What are equities/shares/stocks?

South African equities, also known as shares or stocks, are listed on the Johannesburg Stock Exchange (JSE) and represents a proprietary interest that a person holds in a company. Each shareholder is a partial‐owner of the company in which they have bought shares and investors can buy and sell their shares on the stock exchanges. Companies issue shares on incorporation and original shareholders might still own them, or they may have sold them to someone else through the JSE. If the company makes profit, the shareholders normally have some of it passed to them in the form of dividends. The amount paid in dividends varies year by year, depending on how profitable the company has been and how much money the directors and the company management want to keep in reserve for future expansion.

Why invest in shares?

Almost everyone worldwide has an interest in shares, whether they realize it or not. Millions of people around the world own shares directly. However, many millions more have an indirect stake in the stock market through pension schemes, life insurance policies, unit trusts and tax-free saving accounts. All of these, invest in shares traded on the stock market.

Today, increasing number of people own shares around the world, There is more risk ‐ but there is the opportunity for better reward over the longer term. With deposit accounts, you earn interest on your capital.

When you take your cash back, you get back exactly the same amount that you first deposited (plus the interest it has earned).

With shares, you may receive dividends (reward for holding money) but when you sell those shares, you might get back more than you bought them for, which is your reward for taking a risk (capital gain).

Nevertheless, because shares can go up as well as down in value, it is important to understand that taking a risk means you might get back lesser than you had invested initially. You can minimize your risk by investing in different shares or a collective fund.

There is, however, the possibility of greater rewards. Funds invested in equities in the long term (five or more years) have outperformed regular saving accounts.

You should remember that saving through the stock market should be seen as a long‐term investment.

Historically, money invested in shares over the long term (ten or more years) has almost always outperformed regular saving accounts.

Before investing in stocks and shares, you should understand your own financial position and what you hope to achieve with your investments. Your regular financial obligations should be protected and preparation should be made for unexpected expenses.

Investment should be made out of the excess money saved and as a substitute to keeping the money vacant in a bank account.

Having done this, you are ready to consider investing the surplus in stocks and shares. The three main rationales for owning shares are summarized below:

Ownership in a Company

When an individual invests in the stock market, he automatically becomes a shareholder of that company. As a stockholder, he is entitled to the following benefits:

  1. Voting rights
  2. Dividends to be declared by the corporation and
  3. Share of the remaining assets of the company if it is to be liquidated.

Liquidity of Funds

A stock market investor has easier access to funds. Compared to banks, which have a high minimum balance requirement for deposits and credit, as an individual, you can start an investment with very low capital, and can expect high yields for your initial investment. You can always cash in or out your funds anytime, during trading hours, through your broker.

Make Money

Investors in the stock market make money through dividends and capital appreciation. When a listed company declares dividends, it increases the shareholders’ investing power. An investor who buys into the company at a low market price and sells it at a higher price will gain capital appreciation.

How can I buy and sell shares?

  • Listed share dealings take place on the JSE and this is where existing shareholders sell and new investors buy.
  • Buying shares is easy. You can buy and sell shares by making contact with Mercato, either in person on our website or telephone.
  • After having instructed us to buy or sell shares, we will send you a contract note via email which will show details of the transaction carried out on your behalf.

What are the costs involved to open an investing account with Mercato?

There are no costs involved in opening an investing account.

What is the minimum amount of initial investment?

There is no initial minimum investment amount.

Open your Mercato investing and trading account in 3 easy steps

Create an account

Complete your application by following the “CREATE AN ACCOUNT” link below.

Submit your FICA documentation electronically

To meet our obligations, we need to confirm your identity. Please email your FICA documentation to support@mercato.co.za using your ID number as reference.

Fund your account

Deposit funds into your CCM bank account* and send proof of payment tosupport@mercato.co.za.

* The Investec Corporate Cash Manager (CCM) is an exclusive call account from Investec Private Bank. The account is opened in the client’s own name and funds can be moved at the client’s discretion to his/her investing or trading account. Mercato Financial Services, a division of Lentus Asset Management (Pty) Ltd, as the intermediary, administers the funds on behalf of their clients through an administrative system situated at their offices in Rosebank, Johannesburg.

Stocks and shares offer different levels of risk

Before you start investing it’s important to decide the level of risk you are willing to accept. Cautious equity investors might like to consider a portfolio of solid blue chip investments. It is important to first familiarise yourself with the share investing world before you start trading. Once you do start investing, it is imperative to keep yourself up-to-date with knowledge and research to assist you in achieving your goals.