Beginner to investing in stocks

craigils

New Member
Joined
Mar 30, 2017
Messages
5
#1
I'm a young adult with no dependents, and I'm very keen to start an investment portfolio.
I have followed a popular Udemy course on investing, but it didn't really give me any practical know-how, its more about the types of stocks and risk, etc.
I'm under the impression that ETFs are a good place for me to start.
How does one begin investing in ETFs?
I'm currently with Standard Bank but I'm happy to change bank if that's advisable. Or is the bank irrelevant? I'm not sure if I should be investing through my bank or an external company.

Another question I have is should I be investing using Rands - through a South African company - or through an American/European service so that I can invest in their exchange rate too? Or maybe I'm just misunderstanding, and investing in international ETFs will give me the benefits of the exchange rate changes.

Finally, I keep hearing about bonds vs stocks investing. Is investing in bonds an American thing or how does that work? I can't seem to find much about it in SA
 

VG008

Senior Member
Joined
Dec 9, 2010
Messages
747
#4
I have followed a popular Udemy course on investing, but it didn't really give me any practical know-how, its more about the types of stocks and risk, etc.
Use the following resources (all south african). It will provide you with practical solutions and some theory.

Fat Wallet Show: https://justonelap.com/the-fat-wallet-show/
https://www.takealot.com/manage-your-money-like-a-f-cking-grown-up/PLID48608525
https://www.takealot.com/become-your-own-financial-advisor/PLID27245609
https://www.takealot.com/how-to-make-your-first-million-ebook/PLID42130569

How does one begin investing in ETFs?
I'm currently with Standard Bank but I'm happy to change bank if that's advisable. Or is the bank irrelevant? I'm not sure if I should be investing through my bank or an external company.
Since you with Standard Bank, you can buy efts on a monthly basis @ 0.20%. This is not their web trader platform.
Find out from someone at standard bank how to do this. I can't find a link on their website.

Otherwise, you can use EasyEquities which is bank independent.

Another question I have is should I be investing using Rands - through a South African company - or through an American/European service so that I can invest in their exchange rate too? Or maybe I'm just misunderstanding, and investing in international ETFs will give me the benefits of the exchange rate changes.
If you invest in offshore ETFs, you get the benefit of the current exchange, without you needing to buy currency. If you are worried about the Rand and SA in general and want to convert rands to Dollars and then invest in ETFs, you can do this.

Easy Equities offers this service and there are other platforms as well.

Finally, I keep hearing about bonds vs stocks investing. Is investing in bonds an American thing or how does that work? I can't seem to find much about it in SA
Not an american thing. You can invest in bonds in South Africa. For example: http://www.etfsa.co.za/docs/edu/invest_sa_bond_market_thru_etfs_jan2013.pdf
Research about bonds. Since you are young, you should look at equities more than bonds.
 

proxilin

Senior Member
Joined
Mar 16, 2009
Messages
525
#5
+1 to everything VG008 has said.

You can easily invest in JSE listed shares, in rand, that track ETFs in dollars (e.g. Satrix World), which is the best initial option to get overseas investments that will protect you if the rand depreciates. Once you get comfortable with that, you can look at buying dollars and buying overseas ETFs in dollars.

There are a host of South African blogs and financial websites that can help educate you, I'd recommend reading up a bit before taking the first steps. JustOneLap is fantastic, also look at Stealthy Wealth''s website http://www.stealthywealth.co.za/

Standard Bank also hosts free seminars in the major cities about how to get started in shares. It's usually presented by Simon Brown, who is independent of Standard Bank, so it's not just a sales pitch for the bank. He is the founder of JustOneLap, so you can also just go watch some of the videos on that website, but check for a seminar in your area if you are keen: https://securities.standardbank.co.za/ost/nsp/brochurewarepublic/ost/education_centre/education.html

EasyEquities is the best starter platform, then probably AutoShare Invest through your Standard Bank online banking. Standard Bank's full Online Share Trading is overkill if you are just starting out.
 

rietrot

Honorary Master
Joined
Aug 26, 2016
Messages
10,423
#6
Open an easy equities account and just buy whatever you need. Play around with the demo account if you're unsure. Buy a minimum amount of ETFs that cover everything. Something for top 40/50 something for the SNP500 and maybe a broader world ETF make use of the TFSA.

Bonds are an American thing that's supposed to be less risky. forget about it or get retail savings bonds at the post office if you really have to.

Then if you want to buy individual shares read financial statements and news, figure out some kind of strategy. Don't just buy random stuff.

At this stage forget about currency exchange rates, except if you think there is absolutely no future in SA. Then you need to move yourself abroad, not just your money.
 
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craigils

New Member
Joined
Mar 30, 2017
Messages
5
#7
Thanks so much for the info, guys.

I'll definitely take the EasyEquities route to get started.
I'd heard about them, but I was sceptical. I thought maybe they took a massive cut of your money or something, but I guess they're legit based on your advice.

Thank you, I will definitely check those out. As soon as I've got internet here at my new place, I'll be listening to that podcast.

If you invest in offshore ETFs, you get the benefit of the current exchange, without you needing to buy currency. If you are worried about the Rand and SA in general and want to convert rands to Dollars and then invest in ETFs, you can do this.
You can easily invest in JSE listed shares, in rand, that track ETFs in dollars (e.g. Satrix World), which is the best initial option to get overseas investments that will protect you if the rand depreciates. Once you get comfortable with that, you can look at buying dollars and buying overseas ETFs in dollars.
Okay great. I guess I'll just start with investing in offshore ETFs in Rands through EasyEquities.
Is there any reason why I, as a beginner, should use EasyEquities US Account rather than using just the TFSA and buying offshore ETFs like Satrix World?

Not an american thing. You can invest in bonds in South Africa. For example: http://www.etfsa.co.za/docs/edu/invest_sa_bond_market_thru_etfs_jan2013.pdf
Research about bonds. Since you are young, you should look at equities more than bonds.
Bonds are long term investments with fixed growth rates, right?
Why do you believe that I should look at equities more than bonds?
Sorry, I'm a real rookie.

There are a host of South African blogs and financial websites that can help educate you, I'd recommend reading up a bit before taking the first steps. JustOneLap is fantastic, also look at Stealthy Wealth''s website http://www.stealthywealth.co.za/

Standard Bank also hosts free seminars in the major cities about how to get started in shares. It's usually presented by Simon Brown, who is independent of Standard Bank, so it's not just a sales pitch for the bank. He is the founder of JustOneLap, so you can also just go watch some of the videos on that website, but check for a seminar in your area if you are keen
Thank you. I have signed up on JustOneLap, and will look into their ETF portfolios.
I have actually already signed up for Standard Banks "Getting Started in Shares" course on the 16th.
I'm actually really glad you mentioned it, because I was wondering if it would actually be worth my while. I was concerned it would just be a bunch of trivial stuff or a Standard Bank sales pitch. So you reckon it'll be worth my while then?
 

marco

Expert Member
Joined
Aug 3, 2006
Messages
2,696
#9
We must also take into consideration that emerged or developed markets are just that - Developed. So economy growth would be in the 3 to 3.5% area.
Emerging markets are growing markets and expected growth would be 6 to 7% going forward. World financial advisers have punted emerging markets to revive in 2019 as they have been struggling for any gains over the past 5 years.

The real value of the ZAR to the USD should be R10.00 odd according to the burgernomics experts using the Big Mac index. Some recently calculated the value at R5.80 to the dollar by including other metrics.

Now if the above two are correct and you invest in foreign ETF's in dollars you may just loose out substantially.

So, yes, go for ETF's in emerging markets but on the JSE in ZAR and do not send your cash overseas as a SA resident.
 

McT

The Humble Scot!
Joined
May 19, 2009
Messages
34,743
#11
Wow , looking through EasyEquities, everything looks like **** over the 1 year graph
Markets have been volatile for a year or more. Short term profits are nearly impossible. Long term investments in solid companies with potential in the longer term (ETF’s too) is perhaps the best option right now. Buying units at good value is what I am doing. Also, looking for good dividends ensures a small return in the shorter term.
 

Joeboy69

Expert Member
Joined
Sep 30, 2013
Messages
1,194
#12
At a young age I would get into an RA for the tax benefit. Can still tell your broker in which funds to invest so you are still buying shares
 

VG008

Senior Member
Joined
Dec 9, 2010
Messages
747
#15
Is there any reason why I, as a beginner, should use EasyEquities US Account rather than using just the TFSA and buying offshore ETFs like Satrix World?
macro gave a good explanation. Basically if you don't see a future for SA, planning to leave the country in the future, then you can use the US account.

Bonds are long term investments with fixed growth rates, right?
Why do you believe that I should look at equities more than bonds?
Sorry, I'm a real rookie.
Bonds generally offer lower returns compared to equities in the long term. If you are saving for the short term (holiday, deposit on house, etc.), then bonds, money market accounts, or interest in the bank are good options. Otherwise, long term investments should be in equities if you are younger (since you have time on your side).

On a side note, I see people recommended RAs. You haven't told us your current financial portfolio. Do you have a company pension, current savings, etc.
Those books I recommended provides you with a good basis for structuring your financial portfolio. Example, start with an emergency fund before investing in the market.
 
Joined
Mar 16, 2009
Messages
525
#16
Okay great. I guess I'll just start with investing in offshore ETFs in Rands through EasyEquities.
Is there any reason why I, as a beginner, should use EasyEquities US Account rather than using just the TFSA and buying offshore ETFs like Satrix World?
As VG008 mentioned, before anything else, have an easy accessible emergency account. You don't want to have to access your TFSA, or a USD account, or any shares, for many years. So you should consider what you are saving for, and allocate money accordingly. I.e. don't save for a car/house in a TFSA.

If I had to choose between a TFSA and USD account, I'd use the TFSA account first, and buy offshore equities with that (like Satrix World, or the Ashburton Global 1200, the latter also includes some emerging markets). It'd be more tax efficient than a USD account, and you are still protected if the exchange rate goes bonkers.

I don't know how cost-efficient an EasyEquities USD account is, whether you'd choose that over a TFSA depends on if it makes you sleep better at night to have some money offshore. And if the state of the country worries one that much, I'd also consider splitting money between an RA and a TFSA, if you can't do both. TFSA accounts are my #1 choice, since it's completely under your control, but others would disagree. RA's have immediate tax benefits, but you get taxed when you access it, so it's not such a distinguishing factor for me, personally.

The point is, just start somewhere, you will figure it out and adapt your plan as you go along. By just starting to save and invest, even if it's a R100, you are already doing the right thing, the details of what you buy and where you buy is of little importance. So rather start than be too overwhelmed with trying to figure everything out before you take the first step. You'll learn as you go along.

Oh and you mentioned being scared of EasyEquities's cost, but just to reassure you, they are by far the cheapest way to start investing. Start your TFSA there.

And yes, the Standard Bank seminars are free, so there's nothing to lose, so definitely go. Even if you only learn one thing, it's worth it.
 
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Joined
Mar 30, 2017
Messages
5
#17
Also check the justonelap Facebook page. They recommend the 1st 3 podcasts to listen to as a beginner.
Thank you. I'll definitely check out their Facebook page and listen to those podcasts.

So, yes, go for ETF's in emerging markets but on the JSE in ZAR and do not send your cash overseas as a SA resident.
Thanks for your very insightful message. I'll definitely follow your advice and go for ETF's in emerging markets on the JSE in ZAR.

Wow , looking through EasyEquities, everything looks like **** over the 1 year graph
4-5 years of sideways market. The JSE all share is still at 50k where it was back on june 2014. Meh
I also noticed that... Should this put me off investing for now, and put my money in a savings account or something in the meanwhile? Or is it more sensible to just buy now while its low and wait it out.

macro gave a good explanation. Basically if you don't see a future for SA, planning to leave the country in the future, then you can use the US account.
Understood. Thank you

Bonds generally offer lower returns compared to equities in the long term. If you are saving for the short term (holiday, deposit on house, etc.), then bonds, money market accounts, or interest in the bank are good options. Otherwise, long term investments should be in equities if you are younger (since you have time on your side).
Okay great. That makes sense. My concern at the moment, as mentioned above, is that EasyEquities doesn't seem to show much promise over the last year (I know a year is a very short amount of time in the bigger picture though). Do you believe that investing in ETFs is still better right now rather than interest in a savings account, or the other alternatives?
I checked the Standard Bank savings account options and even the accounts that give you access to your funds at any time say you get interest up to 6-7% pa. Should I be expecting much more than that with ETFs? Getting that kind of growth in a savings account seems very good when comparing to the EasyEquities graphs over the last year.

On a side note, I see people recommended RAs. You haven't told us your current financial portfolio. Do you have a company pension, current savings, etc.
Those books I recommended provides you with a good basis for structuring your financial portfolio. Example, start with an emergency fund before investing in the market.
I don't have much in terms of a financial portfolio at the moment. I'm doing this research so that I can try make an informed decision. Basically I've started my first job this year and will be earning a lot more than I need. I want to do sensible things with the extra money.

The company provides a pension fund in which I can put a percentage in, and they'll match it. Is there any reason why I should put in more than the minimum amount? I mean.. I don't really know how pension funds work, but it won't grow at a higher rate than ETFs or a savings account, would it?

Right now, I'm imagining that I'll put more money into a savings account each month which I can withdraw from at any time, I guess that'll be for any extra expenses like car, medical, etc.
And the extra cash I want to throw into something more long-term, like ETFs.
Am I on the right track or should I change my thinking?

As VG008 mentioned, before anything else, have an easy accessible emergency account. You don't want to have to access your TFSA, or a USD account, or any shares, for many years. So you should consider what you are saving for, and allocate money accordingly. I.e. don't save for a car/house in a TFSA.
This is probably a dumb question, but why shouldn't I save for a car in a TFSA?
Standard Bank has an account called Tax Free Call Investment, which gives interest up to 6.65%, and you can access at any time. That doesn't seem like such a bad place to save for a car. Or are you talking about something different when you say TFSA.

Another question I have this - Is the R33000 pa limit on a Tax Free account a global limit across all services. ie. I can only put R33000 in total between EasyEquities and Standard Bank?

The point is, just start somewhere, you will figure it out and adapt your plan as you go along. By just starting to save and invest, even if it's a R100, you are already doing the right thing, the details of what you buy and where you buy is of little importance. So rather start than be too overwhelmed with trying to figure everything out before you take the first step. You'll learn as you go along.
Thank you very much for this advice. I'm definitely in that situation at the moment where I'm overwhelming myself with trying to figure everything out. Obviously I don't want to go in completely blind, and that's why I'm asking these questions, but I'm glad to hear that I wouldn't be completely dumb to just dive in.
 

jman

Expert Member
Joined
May 9, 2014
Messages
2,015
#18
I don't have much in terms of a financial portfolio at the moment. I'm doing this research so that I can try make an informed decision. Basically I've started my first job this year and will be earning a lot more than I need. I want to do sensible things with the extra money.

The company provides a pension fund in which I can put a percentage in, and they'll match it. Is there any reason why I should put in more than the minimum amount? I mean.. I don't really know how pension funds work, but it won't grow at a higher rate than ETFs or a savings account, would it?

Right now, I'm imagining that I'll put more money into a savings account each month which I can withdraw from at any time, I guess that'll be for any extra expenses like car, medical, etc.
And the extra cash I want to throw into something more long-term, like ETFs.
Am I on the right track or should I change my thinking?
I'll make it easy for you - buy a book called "Manage your money like a F**king grownup" and read it twice. Puts things very clearly and will set you on the path you need. Best (arguably) 200 bucks or so you'll ever spend.

https://www.takealot.com/manage-your-money-like-a-f-cking-grown-up/PLID48608525
 

proxilin

Senior Member
Joined
Mar 16, 2009
Messages
525
#19
This is probably a dumb question, but why shouldn't I save for a car in a TFSA?
Standard Bank has an account called Tax Free Call Investment, which gives interest up to 6.65%, and you can access at any time. That doesn't seem like such a bad place to save for a car. Or are you talking about something different when you say TFSA.

Another question I have this - Is the R33000 pa limit on a Tax Free account a global limit across all services. ie. I can only put R33000 in total between EasyEquities and Standard Bank?
With any savings & investments, you'll see the benefits over the long term (i.e. probably over 10 years plus), due to compound interest (for a lesson on compound interest and everything, +1 go read the book how to handle your money like a F**cking grownup, and listen to the Fat Wallet show). With a TFSA, this effect will be amplified because you are not paying tax. So, you need to leave your money in there for a long time to get the real benefits.

The catch with a TFSA, you have the limit of R33 000 a year to put into it (yes, in total, across all platforms). If you put R33 000 in, and you then take R10 000 out, you cannot put the R10 000 back in. You can only input R33 000, each year. And to get the maximum benefits over the long term, you shouldn't take money out. So that's why saving for "short term" things like a car, and probably a house (people usually buy in their 20s), isn't great to do in a TFSA. If you only want a house in 10+ years, then I guess it's ok to save there. But, overall, you need to leave that money in there for as long as possible (decades) to get the maximum benefit. But to clarify, you CAN take the money out of a TFSA, you just won't get as much benefit if you do.

Secondly, don't invest in a normal interest bearing account that banks claim are "tax free"! Yes, that Standard Bank interest earning Tax Free account is a TFSA. You get an annual interest exemption from SARS anyway, so you won't pay tax on any interest you earn unless you have over R300 000 invested. So there's no point to earn the interest in a tax free savings account, because you wouldn't have been taxed anyway! It's a waste. Tax free accounts are for investing for future you (you in 15/20/25 years), and to get maximum benefit tax wise, you should be investing in shares (which, historically, have had the best return on investment, even when they go pear shaped for a while, like our JSE in the last 5 years). That's why it's also important to diversify and buy global ETF's, then you aren't so at risk with investing in one country.

This is all why you need an emergency fund first, which you can invest in notice accounts at the bank etc, that you can use for emergencies and shorter term savings for a car etc. A TFSA is best used for money you won't touch for many many years.

But yes, this is all in the books and the podcasts, and on the Just One Lap website. It's not complicated once you get into it, you will definitely be ahead of almost everyone you know, just because you've asked the question and started learning :)
 
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