Shares are part of a company’s capital divided into equal parts, entitling a person who purchases it to ownership of a company. The number of shares owned directly indicates the percentage and amount of ownership one can claim in the company.

A share entitles you to earnings gained by the company in instances where companies post profits, and assets when the company undergoes liquidation. Stock markets are places where the shares are traded.

Individuals and companies holding shares are called stockholders or shareholders. Companies issue these shares in a bid to raise capital and invest in the business, helping it grow.

How Stockbrokers Work

You cannot buy shares directly from the stock exchange. You can either buy your shares through your bank or an intermediary known as a stockbroker. Stockbrokers are allowed and regulated by the law to trade, buy, and sell shares on behalf of their clients in the stock exchange market – usually at a small fee or a commission.

They also offer advice to clients on which issues they may want to buy. The Stockbroker gives the initial advice, guidance, and assistance throughout the shares buying process. This makes selecting a stockbroker important. You can learn how to buy shares, making your decisions and choices align with your overall investment goals and individual needs

Buying shares via your bank

If you prefer all your finances to be consolidated in one location, for ease of monitoring and access, buying shares through a bank is the avenue for you. You require an open bank account in South Africa.

An online set-up is further required to ensure that you can trade, buy and sell shares with ease. This setup can be achieved by visiting the local branch of your bank or via phone call as they take you through the whole step.

After setting up an online profile, log into the profile and open an investment account with your bank. If you encounter any difficulties setting an investment account, you can head out to your local bank representative or seek assistance online.

After opening the account, you can now fund the investment account. This is because when you buy or sell shares, the money isn’t credited to your bank account but your investment account. An advantage of using banking is the ease at which the transfer and monitoring of funds are done as they are both connected to the same banking profile.

Buying shares via an Online Stockbroker

You have to research the kind of broker you want for yourself, a broker who aligns with your investment goals and needs. Different brokers offer different packages ranging from execution-only brokers and there are others who manage client accounts and offer advice on stocks. You can easily find the list of credited brokers by visiting the JSE website.

After choosing the broker of your choice, you will be required to fill out your residency and details information. Relevant documents pertaining the Financial Intelligence Centre Act (FICA) will also be requested. Upon completion of all required paperwork, the broker will request you to make a lump sum deposit to your account to open your account officially

There are different types of accounts offered by these brokers mainly; non-discretionary accounts and discretionary accounts. The latter accounts allow brokers to make trades for you, but usually within your acceptable ambits of risk that you pre-determined.

With non-discretionary accounts, you make your own decisions after researching the available stocks with available data. The charges on this type of account are usually lower due to this.

Research

To get it right, you might have to invest in adequate research as an investor. Most companies listed in the stock exchange offer financial statements regarding the company to enable the investor to make intelligent well-informed decisions regarding the acquisition of its shares.

You will need to comb through this data and ensure adequate comprehension and mastery, ensuring that the decisions made come from well-researched knowledge rather than a point of speculation. This will protect you from making decisions that will lead to loss of income.

If you are skeptical of your ability to make the right sound decisions when it comes to the acquisition of shares, you can enlist the services of brokers through the discretionary account. However, an extra charge will have to be incurred

Making of your First Purchase

If you decide that you will not use the discretionary account to purchase shares and you decide to purchase shares on your own, there are some factors you will need to consider. Shares like every other investment have inherent risk, and proper care should be performed to ensure that the stocks you choose are well researched.

Diversification of the types of stocks you choose is highly recommended for you as a beginner to shield your portfolio from the significant dips associated with market cycles. It would be best to decide before the purchase whether you prefer to be a short-term capital gains trader or a long-term trader seeking wealth growth.

The latter does not pay heed to market fluctuations in the stock price. Both have their inherent risks and advantages, which you should consider before that first purchase.

Market indexes are touted as one of the best to invest in commodities as a beginner. This is because they usually represent a group of common stocks, such as growing giant tech stocks or the top 20 stocks in that particular market.

These indexes offer diversification and low maintenance for the investor hence adequately protects the novice investors money while providing steady gains in income.

Final Thought

The stock exchange is a place for opportunity. The more you risk, the greater your returns. However, there exists a line between educated risks and outright speculation. Do not be fooled into thinking investing is easy in any way.

It is vital to understand a company’s inner workings, industry, economy, and stock market to decide what to invest in. The stock market is not a get rich quick scheme, and as stated by legendary investor warren buffet,” it is a tool to transfer money from the impatient to the patient.” However, it’s possible to harvest great and adequate from the stock exchange market.