower the dividend cover, the higher the percentage of total earnings paid out as dividends to shareholders.

For example, if the dividend per share is R1 and the earnings per share is R4 the dividend cover is 4 times. This means the company is paying only 25% (quarter) of what it earned out in dividends. A dividend cover measures how conservative or generous the board of directors is when it comes to dividend declaration. Dividend cover varies from company to company depending on each company's dividend policy, cash flow and performance. It is acceptable for a company to retain a high % of earnings to facilitate financial growth.

Market Capitalisation

Market Capitalisation = the Current Share Price x the number of shares issued

The calculation is usually done if an investor is interested in knowing how the company is positioned in the sector as well as how strong it is in relation to other companies in the same sector. Assuming you want to establish a company's total value (100% shares), you'll use this figure.

Categories of market capitalisation include large, mid and small caps.

As a general rule, companies with a large market capitalisation are safer (less risky) than smaller companies with a smaller market capitalisation. Small companies are more exposed to competition, and tend to be illiquid (when their shares are up for sale there may be no buyers).

Note: Market capitalisation is not always a good indicator. You have to look at this indicator in conjunction with other fundamental indicators.

Buy and hold


Buy and Hold Strategy - History and other success stories support this strategy.

A buy and hold strategy is when an investor buys a share with the intention of holding it for a while without selling it, usually for the medium to long term regardless of the market fluctuations. The aim is to buy shares in companies that promise strong earning potential.

The reason behind this idea is that profits will keep expanding as the economy grows and both dividends and the share price will increase as a result. There may be short-term market fluctuations (e.g. rising inflation, different business cycles) but in the long-term many risks will be smoothed out.

Advantages

  • Taxes are reduced.
  • Fewer worries about the economy and market fluctuations.
  • Trading costs are reduced
  • The hassle of buying and selling is avoided.
  • There is a probability of high returns without significantly increasing your risk.

Disadvantages

  • The strategy works given a long enough timeline.
  • Quick and short-term profits are forfeited.
  • Shares should be carefully chosen, ensuring that they have long-term potential.

Reinvest


Reinvest your dividends for faster growth

Produce more wealth with your dividends Companies distribute dividends once or twice a year. You can re-invest this money in shares to create more wealth.

Benchmarking


Benchmarking

Comparing shares in your portfolio to an appropriate benchmark provides insights into their performance. It is important to compare like with like for a useful comparison. For example:

Shares in your portfolio Benchmark
Large Blue Chips JSE Top 40 index
Small capitalisation Alt Exch index
Heavily invested in banks Financials index
Heavily invested mining shares Resources Index

My shares and tax


Shares attract two kinds of returns, capital growth (appreciation) and dividends . Based on current South African tax laws, dividends are subject to Dividend Withholding Tax, and capital growth is subject to Capital Gains Tax.

If you hold a share as a long-term investment (the time period of holding the share is taken into account), any capital growth (appreciation) upon disposal will be subject to Capital Gains Tax. On the other hand, if you were to buy and sell shares many times at short intervals, you may be considered as holding shares as trading stock and any capital gain will be subject to Income Tax . Income Tax is higher than Capital Gains Tax. Interest income vs. Dividend income. Dividends Tax (DT) became effective 1 April 2012. DT is a tax imposed on shareholders at a rate of 15% on receipt of dividends, whereas Secondary tax on Companies (STC) is a tax imposed on companies (at a rate of 10%) on the declaration of dividends. DT is categorised as a withholding tax, as the tax is withheld and paid to SARS by the company paying the dividend or by a regulated intermediary (i.e. a withholding agent interposed between the company paying the dividend and the beneficial owner, and not by the person liable for the tax, i.e. the beneficial owner of the dividend. Dividend declarations need to be submitted on time by the beneficial owner of the dividend to the company paying the dividend to determine the correct withholding tax amounts. Foreign Dividends received: As from 1 April 2012, foreign dividends received by individuals from foreign companies that are listed on the JSE are taxable at a maximum rate of 15%, but exempt if the individual is a non resident. No deductions are allowed for expenses incurred to produce foreign dividends.

Example:
The taxpayer receives dividends of R50 000 from a foreign company also listed on the JSE.

Foreign cash dividend accrued R50 000
DT payable (R 7500)
Net dividend paid R 42 500

Foreign dividends paid from foreign companies not listed on the JSE fall outside the scope of dividends withholding tax in SA, However, on assessment, the SA resident must include this amount when declaring his world wide income to SARS.

Interest received:
Example:

The SA taxpayer receives interest of R50 000 from his investment account. His taxable amount:

Tax year ended 2013 #
Gross income (local interest source code 4201) R50 000
Less: Exemption (R22 800)
Taxable income (amount to be taxed on assessment) R27 200

The taxpayer must report the full gross interest received. The exemption will be calculated by SARS on assessment

From 1 March 2013, the interest exemption will increase from R22 800 to R23 800

Local dividend received:

If an SA resident receives a cash dividend from a local company, the dividend will attract Dividend Tax (DT) at 15% subject to exemptions and the relevant declarations and undertakings being submitted in terms of the Income Tax Act.

Example:

Taxpayer receives a dividend of R50 000 from a South African company during the tax year ended Feb 2013.

Cash dividend accrued R50 000
DT withheld (R7 500)
Net dividend paid R42 500
  • Whether DT was withheld or not, gross dividends must be reported on the tax return
  • The purpose of this document is not to provide tax advice to the taxpayer but rather a high level explanation of dividends tax. The taxpayer must consult with their own tax advisors to ensure that their tax treatment and tax reporting is correct.

Investment returns


How to calculate real returns?

To calculate a real return on the amount invested, subtract the inflation rate and tax you'll pay on any interest earned, from the interest you are quoted.

How much return can you earn?

Real return = Return - Inflation - Tax

It's unfortunately quite easy for your investment to fail to beat the breakthrough point (interest rate at which you will start to receive a real rate of return on your money), as there are a lot of investment products that offer lower rate of returns than the breakthrough point. As an investor you are not only looking to equal the breakthrough point, you should aim to obtain a little more than the breakthrough point as a reward for not spending money in the first place.

Overview


Krugerrands defined

Krugerrands, the world's most widely held bullion coins, are ounce-denominated gold bullion coins that have been designed for investors around the world who wish to invest in gold.

What sizes are available?

Krugerrands are available in four sizes of pure gold (all of which you can buy from FNB Share Investing)

  • 1 oz
  • 1/2 oz
  • 1/4 oz
  • 1/10 oz

How pure are Krugerrands?

  • Krugerrands are alloyed with a small amount of copper, which make them 22 carat coins
  • They contain 11/12 24 carat gold and 1/12 copper
  • Copper is a traditional alloy of gold coins that are used as currency as it hardens the coins and makes them more durable and sturdy
  • This means you never have to worry about the way in which you store them

Important features of the Krugerrand coins


The Krugerrand, issued only in South Africa, was the first gold coin to be denominated in ounces of pure gold. The value of the Krugerrand, which is measured exactly in 1oz, 1/10 oz, 1/4 oz, 1/2 oz of pure gold can be easily determined at any time.

World's first bullion coin

The Krugerrand, issued only in South Africa, was the first gold coin to be denominated in ounces of pure gold. It was first mass produced as a 1oz gold bullion coin in 1970. Fractionals (1/10, 1/4, 1/2) were introduced in 1980. The imagery and name of the Krugerrand is known to millions of people all around the world.

Traded internationally

Krugerrands can be bought from, or sold to, thousands of coin dealers and banks worldwide. As the Krugerrand is so well recognised, buying and selling these coins internationally is very easy.

Traded for their gold content

Krugerrands carry only a small premium (mark-up) over the value of their true gold content. This is unlike any other collector or numismatic coins, where the value is normally dependent on their rarity and condition. In a nutshell, Krugerrands have been designed for people who want to invest in gold.

Value easily monitored

The value of the Krugerrand, which is measured exactly in 1oz, 1/10 oz, 1/4 oz, 1/2 oz of pure gold can be easily determined at any time. This is because the gold price is quoted internationally in troy ounces.

Legal tender coins

Krugerrands are minted in South Africa by the South African Mint. They have always been legal tender coins under South Africa legislation. As legal tender coins, they do not need to be assayed or melted down upon re-sale, unlike many other gold cast and minted bars.

Durable

Krugerrands are sturdy and have a gold purity of 22 carat, which makes them hard enough to resist normal scratching and denting. This is a very important feature as most soft 24 carat coins and bars are more easily damaged and require protective packaging.

Portable

Krugerrands are easy to transport and store.

Minted in South Africa

Krugerrands are minted by the South African Mint from gold coin blanks supplied by Rand Refinery Ltd. The South African Reserve Bank has authorised Rand Refinery Ltd., the world's largest single-site gold refining and smelting complex, as the sole entity to sell Krugerrands from source to primary distributors worldwide. Rand Refinery Ltd. is owned by leading South African gold mining companies.

Specifications of the Krugerrand


The following information tables the various specs that are present in the range of Krugerrands that are available to the public.

Measurement 1 oz 1/2 oz 1/4 oz 1/10 oz
Gold Content (oz) 1.000 0.500 0.250 0.100
Gold Content (g) 31.103 15.552 7.776 3.110
Weight (g) 33.930 16.965 8.482 3.393
Fineness * (carat) 22 22 22 22
Diameter ** (mm) 32.77 27.07 22.06 16.55
Thickness ** (mm) 2.848 2.215 1.888 1.35

* Fineness: 11/12 gold, 1/12 copper
** Maximum dimensions

Overview


For many centuries, gold has been the investment of choice. Gold provides a safe haven and hedge against the loss of money (inflation) as well as provides a store of value during tough times (wars, political and economic uncertainty).

Krugerrands are the easiest and cheapest way to invest directly in gold bullion. In South Africa, we as residents cannot invest in actual gold bars, and if we could, they would be VAT'able. There are no limits to the amount of Krugerrands you can own and there are currently no FICA restrictions and consideration requirements.

Gold as a store of value


In some countries at certain times, the need to own gold may be overwhelming. At other times, it may be less so. Although the value of gold may increase or decrease, over the past century alone millions of individuals in almost every country worldwide have benefited from owning gold at the right time.

Predicting the right time has not always been easy. For this reason, many people have held some gold as a form of insurance against the 'unexpected', or as a safe commodity to preserve their wealth. Therefore Krugerrands provide a great safe haven and a good store of value.

You don't need to be a rocket scientist


No special knowledge is needed when buying or selling Krugerrands. Since Krugerrands are directly linked to the rand/dollar exchange rate and the dollar gold price, which are published daily, you will always know what value your Krugerrand holds.

How soon would you break even


With Krugerrands, your breakeven point on the price of the coin is when the price rises approximately 6-8%. Thereafter you make a profit, since the buy/sell spread is very small.

Converting your Krugerrands to cash


Krugerrands can be easily converted into cash through FNB Share Investing. We guarantee the buy-back of your coins (if you store them at Rand Refinery Ltd.) at any time. To sell your coins is as easy as buying them. All you need to do is login to Online Banking and click on the Shares/Gold tab and proceed to sell your coins.


A

Account Balance

The account balance is calculated by adding the market value of your holdings to your cash balance.

Company Report (Annual Financial Report/Glossies)

This report is issued by all companies on an annual basis to reflect the performance of the company for the past year. The main components of the report include an Income Statement, Balance Sheet, Cash Flow Statement, Statement of Changes in Equity, Director's Report and an Auditors' Report.

Active share/(s)

A share which trades in high volumes is said to be active.

Asset

Any item owned by an individual or a corporation with an economic value that can be converted into cash e.g. house, car, equipment, investments (such as shares and bonds) etc.

Asset class

A set of investments that have similar risk and return characteristics. For example, the cash category represents a group of investments that have the same characteristics, are subject to the same laws and regulations have similar levels of risk and respond similarly to market conditions. The same is true for the other classes, such as property, bonds and shares.

Asset allocation

The process of deciding what percentages of a portfolio will be held in different asset classes e.g. cash, bond, shares, and property.

At best

An order to buy or sell shares at the best market price at a certain time, determined at the discretion of the broker executing the order.

At market

An order to buy or sell shares, to be executed immediately at the market price, against the best available opposite order.

Auditor/s

A qualified person (usually a chartered accountant) or an independent firm of chartered accountants authorised to approve and sign company accounts. In South Africa, the financial statements of private and public companies have to be verified by an independent firm of accountants every year.

Available to buy shares

The portion of your cash balance that you can use to buy more shares.

Available Balance

The portion of your cash balance that is available for you to transfer or can be used to buy Krugerrands.


B

Balanced Portfolio

An investment which is spread across various sectors or asset classes of the market to limit the exposure to one sector/asset class of the market.

Balance Sheet

The balance sheet is a snapshot of the company's financial history at a specific date. The amounts reported in the balance sheet are balances of the accounts at that precise moment in time.

Bear

Someone who believes the market will decline.

Bear Market

A market where share prices are decrease.

Beta

In terms of investing, it is a measure of an asset's volatility, in relation to the market.

Bid price

The highest price a person is willing to pay to buy a share at that point in time.

Blue chip companies

Shares of companies known for having a record of sound and solid performance. They are usually the more expensive shares and have the greatest market capitalisation.

Bottom line

Accounting term for the net profit or loss.

Bond

A loan made by the investor (bondholder) to a company or to the country's government (bond issuer). The bond issuer promises to pay regular interest to the bondholder and repay the original investment on a set date in the future.

Broker (see also Stockbroker)

In the context of the share market, a person who handles orders to buy or sell shares.

Broker's note

A statement from your broker confirming a sale or purchase of shares.

Bull

Someone who believes the market will rise.

Bull Market

A period where the share prices are increasing.


C

Cash Flow Statement

Some of the entries in the income statement and balance sheet do not involve actual cash inflow and outflow of funds; for example depreciation. Although depreciation reduces the profit of the company, no money is actually spent. The purpose of the cash flow is to disclose information about the events that affected cash flow during the period, just as the name suggests

Capital growth (gain) or appreciation

This is the profit you make when you sell something (an asset) for more than the price you paid for it. You do not have access to this profit until the asset is sold.

Capital Gains Tax (CGT)

Tax levied on individuals when they dispose of capital assets.

Closing share price

This is the last price in cents, at which the share was traded the previous day (the JSE closes at 17h00).

Collective Investment Schemes (Previously referred to as Unit Trusts or Mutual Funds)

Collective Investments are investments where money from a number of investors is pooled together and invested collectively. Collective Investments may invest in a range of different asset classes, for example equities, bonds, property and cash or in a combination of these. Each investor purchases a participatory interest in a fund (i.e. owns a unit or a number of units in the fund) and by doing so participates proportionately in the income or profits of that portfolio. A team of investment managers is appointed and they make the investment decisions on behalf of the investors.

Consumer Price Index (CPI)

This measures how the price level of consumer goods and services used by a household increases between two periods of time.

Consumer Price Index excluding Mortgage (CPIX)

This is equal to CPI but excludes interest rates on mortgage bonds.

Compounding

A process of earning interest not only on your original investment but also on the gains accumulated in previous periods or years.

Compounding Interest

Interest calculated on the amount outstanding at the beginning of a certain period including interest earned in the previous period

Corporate actions

Any action by a company or by another party in relation to a company, affecting a shareholder's investments or benefits relating to those investments. This includes, but is not restricted to take-overs, capital restructuring and related activities, rights issues, stock conversions, script dividends and redemptions.


D

Director's dealings

The buying and selling of shares in a company by a director (person elected by shareholders to serve on the Board of Directors) of that company.

Dividend

A portion of a company's profits paid to shareholders.

Dividend Yield

A company's annual dividend expressed as a percentage of its current share price. Refer to Investor ratios for a detailed description.

Dividend Cover

The number of times the dividend is covered by its earnings. Refer to Investor ratios for a detailed description.

Derivative(s)

A financial instrument that derives its value from an underlying instrument, for example shares, interest rates, commodity prices, currencies.

Diversification

This principle means spreading out your investments between different asset classes and over sectors within the asset classes.


E

Earnings

Income after a company's taxes and all other expenses has been paid. Also called profit for the year.

Earnings Per Share (EPS)

A portion of a company's earnings allocated to each issued share, calculated by dividing earnings by numbers of issued shares. Refer to Investor ratios for a detailed description.

Earnings per share (EPS) ratio

The EPS ratio can be defined as the company's profits (earnings) allocated to each share in issue, and is calculated by dividing profit attributable to ordinary shareholders (earnings) by total number of shares in issue. The higher the company's EPS, the better. This ratio allows you to see at a glimpse if the company is doing better than in the past year/s. A high and growing EPS is an indication that the company is growing and doing well for its shareholders; a low and decreasing EPS is a sign that the company might be struggling.

Earnings Yield

A company's earnings per share expressed as a percentage of its share price.

Exchange

This refers to a platform where investors can issue, buy or sell financial instruments. The JSE Limited is one such example.

Exchange Traded Funds (ETF) also known as Tracker Funds

A fund which is made up of a portfolio of shares that reflects the composition of an index. The fund is listed in an exchange and trades like a normal share.


F

Financial Services Board (FSB)

The Financial Services Board is the regulating body of financial services and products in South Africa.

Financials

Another term for company reports.

Financial Year-End

The date on which a company draws up its reports for audit purposes every year.

Fundamental analysis

Fundamental analysis is the analysis of a company as a whole including its financial statements, management, competitors, markets in which it operates competitive advantages etc.


G

Gearing

Gearing refers to the amount of debt that you have in relation to your assets. If you are highly geared you have a lot of debt compared to the number of assets that you hold. Gearing also applies to companies, and the same definition is used.

Gross monthly earnings

This is your earnings before deductions and tax each month.

Gross profit

The profit before fixed operating expenses (cost of material or merchandise, labour, and overhead) have been deducted.


H

Headline earnings per share (HEPS)

Earnings per share, excluding the exceptional items effects.


I

Income (investment income)

Occurs when your investment generates cash income that you can access. This includes:

  • Dividend income - the profit share paid to shareholders of the company
  • Interest income - the interest earned on the money deposited with an institution
  • Rental income - income received in respect of a property that is rented out etc.

In over-simplified terms, investment income is a collective term used to describe dividends, interest, rental income, royalty or any other forms of income earned on an investment.

Income Statement

An Income Statement is a summary of a company's income and expenses for a specific period and reports the company's final profit or loss for that period - usually 6 months or a year (its heading will specify this). The comparable period for the previous year will also be reflected, so you should be able to see at a glance whether profits are increasing or decreasing.

Income Tax

Tax levied on individuals by the South African Revenue services on income of a revenue nature.

Index

An index is calculated from the weighted or unweighted average prices of a certain group of shares. It is useful because it describes how the share prices within the index have changed over time and it can be used as a tool to determine the directional movement of a sector or to compare the performance of a particular share against the index.

Inflation

The general increase in prices and the fall in the value of money. In South Africa inflation is measured monthly by Statistics South Africa. There are two measures of inflation, the Consumer Price Index (CPI) and the Consumer Price Index excluding interest rates on mortgage bonds (CPIX).

Insider trading

Insider trading occurs when a person has information that is not in the public domain and could materially affect the price of a share; and he or she buys or sells the share as a result of this information.

Interest exemption (from tax)

This is the tax free portion of interest earned on a local investment.

Interest Cover

A measure of a how well a company is able to generate earnings to pay interest on its borrowings.
Interest cover = Operating income (earnings) before interest and tax (e.g. R500m)
Interest expense (e.g.R50m) = 10 times
The higher the ratio, the smaller the risk to default. Interest payment defaults have serious implications for a company.

Interim Reports

A summary of a company's 6-months results which is usually not inspected by auditors.

International Financial Reporting Standards (IFRS)

Statements issued by the International Accounting Standards Board that most South African companies are obliged to comply with when drawing their financial statements. Auditors are required to report if auditees (clients being audited) have complied with the IFRS statements in their annual financial statements.

Investing

Putting money into different asset classes for the medium to long term with the purpose of generating wealth.


J

Johannesburg Stock Exchange (JSE)

This is the South African stock exchange. This is where investors can buy or sell shares in listed companies (secondary market). It is also where companies can raise capital for their business by listing (primary market).


L

Liability

An obligation by a company or individual to settle a debt. E.g. a home loan, credit card payments, store accounts for individuals, accounts payable, bank loans for companies etc.

Liquid (shares or investments)

Shares or investments that can easily and quickly be converted into cash. The more liquid a share the more easily it can be converted into cash.

Listed Shares

Shares that are traded on an exchange between willing buyers and sellers.


M

Market price (of a share)

This is the price at which a knowledgeable and willing buyer or seller could buy or sell a listed share on the exchange. The closing market price is the last price at which the share traded on the day and is the price that you will find quoted in the newspaper.

Market capitalisation (market cap)

Reflects the value of the company and is calculated by taking the number of shares in issue (i.e. the company's shares that are in the hands of the public) and multiplying them by the market price. Categories of market capitalisation include large, mid and small caps. Refer to Investor ratios for a detailed discussion.

Market Sector (Industry)

The JSE classifies listed companies into sectors, taking into account the company's core business activities and groups companies together in such a way that general industrial and economic themes may be common to all companies in the sector. The broad economic sector (industry) categories are:

  1. Basic Material
  2. Oil and Gas
  3. Industrials
  4. Consumer Goods
  5. Healthcare
  6. Consumer Services
  7. Telecommunications
  8. Utilities
  9. Financials
  10. Technology

Market correction

A market correction occurs when the prices of shares which have been increasing (bull market) drop over the short term. It usually provides a good buying opportunity for potential investors. It is different from a bear market because it is much smaller and has a shorter time period.

Market crash

A market crash is a sudden and dramatic decline in share prices across the majority of the stock market. There is usually selling triggered by panic. A crash does not always result in a bull market.


N

Net Worth

The amount by which assets exceed liabilities.

Net Assets

The amount by which the total assets of a company exceed liabilities.

Net Asset Value (NAV)

For companies, it is the value of assets minus liabilities. For collective investments (mutual funds), it is the value of all investments held in the fund's portfolio minus the liabilities. The NAV is usually calculated on a daily basis, at the close of the market.

Net Asset Value per share

This is calculated as follows:

Net Asset Value (NAV) per share = Assets Liabilities (Source: Balance Sheet) / Number of ordinary shares

This calculation gives a possible value of a share in the company, if the company was to be sold. This value is usually lower than the market price for the share and is just an estimate, as in reality, the money raised from selling the company is usually not the same as the net assets of the company. In cases when the NAV is above the market price of the share, it may be a good indicator that the company is undervalued and the company may be a target for a take over.

Note: If the market value is very different from the net asset value, you will pay more for the company's real value.

Example:

A company has R50m assets and R10m liabilities. It has 4 million shares in issue. What is the equity (net asset value) per share?

Answer:

Equity (NAV) = Assets-liabilities
= R50m -R10m
= R40m

No of shares = 4m

Therefore Equity per share = R40m/4m
= R10m
A point to remember is that this value will not necessarily equal the market value per share.


O

Offer price

Price at which you would sell a share.

Option

An option is a contract which gives the holder the right, but not the obligation to buy or sell a specific quantity of an asset at an agreed upon price, at or before a date in the future. A call option gives the holder the right to buy an asset in the future. A put option gives the holder the option to sell at a date in the future.

Ordinary shares

An investment that represents part ownership of a company. The holders of such shares are entitled to distributed profits after preference dividends have been paid.


P

Penny shares (stocks)

These are the cheapest shares on the market (less than 10c) and have the lowest market cap.

Portfolio

Refers to the range of investments held by a person or organisation.

Primary market

The place where shares are issued for the first time so that companies can raise equity finance.

Price Earnings ratio (PE)

The Price Earnings ratio is calculated by taking the company's share price and dividing it by its earnings-per-share figure. Refer to Investor ratios for a detailed description.
This ratio is calculated by dividing the Current Market Price of a share by Earnings per share using Headline Earnings per Share (HEPS).
Generally, the lower a company's PE, the better.
A PE ratio of 15 for example, means that it will take 15 years for the company to recover the money originally spent to buy the share. In reality this is not usually the case, as companies can earn the same profits in a much shorter time. You can compare PE ratios of different companies to see how they rate against one another. You should compare companies in the same industry, as different industries may have different PE ratios. You can also compare a company's PE ratio with its industry/sector. The PE ratio should be looked at in conjunction with other positive factors, such as strong industry, growth prospects, etc. If the other factors are positive and a company has a low PE, you can take it as a good sign. If the industry is weak and/or the company has no growth prospects etc., the high PE might serve as a warning.

Sector (Price Earnings) PE

This is the industry PE. You may use this ratio as a benchmark.

Prospectus

A printed booklet containing information about the company that is distributed to the public when a company is planning to list.

Purchase Cost

Purchase cost is calculated using the actual price paid per unit as well as the charges incurred when buying.


R

Real returns

Real return on amount invested is calculated by subtracting the inflation rate and tax you'll pay on interest earned.

Rand cost averaging

Investing the same rand amount each month or quarter in the same company so that you obtain an average price for your investment over the period you invest.

Repurchase Rate (Repo rate)

The interest rate that is fixed by the South African Reserve Bank (SARB) in terms of its monetary policy. It is the rate levied by the SARB when lending to other local banks.

Return (see also Yield)

The amount of money that an investor earns on the money invested. Also known as yield.

Return on equity (ROE)

A measure of how much the company earns on the investment of its shareholders. It's a snapshot of how efficiently the management of the company is using the capital at its disposal to grow the business. It is calculated as follows:

Return on equity = Earnings for the period(less preference dividends) / Shareholder's equity(less preference dividends)

Generally, the higher the percentage, the better.
This ratio may be compared with industry averages and other investment alternatives

Return on assets (ROA)

This ratio measures the return generated by the company's assets. It is calculated as follows

Return on assets = Revenue(Turnover) / Total assets

Generally, a high return means that the assets are well managed and productive.

Ashburton MidCap ETF

The aim of the Ashburton MidCap ETF is to provide returns linked to the performance of the FTSE/JSE MID CAP Index. The ETF tracks the component equities of the Index in proportion to the Index weightings. The FTSE/JSE Mid Cap index contains the largest 60 companies listed on the JSE that are not included in the FTSE/JSE Top40 Index in terms of market capitalisation. The ETF thus holds the 41st to the 100th largest companies on the JSE in terms of market capitalisation. The Ashburton MidCap ETF pays a quarterly distribution to investors which is made up of any dividends or interest earned from the underlying shares.

Ashburton Top40 ETF

The Ashburton Top40 ETF aims to provide returns linked to the performance of the FTSE/JSE Top 40 Index. The ETF tracks the component equities of this index in proportion to the Index weightings. The FTSE/JSE Top40 index contains the 40 largest shares in terms of market capitalisation listed on the JSE. The Ashburton Top40 ETF pays a quarterly distribution to investors which is made up of any dividends or interest earned from the underlying shares.


S

Secondary market

Companies 'list' by issuing shares in the primary market. After listing all shares trade on the secondary market.

Settlement date

This is the date, governed by STRATE, on which a shareholder has to pay for the shares that he or she has purchased.

Share(s)

An investment that represents part ownership of a company.

Shareholder

An investor holding one or more shares in a company.

Small Caps

See market capitalisation.

South African Futures Exchange (SAFEX)

SAFEX is the platform where equity derivatives, agricultural futures and exchange rates are traded in South Africa.

Speculating

Taking a higher than average risk by buying or selling shares in the market, purely for the purpose of generating a higher than average profit potential in the short term.

Stock Exchange (Stock or Share Market)

Market place for trading securities (e.g. shares, bonds, derivatives etc.)

Stock Exchange News Service (SENS)

All information which a listed company wishes, or is required to make public, is distributed through SENS by the JSE.

Stop loss

A stop loss is a pre-determined level at which you plan to buy or sell shares in a particular company in order to benefit from expected price increases or to limit future losses.


T

Taxable income

Gross income minus allowable exemptions and deductions. It is the net value of income on which you are assessed for personal income tax.

Technical analysis

Analysis of a company using charts to study past share prices, volumes and indices to predict future share price trends and to assist with the timing of purchase and sale decisions.

Trading

Buying and selling for the purpose of making a profit in the short term.

Take Over

Where one company takes over the majority of shares in another.

Tracker Funds (also known as Exchange Traded Funds)

Investor deposits money (buys shares/units in the tracker fund) for a fixed term and the interest that is earned on this deposit is linked to the performance of a stock market index. The fund buys shares in all (or as closely as possible) the companies listed in that particular index.


U

Unit Trusts

See Collective Investment Schemes.

Unlisted shares

Shares that are bought and sold privately and do not trade on an exchange.


Y

Yield

The amount of money an investor earns on the money invested, also known as a return.

Products and services


What shares can be traded on Share Saver?

With Share Saver you don't have to choose any shares. With a single monthly investment Share Saver gives you access to the Top 100 companies on the JSEwhich consist of the Ashburton Top40 and Ashburton MidCap Exchange Traded Funds (ETFs).

What is an ETF?

An Exchange Traded Fund (ETF) is an investment fund that is traded on the stock exchange. It holds assets such as stocks, commodities or bonds and trades close to its net asset value over the course of the trading day. Most ETFs track an index such as a stock index or bond index. ETFs are attractive as investments because of their low costs, tax efficiency, and stock-like features.

What is the Ashburton Top40 ETF ?

The Ashburton Top40 ETF aims to provide returns linked to the performance of the FTSE/JSE Top40 Index. The ETF tracks the component equities of this index in proportion to the Index weightings. The FTSE/JSE Top 40 index contains the 40 largest shares in terms of market capitalisation listed on the JSE. The Ashburton Top40 ETF pays a quarterly distribution to investors made up of any dividends or interest earned from the underlying shares.

What is the Ashburton MidCap ETF?

The aim of the Ashburton MidCap ETF is to provide returns linked to the performance of the FTSE/JSE MidCap Index. The ETF tracks the component equities of the Index in proportion to the Index weightings. The FTSE/JSE MidCap index contains the largest 60 companies listed on the JSE that are not included in the FTSE/JSE Top40 Index in terms of market capitalisation. The ETF thus holds the 41st to the 100th largest companies on the JSE in terms of market capitalisation. The Ashburton MidCap ETF pays a quarterly distribution to investors made up of any dividends or interest earned from the underlying shares.

When I invest, how many Ashburton Top40 shares do I get and how many Ashburton MidCap shares do I get?

For every instruction to buy, you receive one Ashburton Top40 share and one Ashburton MidCap share.

What's the main difference between investing in an ETF and a share?

ETFs are attractive as investments because of their low costs, tax efficiency, and stock-like features. It is suited to customers who have a low risk appetite, as it is structured towards a more long-term investment strategy. You don't need to select the individual shares but still get exposure to the top 100 companies listed on the JSE, in a single investment.

What if I want to choose my own shares?

The Share Builder or Share Investor product may be a better option.

What shares can be traded on the Share Builder product option?

You can choose from a limited basket of JSE shares and exchange traded funds. Visit our Product Finder and choose Share Builder to learn more about these shares.

What happens if I want to buy shares that are not included in this list?

If you are already a Share Builder customer you can upgrade to a Share Investor account online by selecting 'Upgrade' from your Share Builder portfolio on FNB Online Banking. Alternatively, you can contact us on 0875 SHARES (742 737) during office hours or email us at shareinvesting@fnb.co.za .

What shares can be traded on the Share Investor product option?

The full range of JSE listed equity instruments are available for trade.

Can I bring shares that I own and load them onto my account?

Yes you may, depending on which shares these are and which account option you hold. For instance, if you are interested in a Share Builder account but would like to include shares that are not part of the Share Builder basket, we would recommend that you either sell those shares first or rather open a Share Investor account which allows you to add any JSE shares to your account.

How do I access education or information on the share market?

For more information visit our Share Investing Education Centre on the FNB website.

What other services do you offer?

We are able to assist with all matters relating to the administration of shares. Contact us if you have any queries and we will be glad to assist.

Can I buy Krugerrands through FNB Share Investing?

Yes you can, by opening either a Share Builder or Share Investor account!

Account maintenance


Where will my dividends be paid?

Your dividends will be paid into your share account.

How are corporate actions dealt with?

If you hold a Share Saver account or a Share Builder account then corporate actions are handled on your behalf by FNB after we have obtained an expert opinion on the action. If you hold a Share Investor account you would have been asked how you would want to handle the corporate actions relating to your shareholding, when you opened your account.

How do I know how my portfolio is performing?

A percentage gain or loss and the value of the gain or loss is shown on your portfolio screen. This compares the price at which you bought the share to the current price for the share on the market.

Can I view my portfolio via an FNB ATM (Automatic Teller Machine)?

No, this functionality is unfortunately not available.

Are there any tax issues that I need to consider before buying or selling shares?

Shares attract two kinds of returns, capital growth (appreciation) and dividends. Based on current South African tax laws, dividends are not subject to income tax (however are subject to Dividends Tax) and capital growth is subject to capital gains tax upon disposal of the share. If you hold a share as a long-term investment (various factors are taken into account including the period of time which the share has been held), any capital growth (appreciation) upon disposal may be subject to capital gains tax. On the other hand, if you were to actively buy and sell shares at short intervals or if your intention to buy and sell shares was executed with a profit motive, you may be considered to be a trader in shares and any receipt from the sale of such shares will be subject to income tax at your marginal rate of tax. Tax is a complex area and it is advisable to consult your financial or tax advisor for details of the tax implications when you invest in shares. For a comprehensive explanation on how shares are taxed, visit our Share Investing Education Centre. You will find these educational articles under Share Investing & Krugerrands - Download application forms, brochures & Tax Guide.
Disclaimer:
Please note that these articles are for information purposes only as FNB does not provide tax advice to investors (each investor's tax circumstances are different, accordingly each investor should seek their own tax advice).

What documentation (statements, tax reports etc.) will I receive?

You will receive quarterly statements detailing your portfolio and a monthly transactional history. In June of every year the applicable income tax certificates will be generated for the tax year ending 28/29 February. The South African Revenue Service ("SARS") IT3 Submission deadline is end of May annually. Income tax certificates are issued in accordance with rules and guidelines from SARS, you can request income tax certificates from the Share Investing call centre on 0875 SHARES (742737) or download them via online banking. We may at our discretion send a certificate to you. If you earn both interest and dividends from your share investing activities two separate certificates (an IT3(b) Certificate and a Dividend Statement) will be generated and this will assist you to complete your annual tax return. Furthermore, you will also receive a statement of capital gains and losses (an IT3(c) Certificate) which you must use to complete your annual tax return. The onus remains on you to declare the manner in which you held the shares ie: whether on capital or revenue account. Tax-Free Savings Accounts are not reported under existing IT3 or Dividend Submissions, but will be reported as per SARS regulations. FNB is also obliged to report to SARS all details of interest earned and / or paid and / or dividends earned and /or any capital gains or losses from the share investing activities, irrespective of the Rand value.

How do I know that my account details and investment information are kept confidential and that no one else can buy or sell shares on my account?

FNB has strict security measures in place to ensure the security and confidentiality of customer accounts. Authentication measures are in place (e.g. One Time Pin) to ensure that only you, the account holder, can place orders on the account.

What if I have questions, trade disputes, or complaints?

Contact us on 0875 SHARES (0875 742 737) during office hours or email us at shareinvesting@fnb.co.za .

What documentation does FNB issue to SARS?

We are obliged to inform SARS of all interest earned and / or paid and / or dividends received and /or any capital gains or losses incurred by account holders. In terms of IT3(b) SARS now requires us as a bank to report to them (SARS), all amounts earned and paid (including account fees, interest paid, interest earned and any other amount paid into or out of the account, etc) on each account held with us. In terms of Dividends Received SARS requires us to report any dividends you may earn and the dividend tax withheld, and in terms of IT3(c) reporting SARS requires us to Report any capital gains and losses.

Who do I contact if I have trading/account maintenance queries?

Please contact our call centre on 0875 SHARES (0875 742 737) during office hours or email us at shareinvesting@fnb.co.za .

Can I trade in shares and Krugerrands online as a Non-Resident/Emigrant account holder?

Yes you can. Once you have successfully opened a Non-Resident or Emigrant Share Investor account with FNB Online Banking access, you will have full functionality to trade online. For queries call 0875 SHARES (742 737).

Account opening


How do I open a share investing account and how long does it take?

We offer real time account opening. Once logged in to Online Banking just follow the "apply online" prompts. Within a few minutes you could be investing on the JSE.

Can I hold more than one Share Investing account?

Yes, you can. You may hold multiple accounts within your individual profile. This means that you may for example have two Share Builder accounts and one Share Investor account.

Can I open accounts in the name of a Trust, a partnership, a close corporation?

Yes. Share Investor is available to South African, Non-Resident and Emigrant Companies, Trusts and Legal Entities.

Are Non-Residents able to open accounts?

Yes. If you require any more information on opening a Non-resident Share Investor account, please call us on 0875 SHARES (742 737).

Are under 18's able to open an account?

For a Share Saver account, there is no minimum age requirement, but the parent or legal guardian needs to be an authorised signatory for the minor. To open a Share Builder or Share Investor Account, you must be 18 years or older.

How do I add to and/or withdraw funds from my account?

Funds can be deposited or withdrawn according to standard transfer/payment functionality. If you hold an FNB transactional account and also open a share investing account - movement of funds across accounts is especially quick and simple.

How do I know that my funds and investments will be safe once I make a deposit?

Unlike other share trading platforms, FNB Share Investing is located within Online Banking. This means that your account will be located within the most secure online environment that FNB is currently able to offer.

What are the minimum account opening and cash balance amounts required?

For Share Saver, you need to invest a minimum of R300 every month. For Share Builder, you'll need R100 to activate the account and maintain a R100 balance in the account at all times. For Share Investor, you'll need R200 to activate and maintain R200 at all times.

Do I earn interest on cash balances in my trading account?

Yes, at a rate linked to call account rates -1%.

Who do I contact if I have account opening queries?

Contact us on 0875 SHARES (0875 742 737) during office hours, or email us at shareinvesting@fnb.co.za .

Buying and selling


How do I place an order to buy or sell?

You have 2 channels to choose from: either trade online or contact our call centre on 0875 SHARES (0875 742 737) during office hours.

How do I edit my orders?

Orders can only be edited (via the channels listed above) BEFORE the quote has been accepted. Once the quote has been accepted they cannot be edited. Also note that orders can only be cancelled if they have not been sent to the broker.

When is my order executed on the JSE?

An order is executed once it is matched to a sell order. Matching of orders on the JSE starts at 09h00 and ends at 17h00.

How is my order executed?

Market (or best) orders are executed at the best price possible. For a sell order, the shares are sold to the highest bidder. For a buy order, the shares are bought at the lowest price.

How long does it take for my shares to settle?

The trade of your shares will be settled as per STRATE settlement rules. However, you will receive updates via SMS to guide you as to where your shares are in the process. An SMS is sent once the trade is performed and a second SMS is sent once the trade has settled.

What is the difference between a market order vs. a limit order?

Limit orders are only executed when the specified limit is reached. For a sell order, this is when a price is obtained which is higher than the limit sell price. For a buy order, this is when a price is obtained which is lower than the limit buy price. In contrast, market orders are executed at the going market price.

How are trades confirmed?

A trade confirmation is sent via SMS or email to customers on execution of the order. No broker notes are sent.

What are the costs of trading?

See the respective product pages for all costs

What are the trading hours?

A Share Saver, Tax-Free Shares or Share Builder customer can submit orders at any time, but they will only be executed at 15h00. A Share Investor customer can place orders at any time and they will be executed between 09h00 and 17h00. We accept orders for that day only until 16h45.

Can I buy and sell shares through my branch?

No, the FNB branches are not able to offer this service.

Can I buy and sell shares telephonically?

Yes you may. Contact our client services helpdesk on 0875 SHARES (0875 742 737) during office hours.

For how long will my order remain in the market?

Orders are only valid for 1 trading day. If these are not matched in the market for the day, they expire and you will have to place the order again the following day.

What happens if I place an order after cut-off times/on the weekend/after hours?

The order is stored on our system and placed on the market on the next available trading day at 09h45 for Share Investor accounts and 15h00 for Share Saver and Share Builder accounts.

What happens if I change my mind after placing the order?

Orders can only be cancelled if they are in an "INITIATED" status, i.e. they have not been sent to the broker.

What is the difference between 'Buy Now' and ' Buy End of Day' ?

Buy Now orders are placed on the market as soon as possible. Buy End of Day orders are placed at 15h00 on the day.

For Share Investor customers, why is 'Buy End of Day' greyed out for some shares?

Buy End of Day is only offered on those shares that are available on the Share Builder offering.

Account opening


What account do I need to hold to buy Krugerrands?

You need to hold either a Share Builder or Share Investor account to buy Krugerrands. Remember that holding a Share Builder or a Share Investor account gives you the choice to either invest in Krugerrands, shares or both. It's always great to have choices.

What type of Krugerrands can I buy?

You can invest in the full range of Krugerrands through FNB Share Investing. This range includes: 1/10, 1/4, 1/2 and 1 oz generic Krugerrands (KR).

Must I own shares to buy Krugerrands?

No, you don't need to. You just need to have access to a Share Builder or Share Investor account and you may by Krugerrands through this account without buying any shares.

Can I invest in Krugerrands if I do not live in South Africa?

Yes you can. Clients living outside SA need to establish a relationship with the FNB Non-Resident Centre. Thereafter, you can open a Non-Resident or Emigrant Share Investing account, which will allow you to transact and trade in Krugerrands online or via the call centre. For queries to the FNB Non-Resident Centre please call 011 352 5025. For help with trades on Krugerrands please call FNB Share Investing on 0875 SHARES (742 737).

Charges and safe custody


How much does each Krugerrand cost?

The price of each Krugerrand depends the size that you purchase (1 oz, 1/2 oz, 1/4 oz, 1/10 oz). Each coin is quoted at a price provided by RMB and is influenced by the R/$ exchange rate and the gold price at that moment in the market.

Where will my Krugerrand be kept after I buy it, and is it safe?

Your Krugerrand's safety is our utmost priority. FNB Share Investing have a contract with RMB and Rand Refinery Ltd. to keep safe custody of your coin until you wish to sell it or take physical possession of it.

How much does it cost to keep my Krugerrand at Rand Refinery Ltd.?

A custody fee of 0.86% per annum is charged to keep your Krugerrand safely in the hands of Rand Refinery Ltd. This 0.86% is based on the value of your coin holdings and is calculated on a daily basis and charged monthly.

What is Rand Refinery Ltd.?

Krugerrands are minted by the South African Mint from gold coin blanks supplied by Rand Refinery Ltd. The South African Reserve Bank has authorised Rand Refinery Ltd., the world's largest single-site gold refining and smelting complex, as the sole entity to sell Krugerrands from source to primary distributors worldwide. Rand Refinery Ltd. is owned by leading South African gold mining companies.

If I already own Krugerrands, can I hand them over to FNB to keep at Rand Refinery Ltd.?

No, unfortunately not. Only Krugerrands that are purchased directly from FNB Share Investing can be kept at Rand Refinery Ltd.

How do I insure my Krugerrands?

FNB Share Investing gives you peace of mind by insuring your coins at a very competitive custody fee of 0.86% per annum, if you keep the coins at Rand Refinery Ltd. This custody fee includes the full cost of insurance. It is based on the value of your coin holdings and is calculated on a daily basis and charged monthly. This safe custody fee will be deducted off your Share Builder or Share Investor account balance every month.

Can I take physical ownership of my Krugerrands?

Yes you can. If you would like to keep your coins in your own possession, FNB Share investing can provide a personalised quote to deliver the coins from Rand Refinery Ltd. to your residence at a fee.

If I take physical ownership of my Krugerrands, where can I collect them from?

We will deliver them straight to your door! Rand Refinery Ltd. will not allow customers to collect coins directly from their premises, so Share Investing will deliver them safely to you at a fee anywhere in South Africa. To find out more about delivery, please call 0875 SHARES.

Portfolio queries


Do my Krugerrands form part of my portfolio?

Yes. Once you have bought your Krugerrands, you will be able to see the growth in value of your coins along with any shares you may hold in your portfolio. This can be viewed by clicking on the Shares/Gold tab in Online Banking. You have the option to sell your coins at any time, as well add to your portfolio by purchasing more.

How many Krugerrands can I buy?

You can buy as many as you like and hold them for as long as you like.

Is there a limit to the amount of Krugerrands I can buy and sell in one day?

Yes, currently there is a buy and sell cap that is determined by the bank. You will be notified on your portfolio if this cap is reached.

Buy Cap This is a cap that can be set which will limit the maximum number of coins that may be bought per day by a single account. This limit can be changed upon the bank's discretion.
Sell Cap This is a cap that can be set which will limit the maximum number of coins that may be sold per day by a single account. This limit can be changed upon the bank's discretion.

When will my Krugerrand settle in my account?

Orders placed during business hours will settle immediately. Orders placed during non-business hours and on public holidays will settle the next business day at the 08:00 price. FNB will reserve your funds until we are able to settle the order. Should the price have increased by the time the order needed to be settled, and there are insufficient funds in your account to settle, the order will automatically be rejected - thus ensuring that you never become overdrawn.

What return will I get?

Because Krugerrands are made from 22 carat gold, their intrinsic value is dependent on the gold price as well as the rand/dollar exchange rate. Krugerrands have the ability to breakeven much faster than that of other physical investments (collector's coins, fine art, antique furniture).

Tax-Free Savings general FAQs


What is meant by a tax year for individuals?

A tax year is different from a calendar year as it starts on the 1st day of March and ends on the last day of February the following year.

What is the tax year contribution limit for an individual?

Currently you are allowed to contribute a maximum of R33 000 each tax year into any Tax-Free Savings Account(s) that you own. This limit is governed by law and may change over time with inflation.

What is the lifetime contribution limit for an individual?

Currently you are allowed to contribute a maximum of R500 000 in your lifetime into any Tax-Free Savings Account(s) that you own. This limit is governed by law and may change over time with inflation.

Is there a restriction on the number of accounts I can hold?

Tax-Free Savings Accounts can be held at one or more qualifying institutions. It is your responsibility to monitor your annual tax year contribution limit as well as lifetime limit.

Will current interest exemptions remain?

Yes, current interest exemptions will remain however they will not be increased with inflation.

Can the value of my account exceed R500 000?

Yes, the limits only apply to your contributions. The value of your account (after growth/earnings) may exceed R500 000.

What happens if I contribute more than the prescribed tax year and lifetime limits?

If your contributions are more than the prescribed annual limit per tax year and lifetime limit, you will be liable to pay a penalty of 40% on any contribution amount that is over the prescribed limit.

When will the penalty for an over contribution to the prescribed limits take effect?

The penalty described above will be levied by SARS on assessment for the relevant tax year and will be payable by you.

Who will monitor whether I am contributing more or less than the prescribed limits?

It is your own responsibility to monitor how much you have contributed per tax year and in your lifetime into your Tax-Free Savings Account(s). FNB will not accept contributions into the Tax-Free Cash Deposit or Tax-Free Shares Account if they exceed the annual tax year or lifetime limits.

How are withdrawals treated on my account?

Withdrawals can be made at anytime, and are tax free. However, no replacements of withdrawals will be allowed. Withdrawals are not allowed into a 3rd party account and must be paid into your qualifying FNB transactional or cheque account. Where applicable, there may be a withdrawal fee for an early withdrawal.

Can I transfer my account?

Any direct transfers between financial institutions or individuals (or estates) to another is not allowed until further notice. Funds withdrawn from a Tax-Free Savings Account and transferred into another Tax-Free Savings Account will be deemed as a contribution, and contribution limits will apply.

Will I have to pay any tax on my account?

No tax will be levied on any of the interest received, dividends earned or the growth of the assets held.

What is the treatment of a Tax-Free Savings Account on your death?

On your death the account will be added to the estate of the taxpayer for purposes of levying estate duty. While it is held in an estate, returns from the account will continue to be exempt from tax. Amounts within an account cannot be transferred to a beneficiary's Tax-Free Savings Account.

Do reinvestments or dividends count as a contribution?

Reinvestments of returns or dividends will not count as contributions as long as they are not withdrawn and reinvested.

Whose responsibility is it to consolidate the account to SARS?

It is your own responsibility to provide SARS with the necessary documentation for assessment.

Will my contributions into the account be monitored?

Contribution limits into the FNB Tax-Free Savings Account will be capped as per annual tax year and lifetime limits. You may contribute into either the Tax-Free Cash Deposit or Tax-Free Shares Account, but not both product choices. It is your responsibility to ensure that you stay within the limits if you hold more than one tax free product across institutions.

Tax-Free Shares FAQs


What is an ETF?

An Exchange Traded Fund (ETF) is an investment fund that is traded on the stock exchange. It holds assets such as shares, commodities, or bonds and trades close to its net asset value over the course of the trading day. Most ETFs track an index such as a share index or bond index. ETFs are attractive as investments because of their low costs, tax efficiency, and share-like features.

What is the Ashburton Top40 ETF ?

The Ashburton Top40 ETF aims to provide returns linked to the performance of the FTSE/JSE Top40 Index. The ETF tracks the component equities of this index in proportion to the Index weightings. The FTSE/JSE Top 40 index contains the 40 largest shares in terms of market capitalisation listed on the JSE. The Ashburton Top40 ETF pays a quarterly distribution, made up of any dividends or interest earned from the underlying shares.

What is the Ashburton MidCap ETF?

The aim of the Ashburton MidCap ETF is to provide returns linked to the performance of the FTSE/JSE MID CAP Index. The ETF tracks the component equities of the Index in proportion to the Index weightings. The FTSE/JSE Mid Cap index contains the largest 60 companies listed on the JSE that are not included in the FTSE/JSE Top40 Index in terms of market capitalisation. The ETF thus holds the 41st to the 100th largest companies on the JSE in terms of market capitalisation. The Ashburton MidCap ETF pays a quarterly distribution to investors which is made up of any dividends or interest earned from the underlying shares. Do I have to contribute monthly? You have the option of either contributing a monthly amount of R300 or a minimum once-off lump sum of R1 000. You should always consider the cost implications of each option carefully.

What are the costs?

See 'Fees' under 'Shares Option'.

Will my contributions be monitored?

Contribution limits into the FNB Tax-Free Savings Account will be capped as per annual tax year and lifetime limits. You may contribute into either the Tax-Free Cash Deposit or Tax-Free Shares Account. It is your responsibility to ensure that you stay within the limits if you hold more than one tax free.

Can I transfer money out of this account?

In order to transfer money out of this account please contact the call centre on 0875 SHARES (742737). The transfer will be treated as a withdrawal and reported for tax purposes as such.

How long will it take to receive my money after I sell my investment?

After selling your investment you will receive your money as per STRATE rules.

Is there a minimum account balance?

There is no minimum account balance.

Who can open this account?

This account will be available to all South African tax resident natural persons.

How do I know how well my investment is performing?

You can access your Tax-Free Shares Account through Online Banking or through the FNB App.

Do I have to be an FNB customer to open the Tax-Free Shares Account?

Yes, a qualifying FNB transactional or cheque account is required to open the FNB Tax-Free Shares Account.

Why do I have foreign tax deducted from my TFS dividends?

A Tax Free Savings Account (TFSA) is governed by Section 12T of the South African Income Tax Act No.58 of 1962 (the Act) which is specific to South Africa. Certain TFSA products in South Africa do however have the option for TFSA holders to invest in local and foreign investments. Local investment earnings and capital gains and losses will be governed by Section 12T of the Act and will not be subject to tax in South Africa.

The foreign investment earnings are not governed by Section 12T of the Act which could result in foreign taxes being withheld on income earnings in foreign jurisdictions. This means that a TFSA holder will receive a net amount (i.e. Foreign Dividend or Foreign Interest less Foreign Tax Withheld). However the net amount received will be governed in accordance with Section 12T resulting in no additional South African taxes being charged on the net foreign investment income for TFS accounts.

In prior years your statement only reflected the net amount of the foreign earnings but for transparency purposes your statement now reflect the gross dividend value less the foreign tax withheld.

Therefore we are unable to reverse the foreign tax withheld on your TFS account.

Overview


Learn more about shares and investing with our simplified investment solution. With Share Saver, you can invest in the top 100 JSE listed shares, which means you don't have to choose.

You can choose from a pre-selected basket of suggested JSE blue chip shares and exchange traded funds with Share Builder .
Invest online with the full list of JSE listed shares in real-time trading within an integrated platform which allows you take control of your portfolio with Share Investor .

Share Investing Service Agreements +
Ts and Cs


Download the latest versions of the Mandates and Terms & Conditions here.

If you need assistance you can call us on 0875 SHARES (0875 742 737)

Share Builder Terms and Conditions and / or Mandate - (PDF)

Share Investor Terms and Conditions and / or Mandate - (PDF)

Share Saver Terms and Conditions and / or Mandate - (PDF)

Tax Free Shares Terms and Conditions and / or Mandate - (PDF)

Krugerrand Ts and Cs + delivery


Download the latest version of the Krugerrand Ts & Cs as well as the Krugerrand delivery T & Cs (should you wish to take physical ownership of your coins). The terms of the agreements are clearly laid out and are fully covered within the PDF file.

If you need assistance you can contact us on:
0875 SHARES (0875 742 737)

Krugerrand Terms and Conditions - (PDF)

Krugerrand Delivery - (PDF)

Dividends Withholding Tax (DWT) guide and forms


As part of the February 2011 Budget speech, Minister of Finance Pravin Gordhan announced that Dividend Withholding Tax (DWT) will come into effect from 01 April 2012. This will replace the current Secondary Tax on Companies (STC).

Please download the Dividends Tax Guide and relevant exemption forms to understand the impact it may have on your investment with us. If you'd like to read more about DWT, please visit the SARS website.

Dividends Tax Guide and relevant exemption forms

Overview


With the increasing number of broad-based employee share incentive schemes, more and more people are becoming share owners. This guide summarises some of the key aspects shareholders need to be aware of in computing their liability for income tax and capital gains tax (CGT). This guide is primarily aimed at individuals who own shares in their own names. However, many of the principles covered apply equally to companies and trusts, and when appropriate the more obvious differences in the treatment of these entities have been highlighted.

Download a SARS Share investment and tax guide - (PDF)

Rights issue


A Rights Issue is an invitation to existing shareholders to purchase additional shares in the company at a discounted market price. Companies use Rights Issues to raise capital to pay off debt or to fund acquisitions and growth strategies. In certain cases, companies will have its Rights Issue underwritten by an investment bank for reassurance that it will raise the finances.

Rights are also referred to as Nil Paid Letters. This is due to the shareholder, by virtue of his or her existing holding, receiving the rights to buy more shares without having to pay for the rights. However, it must be noted that although the rights to buy the share at a reduced price was awarded free of charge, exercising the rights to obtain the share still requires the shareholder to pay for the share albeit at a reduced price.

Download information on Rights Issues - (PDF)

Understanding Shares


Your guide to the world of investing

Whether you are looking for some tips on investing or just to brush up on the latest jargon, find it here.


Top investing tips

  • Start investing now
    Don't wait. The sooner you start to invest, the better. Time is an investor's best friend because it gives your investments the best chance for growth.
  • Invest regularly
    The sooner one creates the good habit of regular investing the sooner you start participating in market growth.
  • Budget to invest
    Only invest money that you set aside on a monthly basis to help grow your investments. This should never be money that you would need for day-to-day expense or money that you have borrowed.
  • Invest for the long term
    Investing is a marathon and not a sprint. Make sure that you are happy with the idea that the money invested is not available to you for the near future
  • You're buying a company, not just shares
    A share's performance is dependent on the company which in turn is dependent on the environment in which it operates. This includes its industry, the general economy, politics, its customers, etc.
  • Diversify your share portfolio
    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 (ETF).

The ups and downs

Short term
Long term

What costs you can expect

Industry fixed costs
Broker's costs

How much cash you need

  • Focus should be on purchasing good, solid shares in the most cost effective manner
  • Always understand the costs associated with your investment before going ahead. The more cost effective the sooner you will realise returns
  • The minimum number of shares that one can buy is 1 share; however it is never cost effective to buy only one share
  • Before you start buying you need to do a costing exercise, keeping in mind that you will have to pay trading charges in addition to the cost of the share
  • Brokers generally advise clients to buy shares in lots of 50 or 100 shares, making it easy to accumulate and keep track. As demonstrated above, it is also cost effective to buy in bulk
  • Learn how to make the most cost effective investments by using our calculators

How to select the right shares

Accounting
Economics

Understanding markets

Asset classes
Industries
Indices

Learn


Trading jargon

A-G


A

B

C

D

E

F

G

H-O


H

I

J

L

M

N

O

P-Y


P

R

S

T

U

Y