Playing the Stock Exchange

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“I’ve sold all my index stock and flipped it to retail.” 

“If I were you, I’d flog the financials and go short on gold.”

“You have to have Sasol in your portfolio to hedge a tank.”

S,WTF? Sorry, What the fudge?

Many of us desperately want to play the stock market, but it’s intimidating.  That’s why we fall for sales calls where a call centre “fundi” tells us how we are guaranteed to make millions through their unique, market-beating share package for a mere R20,000, which by the way, you will make back in about two weeks.  I received a call like this just last week. So I asked the agent what he would say is a good share to buy these days.  He said, with utter conviction that electricity is the share to buy.

“Are you suggesting Eskom shares?” I asked.

“Exactly.” His smile permeated through my handset.

As you may know, you can’t buy Eskom shares – they’re not listed…

There is no easy/guaranteed way to make money on any stock exchange. Just like you and me, the hottest trader cannot prevent a Nine-eleven or a Credit Crunch or a Black Monday.  We all lose money in those instances. But that doesn’t mean we shouldn’t try.

There are a few ways one can access the JSE. The safest (but by no means guaranteed) is to buy unit trusts – specifically equity funds – like the Coronation Equity Fund or the Allan Gray Equity Fund. In South Africa there are over 100 equity funds and all types of mutations like Top 20s or Fund of Funds unit trusts (or Collective Investment Schemes (CIS) as they are called these days).  An equity fund basically means that you pay a company like Allan Gray to buy shares on the stock exchange on your behalf.  The advantage here is that a team of experienced investors choose companies into which their specific unit trust invests all their members’ money.  The disadvantage is that you will have to pay fees (it is called the total expense ratio (TER)) that could easily go over 2% and even more if the fund does well.  This is called a performance fee and is added if the fund earns over a certain percentage for you.  CISs usually invest in blue chips and do not trade that much.

Another option is to pay a clever stockbroker to invest your money on your behalf straight into the market.  They usually work