If you are ready to start investing in stocks in South Africa but aren't sure of the first steps to take, you’ve come to the right place. Here’s how to invest in stocks and the basics of how to get started in South Africa.
It might surprise you to learn that a $10,000 investment in the S&P 500 index 50 years ago would be worth more than $1 million today. Stock investing, when done well, is among the most effective ways to build long-term wealth. Whether you have $1,000 set aside or can manage only an extra $100 a month, you can get started.
Unfortunately, there are no guarantees and there's a lot that you can and should learn about investing in stocks to achieve financial success. However, right now, read on for the key aspects of stock investing and the steps to begin the process.
Investing in Stocks in South Africa - Key Takeaways
- Investing in stocks means buying shares of ownership in a public company. Those shares are called stock.
- If a stock you own becomes more valuable, you could earn a profit if you decide to sell it to another investor.
- Most people invest in stocks online, through a brokerage account. You can also purchase funds, which hold many different stocks within one investment.
- To invest, you’ll place your orders with us, and we’ll execute them on your behalf. Dividends earned (if any) will be deposited straight into your account.
For more info about how to invest in stocks, you can discover everything you need to know in this guide.
Is Investing in Stocks in South Africa Worthwhile?
Whether or not investing in stocks is worthwhile depends on your aim and the alternatives that are available to you. If you are willing to take on risk, then investing in stocks is a way to profit from share prices going up and dividend payments.
However, remember that you could lose money and that past performance doesn't guarantee future returns.
There are two ways to earn a return on investment from the company shares you own:
1. Share price appreciation
Share price appreciation occurs when you buy stocks and sell them at a higher price. The greater the difference between the buy and sell price of your stock, the higher your return on investment. For example, investing in stock market indices like the S&P 500, which contains 500 large US companies and aggregates their individual performances into a single index. Historical financial market data shows that the S&P 500 appreciated over 200% in the last 10 years.
However, be aware that the stock market doesn't go up every year. The USA 500 and most of the major stock indices typically fall three out of every 10 years. Some drops can feel quite brutal, and their level of volatility is not for everyone. But if you can manage your fear, stocks have the potential of earning significantly higher returns than other investment options over the long term.
2. Income from Dividends
Some stocks provide income in the form of a dividend. Not all companies make dividend payments, meaning you’ll only earn these if the company you’ve invested in pays them. Stocks that are known to pay regular and stable dividends are known as ‘dividend stocks’ or ‘income stocks'. Dividends can be paid into your account for withdrawal or used to invest in more shares.
Earning a dividend income can make a difference to your returns over time. You can build long-term wealth by reinvesting your cash divided using the compounding effect, yielding more returns from that lump sum. Compounding is exponential, meaning even though the initial amount might be small in the short term, the value of your investment portfolio will grow significantly in the long term.
Stock Investing Advantages and Risks
The potential advantage of investing in stocks is earning an income, mostly through passive investing. The returns from the stock market also tend to occur at a faster pace than the inflation rate.
The large number of buyers and sellers available on the stock exchange makes stocks more liquid, making them faster to sell compared to real estate which are non-liquid assets that take longer to convert into cash. Investing in stocks does carry risk too, which we explore in this section.
Benefits of investing in stocks
There are many benefits to investing in stocks. Eight big ones are:
1. The potential to earn higher returns
The primary reason most people invest in stocks is the potential return compared to alternatives such as bank certificates of deposit, gold, and Treasury bonds. For example, in the last 100 years, the average annual stock market return has been about 10%; long-term government bonds have returned 5% to 6% annually during the same period.
2. The ability to earn regular passive income
Many companies pay dividends, or a portion of their profits, to investors. The majority make quarterly dividend payments, although some companies pay monthly dividends. Dividend income can help supplement an investor's paycheck or retirement income. A dividend reinvestment plan uses the income to purchase more shares of the company.
3. The ability to protect your wealth from inflation
Stock market's returns often significantly outpace the rate of inflation. For example, the long-term inflation rate in US has run around 3% annually since 1913. That compares to a double-digit annual return from stocks. Stocks have been a good way to hedge against inflation.
4. The pride of ownership
A share of stock represents fractional ownership of a company. You can own a tiny slice of a company whose products or services you love. Owning stock in the company you work for can be a way to express loyalty and tie your personal finances to the success of the business.
You can easily build a diversified portfolio across many different industries through stocks. That can help you diversify your overall investment portfolio, which could also include real estate, bonds, and cryptocurrency, reducing your overall risk profile while improving returns.
6. Small and discretionary outlays
Unlike property, you’re not required to pay a large outlay all at once, meaning you can invest small amounts at your discretion. With property and mortgages, you’re expected to pay the full value of the investment upfront.
Most stocks trade publicly on a major stock exchange, making it easy to buy and sell them. It also makes stocks a more liquid investment compared to other options such as real estate investments that you can't quickly sell.
8. Easy to get started
The stock market makes it easy to buy shares of companies. You can purchase them through a broker or a financial planner, or online. Once you've set up an account, you can start investing in stocks within few minutes.
New to stock investing and not sure where to start?
Sign up and get your risk-free demo account. This practice account will help you get started and give you the confidence to make your first stock investment. The CAPEX.com platform and app has helped people from all over the world to start investing in stocks, providing access to +5,000 stocks and funds listed on 10 global stock exchanges.
Risks of investing in stocks
There are risks involved when investing in stocks in South Africa. That’s because all investment activities carry a certain level of uncertainty, and this is something you must give careful consideration prior to committing capital. Ensure that you make use of our risk management tools. These are some of the risks you’d need to consider:
Investment risk is the level of uncertainty inherent in all types of investing. Often, the higher the return, the higher the risk. The type of investment risk you take depends on your risk profile. Share price volatility provides a measure of the overall value at which the stock market fluctuates up and down. These are at times unpredictable sharp price movements. Liquidity risk is when a company doesn’t have sufficient assets to be converted into cash to meet its financial obligations and timeously settling debts without impacting its share price. Company risk is the level of exposure the stock you’ve invested in has due to circumstances that negatively impact profits, potentially leading to its failure. Market risk is related to losses you might incur due to the entire market being affected by unfavorable price movements. Exchange rate risk is when the change in currency exchange rates impacts the operations and profits of the company you’ve invested in.
Basics of Stock Investing for Beginners
The first thing to consider is how to start investing in stocks in South Africa. Try this. Which of the following approaches best fits you?
- Some investors have several hours each week to dedicate to stock market investing and choose to buy individual stocks, while others take a less active approach.
- Some investors want to take an active hand in managing their investments, while others prefer to set it and forget it.
- Some are analytical persons and enjoy crunching numbers and doing research, while others don't have any desire to dive into anything math-related.
- Some like to read about the different companies they can invest in, while others like to examine stock charts and trend patterns to spot low-risk/high-reward opportunities.
- Some aim to increase the amount of money in their brokerage account, while others want to generate income as well as grow and protect their wealth.
- The good news is that regardless of which of these approaches you find yourself, you're still a great candidate to become a stock market investor. The only thing that will change is the "how."
Passive vs Active Stock Investment
If you’re managing your own portfolio, you can decide to invest in stocks actively or passively. The key difference between the two is that you determine how long you want to invest. Passive investors generally take a long-term perspective (buy-and-hold the underlying asset), while active investors often trade more frequently.
Active investors attempt to time the market in search of opportunities to buy low and sell high. If you’re looking to take a shorter-term position, you could consider stock trading via CFDs, a more speculative form of investing.
Buying the Underlying Asset
Investors buy the underlying assets with the aim of making a long-term financial return. The length of this process will depend on your individual circumstances. Some people invest in stocks to achieve financial independence and retire early, whereas others invest to fund education or other needs. Regardless of the aim, buying the underlying asset usually involves following a stock investing strategy with a time horizon of at least a year.
Investors will usually choose assets that they expect to increase in value by the time they are ready to convert their investment back into cash. There are no definitive rules about which assets should go into an investment portfolio, and diversifying your portfolio across different asset classes is an option that many experienced investors choose.
Buying the Underlying Asset is generally suited to those who:
- Plan to hold the stock for an extended period
- Only aim to profit from upward price movements
- Are happy to pay the full value of the trade upfront
- Don’t want to use leverage to increase their exposure
Trading Shares CFDs
Trading is speculating on the financial market without having to own the underlying assets. With CFDs, you can trade in both directions and use leverage to increase your exposure. Going short is the reverse of going long, enabling you to profit if you correctly predict a depreciation in a stock's price. However, please note that short selling is a high-risk trading method because stock prices can keep rising – theoretically, without limit. It’s essential to take steps to manage your risk.
Leverage is essentially a loan from your stockbroker that enables you to control a larger amount of money than you have deposited for the trade. For example, leverage of X5 means you can trade $500 with a deposit of just $100. Leverage is a powerful tool that can potentially increase your profits. However, it can also increase your losses so it’s important to understand the risks.
It’s also worth noting that CFD positions that stay open overnight incur a small fee, relative to the value of the position. This is essentially an interest payment to cover the cost of the leverage that you use overnight.
Trading via CFDs is generally suited to those who:
- Want to trade in both directions
- Have a lower initial investment
- Want to use leverage to increase their exposure
- Want to hedge an existing stock portfolio
- Are not concerned about owning the underlying asset
Trading via CFDs and buying shares of stocks differ characteristically, which affects various factors such as buying power, capital efficiency, and how the outcome of the trade is determined. Trading via CFDs involves ‘timing the market,’ whereas buy-and-hold is all about ‘time in the market’. Find out more ways to trade and invest in stocks by heading to the CAPEX Academy.
Investing in Stocks vs. Funds
Stock investing doesn't have to be complicated. For most people, stock market investing means choosing among two investment types.
You can opt for any one of the following approaches or use both. How you buy stocks depends on your investment goals and how actively involved you’d like to be in managing your portfolio.
If you enjoy researching and reading about markets and companies, investing in individual stocks could be a good way to start. Even if the share prices of some companies seem high, you can look at buying fractional shares if you’re just starting out and have only a modest amount of money.
Common vs preferred stock
Common and preferred stocks have different features. Which stock you invest in depends on your aims.
- Common stocks enable shareholders to have voting rights at stockholder meetings and to receive dividend payments, provided the company pays them;
- Preferred stocks are issued to shareholders as priority recipients of dividends. They usually don’t come with voting rights, but stockholders are likely to be able to claim earnings than common shareholders;
If you’re investing in stocks seeking to earn an income or dividends, then you could consider preferred stocks.
Stock investment funds
Stock investment funds offer exposure to the world’s largest, most liquid stock markets, and can give investors the ability to own stocks in some of the world’s most successful companies. When you invest in a stock fund, you also own small pieces of each of those companies. You can put several funds together to build a diversified portfolio.
ETFs vs Mutual Funds
ETFs and mutual funds are similar investment vehicles, with the main difference being that ETFs tend to be passively managed whereas mutual funds tend to be actively managed.
- Exchange-traded funds are instruments that track the performance of a group of underlying assets. When you invest in an ETF, it’s like buying stocks from a very broad selection of companies that are in the same sector or comprise a stock index, like the S&P 500. ETF shares trade on exchanges like stocks, but they provide greater diversification than owning an individual stock.
- Mutual funds share certain similarities with ETFs, but there are important differences. Actively managed mutual funds have managers who pick different stocks to beat a benchmark index. When you buy shares of a stock mutual fund, your potential profits come from dividends, interest income, and capital gains.
Keep in mind that there’s no right or wrong way to invest in stocks. Your costs and responsibilities will vary depending on an active versus passive approach. Mutual funds are professionally managed and may have higher fees. With ETFs and index funds, you can purchase them yourself and may have lower fees. Having a diverse portfolio can help you prepare for the risk and not have all your eggs in one basket.
Investing in Stocks via Technical vs Fundamental Analysis
Before you invest in stocks in South Africa, it’s sensible to do some research. The aim of stock analysis and research is to determine which stocks are worth buying or traded and which stocks should be avoided.
Fundamental and technical analysis are two common ways to sort and pick stocks. How and when to use them can be a matter of personal style, but each has its strengths.
Fundamental analysis of stocks
Fundamental analysis involves looking at all available information in relation to a company, including its financial performance, its financial strength, and the threat of competitors, to determine whether a stock is undervalued or overvalued.
In this form of analysis, investors analyze financial data and often use financial ratios to work out if a stock is worth buying:
- Price-to-earnings ratio (PER) is the relationship between a company’s stock price and earnings per share (EPS). Investors want to buy financially sound companies that offer a good return on investment (ROI). Among the many ratios, the P/E is part of the research process for stock investments because we can figure out whether we are paying a fair price.
- Dividend Yield is a security’s annual dividend payment expressed as a percentage of its current price. This percentage yield tells you what your annual return on investment would be at the price you paid for the security. Thanks to the power of compounding, reinvesting your stock dividends—rather than cashing them out—can increase your returns.
- Return on equity (ROE) is the measure of a company's net income divided by its shareholders' equity. ROE is considered a gauge of a corporation's profitability and how efficient it is in generating profits. The higher the ROE, the more efficient a company's management is at generating income and growth from its equity financing.
Technical analysis of stocks
In this type of analysis, investors examine stock charts and analyze trends, chart patterns, and indicators to predict a stock’s future movements. Those who use technical analysis believe that historical price movements can be used to predict future price movements.
There is no broad consensus on the best method of identifying future price movements, so most technicians gradually develop their own set of rules based on their knowledge and experience.
- Price action is the movement of a security's price over time, which forms the basis for a stock price chart and makes technical analysis possible. Many traders use candlestick charts since they help better visualize stock price movements, eschewing any fundamental analysis in favor of focusing solely on support and resistance levels to predict breakouts and consolidation.
- Technical indicators are heuristic or pattern-based signals produced by the price, volume, and/or open interest of a security or contract used by traders to gain insight into the supply and demand of securities and market psychology. Examples include the Relative Strength Index (RSI), Ichimoku Cloud, stochastics, moving averages, MACD, Bollinger Bands, and more.
- The Dow theory is a financial markets theory developed by Charles H. Dow that rests on six basic "theorems” that were a precursor to modern-day technical analysis. At a high level, the Dow Theory describes market trends and how they typically behave. At a more granular level, like the Elliott Waves theory, it provides signals that can be used to identify and subsequently trade with the primary market trend.
TIP: If you want to learn more about how to trade using technical analysis, please visit the CAPEX Academy homepage where you can find free trading courses.
Both forms of analysis can reveal potentially valuable information, and focusing on just one style could cause you to miss important clues about a stock's value. And since the intended duration of a trade may change, employing both forms of analysis might be your best approach. Use fundamental factors to select the candidate, and technical factors to dictate the ideal entry or exit price.
Stock Investing Strategies and Styles
Investors have different approaches — or ‘investment strategies' — to meet the objectives of their portfolios. They play a key role in determining the future risks and returns associated with the investment portfolio.
Stock investors in South Africa may change their strategy according to market conditions and may use a blend of styles and strategies.
It’s always nice when things have a clear label, and you can’t get much clearer than “buy and hold.” Buy-and-hold strategists seek stock investments they believe will perform well over many years. The idea is to not get rattled when the market dips or drops in the short term, but to hold onto your investments and stay the course.
Buy-and-hold works only if investors believe in their investment’s long-term potential through those short-term declines. This strategy requires investors to carefully evaluate their stock investments — whether they are broad index funds or a rising young company — for their long-term growth prospects upfront.
The biggest challenge to timing the markets is getting it right on a consistent basis. For those stock investors wary of trying their luck on market timing but still wanting a good entry point into the market, the strategy of dollar-cost averaging may appeal.
Investors who dollar-cost average their way into the market spread their stock or fund purchases out over time, buying the same amount at regular intervals. Doing so helps to "smooth" out the purchase price over time as you purchase more shares when the stock price is down and buy fewer shares when the stock price is up. Over time, you gain a better average entry price and reduce the impact of market volatility on your portfolio.
Momentum investors ride the wave. They believe winners keep winning and losers keep losing. They look to buy stocks experiencing an uptrend. Because they believe losers continue to drop, they may choose to short-sell those securities via CFDs.
They use a strictly data-driven approach to trading and look for patterns in stock prices and news like earnings reports to guide their purchasing decisions. Those who adhere to a momentum strategy need to be at the switch, and ready to buy and sell more frequently. The goal is to build profits over months, not years, in contrast with the buy-and-hold strategies that take a "set it and forget it" approach.
Screening for stock investment ideas
Finally, you have learned the basics of investing in stocks. You have learned how to read stock charts and begin by picking some of your favorite companies and analyzing their financial statements. Keep in touch with recent news about industries you're interested in investing in. It's a good idea to have a basic understanding of what you're getting into so you're not investing blindly.
The problem is that sometimes beginner investors don't know where to begin, or, more specifically, how to screen for stocks. To select an individual stock, investors first need a good source of prospective buys.
First Screening – the quality of the underlying currency
Today, much of the advice that purports to cover investing in the stock market in South Africa focuses on individual foreign or local stock picking without regard to a critical aspect – the quality of the underlying currency.
Anyone whose stocks are too concentrated in a falling currency has paid the penalty countless times whether they realize it or not.
To protect yourself, you need as much of your stocks as possible to be denominated in the currencies that are likely to hold their real value or appreciate in the long run and lift your portfolio along with them. Because a good stock investment denominated into the wrong currency may become a bad stock investment and vice-versa.
Step 1 – Identify the currencies you want to be represented in your portfolio:
- Study currency market weekly or monthly charts or representative currency indexes for your projected holding period. If you’re planning to buy and hold stocks for months to years, you want to see trends over the prior few years.
- Identify the currencies with the healthiest uptrends over that period.
- Check that the underlying national economic fundamentals support that trend with good growth, or at least consistently low ratios of debt to the gross domestic product (GDP) and culture of ﬁscal discipline, not growing budget and trade deﬁcits.
Step 2 – Allocate a percentage of your portfolio to each currency:
- Allocate percentages of your portfolio for instruments denominated in or tied to those currencies that are more likely to appreciate in the long run.
Step 3 – Choose the individual shares that provide that given percentage of exposure:
- Then shop around for speciﬁc assets you want that are denominated in or exposed to those currencies so that you have a set portion of your portfolio in both the right currencies and assets in those currencies.
Second Screening – the quality of the companies
- Consider looking for stocks with a low P/E, for example, greater than zero (shows the company is profitable) but less than five.
- Also, consider looking at stocks where the Forward P/E is lower than the current P/E. This shows earnings are expected to increase, and if they do the stock is a better buy at the current price.
- IPO date should be more than a year ago; preference is given to stocks that have been publicly traded for 10 years or more.
- Look for prices over $2 per share, no penny stocks. Also, take into consideration the average volume (over 300,000 shares) and operating margin (over 10%).
- If dividend stocks are on your radar, look for a yield over 5%, but a pay-out ratio below 100%.
Screening for stocks based on the filters above will produce a list of trade candidates. Usually, all are not worthy of investment though.
Third Screening – charts of the stocks
View charts of the stocks produced by the screeners above. The next criteria for stock investment are:
- Only look for stocks at the major long-term support area. We want to invest in stocks at cheap prices (compared to historical values), not expensive prices. Investment trades don’t require a stop loss, but you should have a price in mind where you get out if conditions don’t improve for the stock. An investment doesn’t mean you hold it forever if it doesn’t do what you expect. Have a low tolerance for stocks that keep dropping.
- Also, have an exit plan for how you will exit a profitable or losing trade. Define how and why you will exit. Since we used to support to get into the trade, you may consider exiting just below a long-term resistance level. Once you are out of your trade, don’t worry about what the stock does after. Take the money and invest in other stocks, going through the same process again, as discussed above.
This brings us to one final guideline on how to pick stocks:
- If buying at the support line planning to exit just below the resistance line, the upside potential should outweigh the downside risk. In many cases, market strategists find the ideal risk/reward ratio for their investments to be approximately 1:3, or three units of expected return for every unit of additional risk. Investors can manage risk/reward more directly using stop-loss and take-profit orders.
How to Diversify Stock Investments to Lower Risk
While investing in stocks is riskier compared to bonds, there are ways to reduce your investment risk, such as by diversifying. Diversification means investing across different types of stocks, sectors, and markets so that you spread out your risk. If one type of stock or fund goes down in value but other types of investments go up or stay the same, your entire portfolio is not impacted in a big way.
Here are some ways you can diversify your stock investments in South Africa:
Some stocks can satisfy both objectives (share price appreciation and dividend payments), at least to some extent, but most stocks can be classified into one of three categories: growth, income, or value. Those who understand the characteristics of each type of stock can use this knowledge to grow their portfolios more efficiently.
1. Value Stocks
Undervalued companies can often provide long-term profits for those who do their homework. A value stock trades at a price below where it appears it should be based on its financial status and technical trading indicators. It may have high dividend payout ratios or low financial ratios such as price-to-book or price-earnings ratios. The stock price may also have dropped due to public perception regarding factors that have little to do with the company’s current operations.
Value stocks are best for investors looking to hold their securities long-term. If you're investing in value companies, it may take years (or longer) for their businesses to scale.
Best Value Stocks for 2024
2. Growth stocks
Growth companies may currently be growing at a faster rate than the overall markets, and they often devote most of their current revenue toward further expansion. Every sector of the market has growth companies, but they are more prevalent in some areas such as technology, alternative energy, and biotechnology.
Growth stocks are inherently riskier and generally only thrive during certain economic conditions. Investors looking for shorter investing horizons with greater potential than value companies are best suited for growth investing. Growth stocks are also ideal for investors who are not concerned with investment cash flow or dividends.
3. Income stocks
Income stocks are companies that pay consistent dividends to their investors. Dividend stocks are usually well-established companies with a track record of distributing earnings back to shareholders. A portfolio consisting of dividend-paying stocks can compound significantly over many years.
Investors look to income stocks to bolster their fixed-income portfolios with dividend yields that typically exceed those of guaranteed instruments such as bonds or saving accounts. Dividend stocks are popular among retirees and those looking to generate passive income.
A well-diversified portfolio will provide most of the benefits and fewer disadvantages than a few stock ownership alone. Diversification across stock sectors helps to mitigate idiosyncratic or unsystematic risks caused by factors affecting specific industries or companies within an industry.
1. Energy stocks
The energy sector covers companies that do business in the oil and natural gas industry. It includes oil and gas exploration and production companies, as well as producers of other consumable fuels like coal and ethanol.
Characteristics: Volatile, historically a dividend payer, ultra-sensitive to commodity prices.
2. Materials stocks
The materials sector includes companies that provide various goods for use in manufacturing and other applications. You'll find makers of chemicals, construction materials, and containers and packaging within the materials sector, along with mining stocks and others.
Characteristics: Volatile, growth-oriented, historically a dividend payer, sensitive to commodity prices.
The industrial sector encompasses a wide range of different businesses that generally involve the use of heavy equipment. Transportation stocks such as airlines, railroads, and logistics companies are found within the industrial sector.
Characteristics: Volatile, growth-oriented, historically a dividend payer.
Best Airlines Stocks
The utilities sector encompasses every different type of utility company you can imagine. Within the sector, you'll find utilities specializing in making electrical power available to residential and commercial customers, as well as specialists in natural gas transmission and distribution.
Characteristics: Volatile, historically a dividend payer, ultra-sensitive to commodity prices.
The healthcare sector has two primary components. One component includes companies that develop pharmaceuticals and treatments based on biotechnology, as well as the analytical tools and supplies needed for the clinical trials that test those treatments.
Characteristics: Historically a dividend payer, defensive.
Best Healthcare Stocks
The financials sector includes businesses that are primarily related to handling money. Banks are a key industry group within the sector, but you'll also find insurance companies, brokerage houses, consumer finance providers, and fintech companies among financials.
Characteristics: Growth-oriented, historically a dividend payer, sensitive to interest rates.
Best Financials Stocks
Consumer discretionary sector
The consumer discretionary sector covers goods and services for which consumer demand depends upon consumer financial status. The sector includes companies that sell higher-priced items like automobiles and luxury goods, as well as leisure products.
Characteristics: Volatile, growth-oriented, sensitive to changes in the economy.
Consumer staples sector
The consumer staples sector includes goods and services that consumers need, regardless of their current financial condition or the current economic climate. The category includes companies in the food, beverage, and tobacco industries, as well as household and personal care products.
Characteristics: Volatile, growth-oriented, sensitive to changes in the economy.
Information technology sector
The technology sector covers companies focusing on creating software or providing services related to implementing technological solutions like cybersecurity, while others are more involved in building the equipment, components, and hardware that make tech possible. Also includes makers of semiconductors and the equipment used to produce semiconductor chips.
Characteristics: Volatile, growth-oriented, high price-to-earnings ratios.
Communication services sector
The communication services sector includes a couple of major areas that used to be part of other sectors. Telecommunication services providers make up one wing of the sector. At the other end are media and entertainment companies, including both older media like television and radio and interactive media via the internet and newer forms of communication.
Characteristics: Volatile, growth-oriented.
Real estate sector
The real estate sector generally includes two different types of investments related to real estate. Some stocks in the sector are responsible for developing new real estate projects and then managing them by obtaining tenants for various spaces within the project property. In addition, most real estate investment trusts (REITs) operate in various areas of the real estate industry.
Characteristics: Less volatile, historically a dividend payer, sensitive to interest rates.
Own companies located in the United States, Europe, Japan, and emerging markets. Diversification allows you to take advantage of growth without being vulnerable to any single geography.
The US dollar is the world’s reserve currency and until that is the case, it will have a major advantage over most other currencies in the world. With the risk currencies declining in comparison to the US dollar, it is prudent to consider investing in American stocks to safeguard your capital against emerging markets and frontier markets' currency decline.
The US markets have many of the biggest blue-chip companies on their bourses, giving investors access to trillion-dollar giants or stock market indices like the Dow Jones.
While the US equity market is driven by the technology and healthcare sector, the European stock market is more diversified across consumer sectors, healthcare, financials, and energy.
According to experts, there are some key themes emerging that should drive structural change and growth across Europe for many years to come: social inequality, climate change, and digitalization. European markets currently look attractively priced, and this could present some exciting opportunities for stock investors.
Investing in the GCC stock markets provides investors with access to thriving economies such as Saudi Arabia, the United Arab Emirates, Qatar, Oman, Bahrein, and Kuwait, as well as the opportunity to diversify equity portfolios away from traditionally favored Western economies.
GCC IPOs have thrived despite global challenges and the South Africa and Saudi Arabia have played a significant role in this market, collectively raising $7.35 billion from 35 IPOs. The region anticipates a strong IPO pipeline fuelled by government incentives and foreign investor interest, with more than 15 companies already announcing listing plans before the end of this year.
Asia Pacific Markets
Asia’s size and influence on the world stage means it offers a great opportunity for stock investors. Asia is the home of some of the largest economies in the world, as well as some of the fastest-growing economies in the world. With 60% of the world's population living in Asia, these regions are seen as the new drivers of global growth.
Japan is one of the most technologically advanced nations in the world and one of the biggest economies, with the largest GDP after the US and China in nominal terms. Japan enjoys technological advancements in some of the most complex industries in the world, and it is one of the few countries in the world that can manufacture its own semiconductors.
China is one of the fastest-growing emerging markets in the world. After posting high single-digit growth over the past two decades, the country is expected to surpass the United States and become the world's largest economy over the next few years. And with its enormous population, China's economic growth isn't expected to slow down anytime soon.
Emerging markets like India are fast becoming engines for future growth. Currently, only a very low percentage of the household savings of Indians are invested in the domestic stock market, but with gross domestic product (GDP) growing over 5% annually, and a stable financial market, we might see more money joining the race.
How to Invest in the Indian Markets I Best Indian Stocks 2024
3 Steps to Start Investing in Stocks in South Africa
The first thing you need to invest in stocks in South Africa is access to the market through a brokerage account. The process of opening a brokerage account is like that of opening a checking account. The next step is to identify which stocks you want to buy and how much you want to invest in that stock. Do your research and evaluate your risk appetite before you make that decision. Lastly, place an order to buy the stock.
1. Open and Fund an Invest Account with us 2. Research and Select Your Stocks or ETFs 3. Buy and Sell Shares on Our Platform or App
1. Open an investment account
All the advice about investing in stocks for beginners doesn't do you much good if you don't have any way to buy stocks. To do this, you'll need a specialized type of account called a brokerage account.
These accounts are offered by companies such as CAPEX.com. Opening a brokerage account is typically a quick and painless process that takes only minutes. You can easily fund your brokerage account via an electronic funds transfer or any other payment method available in your country.
With CAPEX.com you can buy and sell stocks outright (i.e. trade real shares) via an Invest Account, but you can also trade stock price movements via Contracts for Difference (CFDs).
2. Choose your stocks or stock funds
Now that we've answered the question of how you buy stocks, if you're looking for some great beginner-friendly investment ideas, here is a list of the best stocks to buy in 2024 to help get you started.
Of course, in just a few paragraphs, we can't go over everything you should consider when selecting and analyzing stocks, but here are the important concepts to master before you get started:
- Diversify your portfolio.
- Invest only in businesses you understand.
- Avoid high-volatility stocks until you get the hang of investing.
- Learn the basic metrics and concepts for evaluating stocks.
With CAPEX.com you can invest in +5,000 stocks and ETFs listed on 10 global exchanges, and trade 2,000 CFD on shares for short-term speculations or to hedge a stock portfolio.
3. Determine how much you can invest – then buy
How much you should invest in stocks is completely up to you. There’s basically no minimum amount you’re required to invest in stocks with us, but there may be certain deposit requirements. You should only ever invest an amount that you’re willing to risk, as the markets could move against you.
Log in to your account and go to our stock investing platform. From there, you can invest in thousands of popular stocks, from exchanges across the world. Simply search for your preferred stock, or ETF on our platform, open its chart, and place your order.
With CAPEX WebTrader you can build, adjust, and monitor your portfolio, all in one place, or invest on the move through our full-featured mobile app for phones or tablets, iOS and Android.
The bottom line on investing in stocks in South Africa
Learning how to invest in stocks can be daunting for beginners, but it’s just a matter of figuring out which stock investment approach you want to use, what kind of companies make sense for you, and how much money you should put into stocks.
Before you start investing in stocks, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free investing courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you become a better trader or make more informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for stock investors who are looking to make a transition to leveraged trading.