How To Buy Shares Online In South Africa [BEGINNERS GUIDE]

When I first started investing in stocks online, I was blown away at how complicated everything seemed. There’s so much mixed information online without real direction for the beginner investor. Fast forward four years, I’m now in a position to write this guide specifically tailored for the beginner investor in South Africa.

There are multiple online platforms you can use to buy shares online. You can buy on the JSE (Johannesburg Stock Exchange) you can subscribe to a 3rd party online trading platform. However, I highly recommend you buy shares directly within your bank account. I use this method because, for most of us, it’s already set up and ready to go.

IMPORTANT SIDE NOTE: As far as I’m aware, South African banks, the JSE, and online trading platforms in South Africa won’t give you access to American shares like Amazon and Coca-Cola. If you would like to see step-by-step how I trade American shares in South Africa, make sure you read this guide.

So without a hidden sales pitch and financial jargon you won’t understand, let’s get started.

You’ll need a South African bank account to use this “How To” guide. It’s almost impossible to buy stocks in this digital era without one. So if you haven’t done so already, make sure you open a bank account.

Here are a few of the best local banks that offer investment accounts within your bank profile:

The reason why I like to invest through my local bank is that you don’t need to go through the whole process of opening a 3rd party trading account, which can be a bit of a pain. Especially since you’ll need to get it FICA verified.

On top of that, having my trading account in the same place as my bank account keeps all my finances consolidated into one area, which makes funding the trading account connected to my bank profile quick and easy.

The final major reason is there are so many scam sites out there, so you need to be careful. If you invest through your bank, you can be 100% sure that your investment and money are safe.

01. Set Up An Online Banking Profile

Once you have a bank account open in South Africa, you’ll need to make sure you have your online banking set up if it hasn’t been done already. This will give you access to a trading account that you can use to buy and sell shares. If you already have an online banking profile set up, then skip over to step 02.

If you don’t have your online banking profile setup yet, walk into your local branch or give your bank a call, they’ll take you through the full process. It’s generally pretty easy, and it will only take a few hours to activate.

Online banking offers a ton of other amazing features that makes managing your finances extremely easy, so it’s something you’ll want to set up whether you’re going to use it for trading or not.

02. Log In To Your Online Banking Profile

Right, you have your online banking set up now it’s time to log into your online banking account. I bank with FNB (First National Bank,) so if you bank with them too, you’re in luck. I wrote out a step by step guide that walks through how you can buy shares on the FNB online platform.

But in all honesty, this process isn’t that complicated. Most banks in South Africa have an investment section. If you’re not sure where it is, then give your bank rep a call or walk into your local branch.

03. Open An Investment Account With Your Bank

Most of the time you’ll need to open an investment account inside of your online banking profile. This step is fairly easy and can be done without walking into your local branch.

Here’s are links to open investment accounts with some of the popular banks in South Africa:

I bank with FNB, so the process with your bank will be different. However, the jargon they use will be similar. Once logged into your online banking, look for a menu option that mentions “Investments” or “shares.” Click on that menu option and look for a section that talks about investment accounts. Click on it and follow the prompts.

If you do struggle you can walk into your local branch or call a bank rep. Or you could even do a quick google search online, they might have a guide

04. Transfer Money Into Your Investment Account

So you have online banking fully setup? Great now, all you need to do is fund your investment account, and then you’ll be able to start buying shares. When I first started investing in stocks through FNB, I thought that when buying shares, it would deduct money from my main bank account. However, this isn’t the case. You need to transfer money from your main account to your investment account.

Since your investment and bank account are connected to the same banking profile, this should be easy to do. Simply click on the “Transfer” tab within your online banking profile, then select the amount you want to invest, then finally choose the account you want to “transfer money from” and “transfer money to.”

This process should only take a few minutes if your online banking profile and investment account have been set up correctly.

05. Do Proper Research On The Shares You Want To Buy

Now you have a fully funded investment account ready to buy shares. Before you do, though, stop! Have you done the proper research?

It’s important to realize that when you buy a stock, you are buying a piece of a real company. It’s not just a ticker on the screen that randomly jumps around, even though a lot of investors usually treat it that way.

Since it’s a real company, I want you to do the same research as if you were buying a real business from a friend. Think about some of the questions you would ask that friend, and then find the answers to the same questions for the ‘stock’ you want to buy.

Here are some questions I would be asking about the company:

Is the company you’re buying overpriced?

In other words, never buy a hyped-up stock. A quick way to value a business is by looking at how much profit the company has produced compared to its current price, and then compare that figure over time.

This figure is known as the “price to earnings” ratio. And you can get it by dividing the price of a stock by how much it has earned. That number will give you a rough idea of how long it will take to make your money back.

For example, the MTN group stock costs R5.50 per share, and they earned, on average, 0.50c per share over 12 months. That calculation would be, 5.5/0.5=11. So your price to earnings ratio, or p/e ratio would equal 11. As a rule of thumb, this would mean that for every X amount you invest, it will take you 11 years to double your money. Which is pretty good considering companies like Amazon have a p/e ratio of around 116, which is insanely high.

Do you understand the business?

If you don’t understand the business, you won’t notice when the company isn’t doing well. So try to stick to an industry that you are familiar with. For example, if you’re a builder, invest in construction companies. If you’re a farmer, stick to agricultural companies. You’ll spot trouble from a mile away compared to other investors that have no clue what they’re doing.

Has the company been profitable for a long time?

I would look at the books for over ten years. This will give you a solid idea of how long they have been profitable. You don’t want to buy in a business that is doing well short term. But on the other hand, also keep in mind that most companies have bad months, so don’t let a few unprofitable months push you away from the decision. It’s the overall trend over ten years you’re looking for.

Is the business riddled with debt?

Businesses can survive on debt when the economy is flourishing. However, they generally don’t survive when the economy takes a downturn. Like Warren Buffet once said, “when the tide goes out, you’ll see who has been swimming naked.”

But there is a caveat to this, it can be normal for a business to have debt. In some cases, managers can leverage debt to grow a company quicker. However, you need to be able to calculate if it’s too much. A quick way you can do this is by either:

  • Comparing its debt to other companies that you know are great in the same industry, (another reason why you need to understand the business.)
  • Or you can see how much debt and earnings the company had during the last recession, then see if a similar ratio exists today. If the company has taken on a lot more debt and they still earn the same, then it might be a sign that they are taking on too much debt they can handle.

Step 06. Don’t Look At Your Stock’s Price Too Often

After I’ve bought shares I hold on to them for at-least 5 years unless one of two things happen.

  • Something seriously affects how the business can operate. For example, merging competition, a lousy manager takes over, or the company is taking on more debt than I would like. Point of note, a short term event sparked by ‘bad news’ or a bad quarter doesn’t count. If the core of the business hasn’t changed, these only provide buying opportunities.
  • The price of the stock soars over the value that I believe the stock is worth (known as intrinsic value,) and I don’t believe the hyped price is sustainable.

Having these two “rules” helps me stay out of the psychology of the market that’s driven by waves of greed and fear, which requires patience! Looking at your stock’s price often will slowly drag you into the market, which could result in rash, unplanned decisions.

Warren Buffet once said, “The stock market is a device for transferring money from the impatient to the patient.” So leave your stocks be, instead spend your time researching the industry, or studying your stocks quarterly reports.

Can Buying Shares Make You Rich in South Africa?

Ah, the age-old question. There are so many movies and stories of people getting rich overnight by trading shares on the stock market, it’s ridiculous.

But let’s see what the data says. According to a study done by Market Watch, your average investor only made 4.79% on their money in a full year. So if you invested R10,000 and you performed as the average investor did, then you’d walk away with R479.

Doesn’t sound that exciting, does it?

So don’t be fooled, while a small minority of people do get rich on the stock market, the chances that it will happen to you is very slim. But I don’t want to be a dream killer, making a lot of money on the stock market is possible, it’s just usually a slow-going process that requires a lot of time and patience.

How To Buy American Shares?

We hear about outstanding companies in America like Amazon and Coca-Cola all the time, if only we could get our hands on some!

Well now you can.

I researched and found a way for South Africans to get their hands on every single American share they can think of without being an American resident. So if you would like to get access to American shares too, make sure you read this step-by-step guide I wrote titled “How to buy and own American shares in South Africa.”

YOUR TURN: Have you ever bought shares online in South Africa? Let us know your method in the comments below so that we can all learn from each other!

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