Thanks to movies like “The Wolf of Wall Street”, playing the stock market is most often portrayed as a mysterious undertaking, peppered with tough negotiations, crazy mathematical algorithms and, of course, crowds of rowdy people shouting on a stock exchange floor.
The popularity of online trading technologies and a burgeoning industry populated by financial service providers eager to help people invest their money in shares, has laid the foundation for a solid trend, where more and more young, career-driven people are discovering the benefits of playing the stock markets.
We dive into the world of stock trading, and shed some light on this heady pastime of the wealthy elite.
More importantly, South African government programmes and communications, particularly from the National Treasury and Minister of Finance, have consistently thrown the spotlight on the importance of saving and investments as an essential mechanism for creating individual wealth.
Stock market trading is not, despite the media portrayals and mystical appearance, just for the rich and famous. Stock market trading can be undertaken by anyone keen enough to learn, and who has the disposable income to devote towards it. As with most investments, people who delve look into stock market trading as an investment opportunity, most often do so with the aim of creating a comfortable retirement for themselves in the future.
But, for people who are keen to try their hand at stock market trading, it can seem difficult to get to grips with the definitions of exchange rates, indices and dividends, and strip away the mystery that seems to surround this realm.
It can, however, be stripped away, when people take the time to understand how exchange rates works, how company shares can fluctuate and what kinds of investment opportunities exist within the stock markets.
Before you start venturing into the world of stocks and shares, however, the most important thing to understand is that investments are an important personal choice that enable you to create a future for yourself, or perhaps even generate a passive income stream.
"Whatever the choice you make, it's important to save, invest and participate in this type of investment, with a firm goal in mind", says Christopher Mills. As Director of a digital marketing agency in Cape Town, Christopher began exploring stock market trading as an investment possibility during 2012, and has gone on to become quite a pundit on the stock market, regularly writing useful blog posts that highlight interesting moves and technologies in that realm.
Christopher found that, as his understanding of the stock market and the various technologies one can use to trade increased, he began to feel more confident about making the move to stock market trading. He says: “Personally, before I began trading, I set out to learn as much as I could through traders on Twitter, online resources and so forth. Once I had a basic understanding and had taken the first steps I then looked at chatting to professionals. What this allowed me to do was understand what they were saying but also ask valuable questions”.
As a young person looking to invest, Christopher also says “ the biggest hurdle is that of understanding that the investment should be seen as a long term endeavour, perhaps even an opportunity to create retirement income for yourself. It's very difficult to look at the long term when you're in your early twenties, because buying a flashy car or making other status-related big purchases can seem far more attractive. There is, however, one very simple reason to invest when you're young: compound interest. Whether you're looking at a unit trust, an exchange traded fund or a stock broker account, as your money grows so does it grow more due to compound interest. The earlier you start, the sooner the investment grows. There are many more reasons to invest from a young age, but the most important premise behind all of it is to make life easier when it comes to retirement”.
A brief glance at the expanse of online resources devoted to helping people understand stock market trading, and enabling people to do it themselves, if they choose to, highlights again how the process of stock market trading has become less mysterious and more inviting to so many people.
It is perhaps most important to note that, no matter what investment vehicle you choose, whether it’s long term savings; shares on the stock market or retirement annuities, investment is a very personal venture. The amount you choose to devote to investments each month and the manner, in which you choose to, is ultimately up to you.
Of equal importance, when you look towards buying shares to participate in stock market trading, you will eventually go through a broker account or brokerage firm. Making use of these services does mean that you will be charged a range of fees and it’s vital that you keep this in mind when making your investment contributions, or are looking to sell or cash in your shares. Make sure you fully understand the range of fees you’ll need to pay when playing the stock market and remember to include them in your calculations.
So, how do you start? Here are our tips:
- Assess your financial standing and add your investment contributions (i.e. the amount of money you’d like to set aside to buy shares with) to your monthly expenses).
- Do your research! Check out online resources (we’ve put together a short list below!), read books and, if you like, ask for assistance from your financial portfolio firm or banking institution. If you’d prefer to not handle the trading of your shares personally, your investment portfolio manager will be able to help you, or your banking institution. Most of the major banks can provide you with easy to use share purchase packages, which often entail a minimum investment amount or deposit required.
- Spend some time exploring the range of online trading platforms that are out there. Many of them don’t just provide online trading services, but also regular online training and support services, to help you conduct your share transactions and gain a better understanding of your share portfolio. The Johannesburg Stock Exchange also provides useful updates and online resources via their website. Websites like Moneyweb, Sharenet and Finance24 will also help you keep tabs on stock market news. Online platforms like PSGOnline will enable you to conduct your stock market trading through their software and also provide support to you along the way.
- Get started and get excited, as you enter the wonderful world of stock markets and shares. Get ready to enjoy this opportunity of creating a golden future for you and your family!