7 Reasons You Should Be Investing in Shares

Investing in shares on the Johannesburg Stock Exchange offers a host of benefits for the long-term investor. Here’s a handful.

Meet Cassandra – Cassy for short.

Cassy graduated last year – Honours in Tax – and has landed her first real gig. She got a job with a multinational company and is coming in as a junior to learn the ropes.

Cassy is long-term oriented and knows the importance of saving for the future.

She intends to open up her own tax consulting business after she has gained sufficient practical experience. In the meantime, she’ll be investing her long-term savings on the Johannesburg Stock Exchange (JSE).

Cassy has signed up with an online brokerage platform and has budgeted R700.00 a month for investing.

She’s done her homework and knows that there are costs involved in buying and selling shares.
So, to keep trading costs to a minimum, she intends to invest in the Satrix ALSI Index Fund. This fund is not only cost-efficient, but it gives her exposure to all the shares trading on the JSE, which diversifies her risk.

She decides to educate herself so that she can make her own calls on what shares to invest in next year.

If history’s any guide, her steady, consistent approach will yield a crafty little nest egg in the next 15 years – large enough for her to spread her entrepreneurial wings.

Why Cassy Loves Investing on the JSE

Cassy’s strategy capitalizes on three attractive features of investing on the JSE.

1. It’s convenient. Many South African stockbrokers offer intuitive online trading platforms. They’re easy to use and allow her to buy and sell shares with a click of a mouse.

2. A wide variety of index funds and ETFs make it easy to diversify her portfolio quickly and cheaply.

3. World-class financial reporting requirements give her excellent visibility into the goings-on at each listed company, giving her the information she needs to pick winning shares.

Meet DJ Deejay

Photo by Matt Rhodes
Photo by Matt Rhodes

Deejay is a house music DJ and has been making mad music for a good few years. His beats have proven quite popular on the Durban club scene, and he has managed to rake in some serious cash.

His friend Natasha suggested that he think about investing on the JSE:

“Deejay, take the advice of a good old friend – investing in companies on the JSE is a great way to build wealth over the long-term.

  • If you buy good companies at fair prices, you can expect the value of your shares to grow over time.
  • Many companies even pay dividends to their shareholders once or twice per year.

But keep in mind that owning shares is like being in a relationship – you don’t end it when things get rough. Buy shares of a quality company at a fair price and stick with them during tough spells. Your reward will be handsome if you remember this.”

Intrigued, Deejay contacts one of the well-known banks and informs them of his decision to invest his money.

His savings allow him to open up a premium account with access to a personal broker who will help him to build and manage a healthy share portfolio to match his long-term goals.

Why Deejay Loves Investing on the JSE

Deejay wants a decent return on his money, but unlike Cassy, he’d rather be at the club than spending an evening poring over financial reports. Investing on the JSE allows him to accomplish both aims.

4. Diversified share portfolios tend to appreciate in value over time. In fact, no other asset class has been so successful at building investor wealth.

5. Periodic dividend payments can provide Deejay with a valuable income stream as he patiently watches his portfolio grow.

6. The nature of share investing allows him to choose to be very involved in choosing stocks or, instead, turn over the task of managing his account to a trusted broker.

This Is Thulani

Thulani is a man of his word.

His photographs have been pulled off his cubicle “wall” and his mug from home is packed snugly in the box on the floor. This is it. He has finally made it.

Unlike many his age, Thulani is not afraid of retirement because he has invested enough of his income over the years in what is now a solid share portfolio to carry him through the later years of his life.

He would have loved to have his wife waiting at home for him, God is the best of planners after all.

His heart skips a beat when he thinks of his trip to Nairobi next week where he will be visiting his daughter and grandchildren.  He’ll Skype her first thing when he gets home.

Thulani will be selling off his investment in the Satrix 40 ETF month on month to cover his living expenses and a few trips here and there.

He is glad of the liquidity that his investment brings and is thankful to his younger self for thinking about him in his old age.

He hopes that his daughter has taken his advice and is investing 10% of her monthly salary each month.

Why Thulani Loves Investing on the JSE

7. In a word, liquidity. Unlike real estate and many other investment classes which take time to sell, investing in shares on the JSE allows Thulani to sell (withdraw) the money that he needs at the time that he needs it. He doesn’t need to worry that his cash will be tied up if an unexpected opportunity or financial emergency arises.

Your Turn

What questions do you have about the JSE or investing in shares more generally? Let’s hear them in the comments!

14 thoughts on “7 Reasons You Should Be Investing in Shares”

  1. Very happy for Cassy that she has right away chosen the right cause for her future financial wellbeing.

    It is good that she has even started with the indexed funds and the ETFs to allow for diversification. Also her monitoring of the activities of her investments will, definitely, help her a lot.

    If there are other mutual funds which invest in other countries’ markets (like we have EPACK in Ghana), she must take advantage of that too, to further diversify her investment portfolio.

    Wishing her the best in her endeavours.

    1. Hi Sam

      I agree, I intend on teaching my kids to save from that very first paycheck.

      I love the idea of investing in ETFs across different stock exchanges! It adds a wonderful new dimension to investing.

      Great comment!

  2. Does one needed to be business minded person before going into this? I am police officer Ghana how do I do it. I don’t have any business background. Plse school me on this.

    1. Dear Anthony. The best way to do this would be to start learning about share investing. There are wonderful “How to” guides on the site which could be of help. The key is to understand what you are doing before taking that first step.

  3. Am a Kenyan working in Nigeria and intends to put my savings in Nigeria Stock Exchange. Do you know competent and trusted stock brokerage firms that can help me achieve this?

    1. There may be many Stock Brokers in Nigeria who will be eager to help you.
      You “google” for stock brokers in Nigeria and see the result. Or, at best “google” or search for the Nigeria Stock Exchange; get their contact address or phone number and see the result. Through research, you can know the well-established Brokerage Firms. Good luck.

    2. Hi William. There’s a great article by Ryan “How to invest on the Nigerian Stock Exchange” on the site that you can have a look at. It is packed with valuable information.

  4. Hi
    My name is Ann am a Kenyan who’s interested in starting to invest in the NSE.Does anyone know any trusted brokers in Nairobi..

  5. Mr Hoover, I’m still 19yrs old but I find this investing business interesting. Will it be a good idea for me to open an account or do you think this business is not child friendly?

  6. Hi. Also new to the world of investing..do have a number of shares in SA companies. A question I have is how can a South African purchase global company shares such as Coca Cola or Shell?!

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