Auto share invest
Auto share invest  

1. What are shares?

Shares, also known as equities, refer to the units or portion of a company you own. In simple terms, buying a share is like buying an interest in a company and becoming an owner of that business.

As owners, shareholders have certain rights and responsibilities. These include the right to share in profits, attend, vote and appoint a proxy at a general meeting and approve certain key corporate actions, such as share buy-backs and acquisitions. In South Africa, companies list their shares on the JSE Limited.

Despite its advantages, investing in shares can be risky. It is important to first familiarise yourself with the share investing world before you start trading. Once you do start trading, keeping yourself up-to-date with knowledge and research will help to you to achieve success.

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2. Why invest in the stock market?

Investing in shares for the long term is a solid way to create wealth. Although it carries risk, it also carries the potential for reward. Although there is no such thing as a safe investment, you can structured your portfolio in a way that helps to reduce as much risk as possible.

The specific benefits of investing in shares over any other asset class include:

  • Good potential returns
  • The ability to manage risk by diversifying your portfolio across sectors and companies
  • Receiving dividends
  • The potential to create long-term investments

3. What influences the share price?

The forces of supply and demand are the key influences of the changes in share prices. To put it simply, the share price will go up if more people want to own a share than are prepared to sell it.

Over time a share price will track the underlying trend in the company’s earnings. If earnings (and dividends) grow consistently, the share price should follow. But there are other aspects that affect investor appetite for shares, including the performance of international markets, general economic growth, sector or company-specific news, share buybacks and futures trading.

The influence of US share prices is no longer as important to the JSE as it once was the connection between movements and international share prices increases in times of uncertainty. Overall, share prices tend to go up when the economic news is good as this means companies should see their earnings increase. Good news from a certain sector or company can also drive share prices up as investors expect good future earnings. There are other buyers of shares apart from investors, including companies (through share buybacks) and futures traders. They also affect the demand/supply equation.

For a share to trade we have an agreement on price and a disagreement on value in that generally sellers think that the share is expensive whilst buyers think that it is cheap. The bottom line is that if there are more buyers than sellers of a share, the price will rise as this excess demand will usually push up the share price whilst the opposite is equally true. There will be more buyers in the market if the company's future and consequential returns are perceived as positive and more sellers if that future and consequential returns are perceived to be negative.

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4. How do I invest in the stock market?

You can buy and sell shares through a registered stockbroker. There are two types of stockbrokers, full service brokers and online stockbrokers:

Full service stockbrokers:

  • Give advice and help you place trades over the phone
  • They charge relatively higher fees than online brokers and the minimum investment amounts may be applicable (e.g.1.3%-1.75% and R300K- R1m).

Online stockbrokers such as SBG Securities (Pty) Ltd, Online Share Trading:

  • Allows you to trade via a website (Online Share Trading website)
  • Provides telephonic support
  • Give buying and selling recommendations online
  • Low fees
  • Many online tools that can help you manage your share portfolio.

Auto Share Invest (ASI)

Auto Share Invest (ASI) allows you to invest directly in shares listed on the JSE.

The nature and structure of ASI allows SBG Securities to reduce the brokerage cost and compulsory charges to as little as R25 per month which includes VAT, strate, securities transfer tax (STT) and brokerage on a R500 monthly investment.

ASI provides the following advantages:

  • A low cost platform for buying and selling shares or securities on a monthly basis
  • A choice of about 100 well-known shares and listed securities in which to invest
  • Fact sheets that detail:
    • The performance of each share or security
    • Background information on each share or security
  • The provision of the JSE's Stock Exchange News Service (SENS). This is a service a listed company uses to communicate important company information to share holders, such as announcements.

Step-by-step guide

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5. How ASI actually works

You select the listed securities you would like to invest in with a minimum of R500 per selected share(s) per month. You then set a monthly recurring purchase order and make payment online via the Standard Bank internet banking website.

Once a month, your share purchase instruction is sent to SBG Securities, to buy the selected shares on the JSE. SBG Securities will buy the required quantity and based on the price, it pays for the shares on the day of purchase, allocate the allotted shares to your ASI account.

You can view your portfolio online on a daily basis to verify its value. The market value of your shares will be shown in terms of the closing price of such share from the previous business day.

If you want to sell your shares, you simply select the future date. All sales are done on a Friday or the preceding business day if that Friday is a public holiday. You instructions to sell will then be transmitted to SBG Securities who will try sell the shares on that date. The money you receive from the sale will automatically be paid into your bank account after five business days from the sale date.

You can enter a purchase or sell instruction at any time, just make sure it’s in no later than 23:00 the day before the relevant sale date.

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6. What happens to the cash left over in my ASI Account?

All remaining cash or cash accumulated from distributions made by the company in which you hold shares, is held in your account with the JSE Trustees (Pty) Ltd (JSET account). This will be reinvested to grow your investment further by purchasing more shares with your next purchase instruction.

Example:

Monthly debit order = R500 for share 1 and R1000 for share 2

Remaining cash = R100

Cash is split into ratio as per order which means that with the above example 33.33% of the R100.00 cash remaining will go to purchase of share 1 and 66.67% to share 2.

Order placed = R500.00 + R33.33 - R25.33 (cost) = R508.00 for share 1

Order placed = R1000 +R 66.67 - R30.67 (cost) = R1036.00 for share 2

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7. What happens to my dividends with ASI?

Twice a year the JSE listed company you buy shares in, may choose to pay a dividend (not all companies pay dividends), from the profits it has generated over the past six months. The cash paid to you for dividends will be kept in your JSET account and used with your next purchase order to purchase more shares.

So for example, if you own 10 shares of a company and its pays a dividend of R2.00 per share, after the deduction of dividend with tax, you will receive R20 worth of dividends. In your next purchase order we will add this R20 to your purchase of shares.

An illustration of the application of the above is as follows:

Monthly debit order = R500.00

Company’s share price = R80.00

Order placed = R500 + R20 (dividends) - R25.20 (brokerage costs and compulsory charges) = R494.80

Number of company’s shares bought = 6 shares instead of 5 if you did not have the dividend.

This reinvestment may assist with the growing of your investment.

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How much does it cost?

Brokerage

ASI allows SBG Securities to reduce the transaction costs on trades of R500 to more favourable levels that compare with other monthly investments. Monthly investments greater than R500 tend to be more cost effective.

Below is an example of the costs on a monthly purchase transaction:

Monthly investment amount

Fixed costs

Variable costs 2

Total costs

Cost % of amount invested

R500

R20

1%

R25

5.0%

R1 000

R20

1%

R30

3.0%

R1 500

R20

1%

R35

2.3%

Cost includes: brokerage, STRATE, investor protection levy, VAT and STT on purchase transactions.

Sales transactions also have a variable cost of 0.75%.

Other charges

  • Inactivity fee: R25 will be charged for every 60-day period where no transaction has been conducted, whether a purchase or sale transaction.

To register

To open an ASI account, you must be an individual (no companies, trusts or partnerships) and have been fully FICA'ed by the Standard Bank in respect of all your accounts.

To start trading on ASI, please complete the online registration form.

For more information call 0860 121 161

Please note that ASI is provided by SBG Securities (Pty) Ltd, Reg #: 1972/008305/07, an authorised user of the JSE Limited and a subsidiary of the Standard Bank Group Limited.

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8. What is the difference between ASI and a collective investment scheme (unit trust)?

A collective investment scheme (CIS), manages your money by trading in local and international markets, bonds, currencies etc. CIS pools investors' money and are thereby able to spread the risk across many shares, sectors and countries. You can use CIS to invest directly with the JSE with smaller amounts of money in some cases from as little as R250 and lump sum amounts from R1 000.

The main difference between a CIS and ASI is that with ASI you have the control of exactly which shares you wish to invest in. You will also enjoy the full benefit of dividends being reinvested and any cash left over in your JSET account, which will earn interest at the JSET interest rate. Through ASI, you will have control over the manner in which you wish to invest in a long term future. When you invest in a CIS, the CIS manager chooses which shares to invest in.

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9. What is SBG Securities, Online Share Trading?

Online Share Trading allows you to trade in any shares listed on the JSE at any given time. The costs involved are lower and you get full control on the purchase and sale of shares, and the price at which you are willing to purchase or sell such shares.

You are also not limited to only trading in respect of the listed securities that are available to ASI account holders.

Online Share Trading offers you the following, amongst other, benefits:

  • Educational courses covering the basics of investing, fundamentals, trading skills, technical analysis, warrants, futures and share instalments.
  • Trade shares online starting at only 0.7%* or min R70* per trade.
  • Trade warrants and share instalments online at only R50* per trade
  • Buy and sell recommendations and share research
  • Optional streaming live prices directly to your desktop at only R99 (incl. VAT) per month.

For more information on Online Share Trading, the costs and what it can offer you go to www.standardbank.co.za and click on the Online Share trading link.

* - excludes VAT & statutory charges

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10. Education

Online Share Trading is hosting free 1 hour educational seminars open to the public. These seminars are designed to get you started on how to invest in shares.

By attending one of the seminars, you will learn about:

  • Investing and returns
  • Why invest in the share market
  • How to develop an investment strategy
  • Understanding the share market
  • What determines the share price
  • How to make money in the share market
  • How to chose companies to invest in
  • How to buy shares.

For more information about Online Share Trading and these seminars, call our South Africa call centre on 0860 121 161, our international call centre +27 11 378 7876 or email securities@standardbank.co.za.

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Customer Care line

0860 123 000 / +27 11 299 4701

Information@standardbank.co.za

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