How To Buy Stocks in South Africa
To buy stocks in South Africa you need to: open a brokerage account, deposit funds, research companies, place orders online, and monitor investments.
Investing in stocks has a lot of potential in the dynamic environment of South Africa's thriving economy. The country has the second-largest economy in Africa and a reputable financial market, making the allure of potential gains on the stock market difficult to resist.
TU experts will delve into the complexities of stock selection for South Africans, revealing tactics for navigating both domestic and foreign markets in this article. They will also provide a step-by-step manual that details each step of the stock purchase process, including creating an account with an online brokerage, funding it with money, researching and selecting preferred stocks, and finally placing orders using a user-friendly trading platform.
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1. Choose an online stock broker
To begin investing in stocks, you need to select an online stock broker. Look for a broker that offers a user-friendly interface, low fees, good customer service, and a wide range of investment options. It is essential to ensure that the broker is regulated and operates within your country's jurisdiction.
For beginners, brokerages with extra benefits such as social trading can be invaluable as they offer opportunities to learn from experienced traders, as well as study best strategies. Additionally, access to comprehensive educational resources, fractional shares trading, and a diverse range of ETF investment options can further empower beginners in making well-informed and diversified investment decisions.
2. Sign up for an account
Once you have chosen a suitable broker, you'll need to sign up for an account. The registration process typically involves providing your personal information, which may include:
Your full name;
Address and contact details;
Date of birth;
Social Security number (or equivalent);
Proof of identification (such as a driver's license or passport);
Employment and material status information is optional.
Keep in mind that some brokers might require mandatory verification of your identity and documents.
3. Make your first deposit
To pay for the stocks you want to purchase, you'll need to deposit funds into your brokerage account. Most brokerages offer various funding options, such as bank transfers, credit/debit cards, or wire transfers.
Bank Transfers: Usually free or low-cost, but may take a few days to clear.
Credit/Debit Cards: Instant, but may involve additional fees.
Wire Transfers: Instant, but may involve additional fees.
How much money should I deposit for the first time? TU experts recommend starting with a small amount to understand the stock market and gain practical experience.
4. Choose the stocks you want to buy
With your account funded, it's time to choose the stocks you want to buy. You can use your brokerage's research tools or other financial websites to gather information about potential investments. Take into consideration factors like your budget, risk tolerance, and long-term investment goals when making your decisions.
If you are inclined towards long-term investing, it is essential to focus on conservative trading strategies, prioritize portfolio diversification, and thoroughly understand the businesses of the companies you invest in. On the other hand, if you prefer active trading, consider learning technical analysis or other techniques to make informed decisions and navigate the dynamic nature of the stock market effectively.
5. Place your orders to buy stocks
There are different types of orders you should understand:
Market order executes the buy order at the current market price. It prioritizes execution speed over price, ensuring immediate execution.
Market order use case: Investors who want to enter or exit a position quickly, especially in highly liquid stocks.
Limit order sets a specific price at which the investor is willing to buy or sell a stock. It allows investors to control the price at which the trade will execute, offering price protection.
Limit order use case: Traders who want to buy or sell at a specific price and are willing to wait for the market to reach that price.
Stop order (stop-loss order) executes the order when the stock reaches a specified price. Stop orders are used to limit potential losses by triggering a sale if the stock's price moves unfavorably.
Stop order use case: Traders who want to protect their investments from significant price declines.
6. Monitor your investments
The stock market can be volatile, and the value of your holdings may fluctuate. Stay informed about the companies you've invested in and keep an eye on market trends. Remember that investing is a long-term endeavor, and it's essential to review and adjust your portfolio periodically based on your financial goals and risk tolerance.
By following these steps and staying informed, you can start your journey into the world of online stock investing. Remember that investing involves risks, and it's crucial to do thorough research and seek professional advice if needed. Happy investing!
Rules and Regulation
Licensing
Cryptocurrencies are not formally regulated in South Africa. The South African Reserve Bank (SARB) issued a statement cautioning against the use of cryptocurrencies for payments, but trading on decentralized platforms, as well as cryptocurrency mining and holding, are permissible.
Crypto investor protection in South Africa
South Africa lacks specific cryptocurrency legislation. While consumer protection laws may offer some recourse, in case of a crypto exchange failure, traders may not receive compensation directly from the government or regulatory bodies.
Cryptocurrency Taxation in South Africa
There is no specialized taxation framework for cryptocurrencies in South Africa. However, cryptocurrency traders are still required to pay income tax, typically at rates similar to those for Forex traders, ranging from 18% to 45%.
How do I sell my stocks in South Africa?
According to TU experts, selling stocks in South Africa involves a few key steps. First, choose a reputable stock brokerage near you. Once you've selected a broker, navigate to your portfolio on their platform, locate the stock you want to sell, and initiate the sell order. Specify the number of shares and review all the details before confirming the order. Once submitted, your broker will process the order, and upon execution, you'll receive a confirmation. The settlement process typically takes a few days, after which you can decide to withdraw the funds to your linked bank account or reinvest them in other assets within your brokerage account.
Best stock brokers in South Africa
What are the benefits of buying stocks in South Africa?
Buying stocks in South Africa can offer several potential benefits to investors. Here are some of the benefits of buying stocks in South Africa highlighted by Traders Union experts:
Capital growth: Investing in stocks can provide the opportunity for capital appreciation over time. As the companies you invest in grow and succeed, the value of their stocks may increase, allowing you to potentially sell them at a higher price than you paid. This capital growth can contribute to building wealth over the long term.
Dividend income: Many companies in South Africa offer dividends to their shareholders. Dividends are a portion of a company's profits distributed to shareholders as a cash payment. By investing in dividend-paying stocks, investors can earn a consistent stream of income, which can be especially valuable for those seeking regular cash flow.
Diversification: The South African stock market provides access to a wide range of industries and sectors, allowing investors to diversify their portfolios. Diversification involves spreading investments across different types of stocks, reducing the risk associated with having all your investments tied to a single company or sector. This strategy can help mitigate potential losses during market downturns.
Ownership and influence: When you buy stocks, you become a shareholder and partial owner of the company. This ownership grants you certain rights, such as the ability to vote on key company decisions and attend shareholder meetings. Depending on the number of shares you hold, you may have a say in matters like corporate governance and the appointment of board members.
Liquidity and accessibility: The South African stock market offers high liquidity, meaning that you can easily buy or sell shares at prevailing market prices. This accessibility provides investors with the flexibility to adjust their portfolios according to changing market conditions or personal financial goals.
Is it safe to buy stocks online?
Yes, in general, stock investing is safe, but you should learn some basic safe investing rules that will help protect your money.
Research and select a well-established, reputable online brokerage platform with a track record of security and customer satisfaction.
Buy stocks using a secure internet connection, preferably your private home network, to reduce the risk of unauthorized access or data interception.
Create strong and unique passwords for your brokerage account, incorporating a combination of letters, numbers, and special characters.
Enable 2FA whenever possible. This adds an extra layer of security by requiring a second form of verification, such as a code sent to your mobile device, before accessing your account.
When funding your brokerage account or making transactions, use secure payment methods such as bank transfers or credit cards. Avoid sharing credit card details directly with third parties.
Be cautious about sharing unnecessary personal information online, especially on social media platforms, to minimize the risk of identity theft or fraud.
Keep a close eye on your brokerage account's activity. Regularly review statements and transaction history for any unauthorized or suspicious transactions.
Educate yourself about common stock frauds and phishing attempts related to stock trading.
Can South Africans trade stocks with international brokers?
Absolutely. South Africans have the option to trade stocks through international brokerage firms. These firms provide accessible trading platforms and services that enable individuals from various countries, including South Africa, to participate in stock trading on global stock exchanges. However, it's crucial to exercise caution and collaborate with reputable companies to ensure a safe and reliable trading experience. Trusted brokerage platforms like eToro are excellent choices for South African investors looking to engage in international stock trading. Such platforms offer a range of benefits, including user-friendly interfaces, diverse investment options, and robust security measures.
What is the minimum stock investment in South Africa?
In South Africa, the minimum stock investment can vary depending on the brokerage you choose and the specific stock exchange you're interested in. Generally, there is no nationwide minimum requirement for stock investments, but brokerage firms might have their own minimum deposit or investment amounts to open an account. To start trading in South Africa, the minimum amount of money you need can range from as little as a few hundred South African Rand (ZAR) to a few thousand ZAR. Some brokers offer lower minimums for online trading accounts, making it more accessible for individuals with limited capital to begin investing in stocks.
Can I trade fractional shares?
Yes, you can trade fractional shares in South Africa, and this is made possible by certain brokerage platforms like eToro and several others. Fractional shares allow investors to purchase a portion of a single share of a company's stock, making it possible to invest in high-priced stocks without needing to buy a full share.
Are capital gains or dividends taxable in South Africa?
In South Africa, dividends received by individuals from domestic companies typically enjoy an exemption from income tax. However, it's important to note that a dividend tax is applied at a rate of 20%, which is withheld by the entities distributing the dividends to the individuals. This means that while individuals might not directly pay income tax on the dividends they receive, there is a withholding tax that is deducted before the dividends are disbursed to them. This system helps ensure that taxes on dividends are accounted for at the source.
FAQ
How do beginners buy stocks in South Africa?
Beginners in South Africa can buy stocks by opening a brokerage account, depositing funds, researching companies, placing orders online, and monitoring investments.
How can I buy South African shares?
To buy South African shares, you need to choose a reputable brokerage, open an account, deposit funds, research stocks, place buy orders, and manage your investments.
Can I buy shares with R100?
Yes, some brokers allow you to start with a small investment like R100, but consider transaction costs and the limited investment scope with such a low amount.
How to buy JSE stocks in South Africa?
To buy JSE stocks in South Africa, open a brokerage account, fund it, research JSE-listed companies, place buy orders through your broker's platform, and track your investments regularly.
Team that worked on the article
Alamin Morshed is a contributor at Traders Union. He specializes in writing articles for businesses who want to improve their Google search rankings to compete with their competition.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).