Looking to buy shares in South Africa? There are plenty of platforms to choose from, but before you get started you need to find the right broker for you and make sure you have a sound understanding of the shares market.
To help you out, this guide takes you through everything you need to know about buying shares in South Africa. This includes reviews of the best stockbrokers, a run-through of the basics of the shares market, and a step-by-step guide on how you can get started today.
How to Buy Shares in South Africa in 3 Steps
If you don’t have time to read our full guide and you want to buy shares instantly, below you’ll see three quick steps that you need to follow to buy shares in South Africa right now.
Step 1: Open an Account
Open a trading account with a broker that allows you to buy shares, lik eToro.
Step 2: Deposit Funds
Fund your brokerage account using a credit or debit card, bank transfer, or e-wallet.
Step 3: Buy Shares
Decide what shares you want to buy, set up the trade, and then buy shares.
75% of retail investor accounts lose money when trading CFDs with this provider.
Step 1: How to Pick a Shares Trading Account in South Africa?
Finding the right broker that offers share trading in South Africa is a crucial factor to your success. Whether you are an experienced trader or a novice, you’ll have to take into consideration the range of shares, the regulatory framework of the broker, and the trading tools and platform it offers.
To help you out, we did our research on the best places to buy shares in South Africa in 2020.
1. eToro – Best Place to Buy Shares in South Africa
eToro is one of the most popular trading platforms for share trading in South Africa, and deservedly so. The largest social trading platform in the world operates in more than 140 countries and has more than 11 million users as of 2020.
When it comes to buying shares, eToro offers more than 800 from 17 different exchanges to choose from, and you can either purchase the assets or trade CFDs. There’s no commission, and the spreads are known for being very competitive.
One of the most notable aspects of eToro is its CopyTrader tool, which allows you to copy the portfolios of top investors! As a social trading platform, eToro also allows you to interact with other users and each account has its own personalized news feed,
eToro’s proprietary trading platform is very impressive, and there’s also the eToro app for mobile trading. The minimum deposit is $200 (around 3,400 rands), and you can choose from a variety of payment methods, including PayPal, Neteller and Skrill.
The fact that eToro is regulated in the United Kingdom by the FCA, in Australia by ASIC, and in the European Zone by CySec makes eToro a safe and secure brokerage firm.
- Social and copy trading
- Buy over 800 shares or trade CFDs
- 0% commission and tight spreads
- Strictly regulated
- 0.5% currency conversion fee on deposits
2. Plus500 – Best Broker for Shares CFDs
Plus500 is a leading CFD broker that offers South Africa users the chance to trade hundreds of shares, mostly from the US and UK, with up to 1:5 leverage. Plus500 also offers CFDs for a wide range of other assets, from forex to cryptocurrency.
Plus500’s intuitive platform is well designed and very user-friendly. There’s also the excellent Plus500 mobile app, available on iOS and Android, which allows you to buy shares CFDs and sell them while on the go. The platform also features useful trading tools such as risk management tools and traders’ sentiment. Additionally, you’ll have access to a wide range of technical indicators, market news, and a free demo account.
You can get started on Plus500 with a minimum deposit of £100 (around 2,160 rands). Plus500 doesn’t charge any commissions, the spreads are very competitive, and there’s no withdrawal fees to worry about either.
In South Africa, Plus500 holds a financial services license from the Financial Services Regulation Act (FSCA) under the company name “Plus500AU Pty Ltd”. This means that South Africa investors funds’ are protected in safe accounts and the FSCA can interface in any event of a dispute between the broker and the client. Plus500 is also regulated by ASIC, FCA and CySEC, so it’s extremely secure.
- No commission and tight spreads
- Easy to use and intuitive trading platform
- Multiplier tier-one licenses
- Limited educational materials
3. AvaTrade – Advanced Trading Platforms and Tools
Founded in 2006, AvaTrade is a reputable broker that enables users to instantly trade CFD shares of companies through a selection of advanced trading platforms, including the MetaTrader 4, MetaTrader 5, AvaTrade’s proprietary desktop web-trader and the AvaTradeGo mobile app.
Additionally, AvaTrade offers you to automate your trading, meaning you will be able to copy trades of experienced traders and use top signal service providers such as DupliTrade and ZuluTrade to utilize automated trading. AvaTrade offers a decent selection of shares, but it’s doesn’t have as many as the other brokers on this list.
One of the best things about AvaTrade is the low fees for buying shares CFDs. There’s no commission to pay, and the spreads are some of the tightest around, starting at around 0.9 pips. The minimum amount that you can deposit is $100 (around 1,730 rands) or equivalent, although this broker doesn’t accept any e-wallets.
AvaTrade is also heavily regulated with six regulatory authorities. This includes an authorization to operate in South Africa as the brokerage is regulated by the South African Financial Sector Conduct Authority (FSCA No.45984), so it’s a very secure platform.
- Automated trading via MT4 and MT5
- Competitive spreads
- Highly regulated broker
- Limited selection of shares
4. IG – Invest in Over 12,000 Shares
IG Markets is one of the most popular and well-reputed trading platforms among South African investors. In fact, this broker has numerous awards in South Africa including South Africa’s top CFD provider in Business Day Investors Monthly Annual Stockbroker Awards in 2012 and 2013, the best platform for Active Day Traders in 2013 and 2014 and SA’s best Online Broker in 2015 and 2017.
What sets IG Markets apart from the competition in the industry is the wide range of markets and products, particularly the huge selection of more than 12,000 shares from various stock exchanges around the world. Like eToro, IG allows users to both buy shares and trade share CFDs. There’s no commission and the spreads are very competitive, starting from as low as 0.6 pips.
Moreover, IG is one of the few brokers out there that allows traders to buy and sell the South Africa (JSE) 40 stock index with a leverage ratio of 10:1. Another benefit of trading shares via IG Markets is receiving dividends. This allows you to get a steady income by investing in paying-dividends companies.
IG offers a variety of trading platforms, including its own web-based proprietary trading platform, the MetaTrader4, and the professional ProRealTime platform. This makes IG an ideal platform for all levels of investors who want to buy shares in South Africa.
- Dividend reinvestment plan (DRIP)
- A wide selection of trading platforms
- More than 12,000 shares from various exchanges
- No social trading
Step 2: Learn How the Share Market Works in South Africa
You may have settled on a stockbroker, but do you have an understanding of how the share market actually works? This is crucial, as you’ll be risking your own money, and it takes time and dedication to be successful when it comes to buy shares.
What are Shares?
In short, shares are units of ownership of a company or a financial asset such as a mutual fund or investment trust. If you own shares in a company, then you own a small portion of the company.
Shares are of interest to traders and investors for a number of reasons. They can be sold at a profit if the company performs well and the shares grow in value, and many shares also entitle holders to dividends, which is a portion of the company’s profits that is regulated paid out to shareholders.
Ways to Buy and Sell Shares
There are different ways in which you can get exposure to shares in South Africa. The diversity of products on the share market serves investors’ needs and can be a great diversification strategy for those who understand the fundamentals of the share market. Below are some of the most popular ways to invest in shares:
- Buy Regular shares
The most common way to buy shares is to simply buy them directly from a stockbroker. The top brokers offer hundreds, if not thousands of shares, and to buy them you simply need to select a share, set the trade parameters and confirm your order. You will then own however many shares you bought.
- Invest in shares through EFTs and Index Funds
Simply put, an Exchange-Traded Fund and Index Fund are a basket of securities designed to track a particular area of the market. One of the best ways to invest in shares is through Exchanged Traded Funds (ETFs) and Index Funds. Why? Simply because these funds enable you to diversify your portfolio to a larger market index that focuses on a specified sector, region, or commodity.
For example, instead of investing in one particular South African company, you can buy the Johannesburg Stock Exchange (JSE index) that is a collection of all the largest shares in terms of market capitalisation traded on the South African stock exchange.
- Trade shares using CFDs
Contracts for Difference (CFDs) are another great way to trade derivative shares. Trading shares through the CFDs is very similar to trading shares through traditional brokers except that you don’t actually own the underlying asset, meaning you can speculate on the price movement of a share but you do not hold shares of the company nor having shareholders rights.
The benefits of CFDs trading is that you don’t have to go through a complicated registration process, you go easily buy and short-sell a share, and you can use leverage, meaning you borrow capital from a broker to make larger trades.
- Trade shares with options
Share options trading can be complex, however, once you understand the rules of trading options you will be able to diversify your trading style and reduce the risk involved with buying shares.
When you buy an option, you’re paying a premium for the right (but not the obligation) to buy the share at a certain price, and a certain date. In that sense, your risk is limited to the premium price multiple the number of options you buy. Another advantage of trading shares with options is that you may hedge your position with options hedging techniques.
What is the JSE in South Africa?
The Johannesburg Stock Exchange (JSE) is the largest and most well-known sthare exchange in South Africa. The JSE Index, which consists of the top 40 listed companies on the JSE exchange based on Market Capitalisation, is the most important index from South Africa as well as the African continent.
How to Make Money from Buying Shares in South Africa
There are several ways to make money from buying shares. One of the most common is generating capital gains by buying shares and them selling them on at a profit when they increase in value.
But before you start investing, you’ll have to define your investment strategy and the types of shares you are looking for. First, there are three categories of shares you must know:
- Growth shares – Growth shares are usually companies that have innovative products or services and are experiencing rapid growth. Or, in other words, startups.
- Value (Blue-Chip) shares – Value shares are usually well-established companies with a strong financial status.
- Income (Dividend) shares – These shares typically provide a steady income in the form of dividends.
The next step involves finding a trading strategy that matches your personality. While some take the ‘buy and hold’ strategy, others are better in identifying small price fluctuations, and therefore are becoming day/swing traders.
Regardless, you will have to learn and evolve along the way. Investing and trading are a dynamic activity, hence, there are endless buying shares opportunities at any given moment.
How to Buy Shares in a Company in South Africa
Generally, you can buy shares of a company in South Africa without an online broker by investing in shares through the company’s ‘direct share purchase’ plan. But frankly, if you are not a big investor, then forgot about it.
The easiest and most common way to buy shares is to use an investment platform that allows you to buy shares of a public company in South Africa through. There are many online stockbrokers that offer this service, so it’s just a matter of finding the right one for you.
What Regulations are in Place for Buying Shares in South Africa?
The Financial Services Regulation Act (FSCA), together with the South African Reserve Bank (SARB), is responsible for the regulation of the share market in South Africa and every financial service provider that offers securities and derivatives to South Africa residents.
These financial agencies also regulate CFD brokers that are authorized to offer services in South Africa, but brokers that hold other regulatory licenses, like the FCA (UK), are also authorized to offer financial trading services in South Africa.
What Risks are Involved with Buying Shares in South Africa?
Regardless of your location, your trading strategy, and the broker you choose, there’s always a certain level of risk when you invest. Just as shares can increase in value, they could also rapidly drop in value depending on things like company performance and news events.
Some brokers allow you to use risk management tools that can significantly reduce the risk of losing your capital and more importantly, allow you to control your trading activity. Some of the most well-known risk management tools and techniques for trading include the risk-reward ratio, a stop-loss order, and integrating options as hedging strategy techniques.
Step 3: What Factors Should you Consider When Buying Shares?
There are thousands of shares to choose from at the top brokers, so you need to carefully select the ones that are right for you. Here’s what to consider.
Historic Financial performance
Before you decide to buy a particular share, you should find out the share’s historical performance including its all-time high, the all-time low, and the current trend the share is exhibiting. Most technical analysis analysts believe that it is possible to predict the future price, or at least get a better indication of the company, by analyzing a share’s price history.
It’s important to know how to analyze the historical performance of a share. Remember, you can use different timeframes to analyze the historic performance of a share – 1H, Daily, Weekly, and Monthly chart. Here are some basic technical analysis indicators to help you get started:
Fibonacci Retracements – Draw Fibonacci retracement levels from the share all-time low to all-time high.
Relative Strength Index (RSI) – RSI is a momentum technical indicator that measures the historical strength or weakness of a company. The RSI has a reading from 0 to 100, with 70 signals overdemand, and 30 signals oversupply.
Support and Resistance/Trend Lines – Support and Resistance/Trend Lines are among the base concepts of technical analysis, but also the most useful and effective. You should simply look for areas in which the share paused for a while, or find an ongoing trend.
Furthermore, it’s advisable that you find out the financial performance of the company in the past few years, including its revenues, cash flow, net earnings, etc.
Dividends are simply payments that a company distributes to shareholders. Investing in Dividend-Payout companies allows you to create a steady income regardless of the price movement of the share. Keep in mind that not all companies pay dividends, so you’ll have to dig in to find the best-paying dividends shares.
Professional Share Forecasts
Another tool that can help you find investment opportunities in the share market is by analyzing professional share forecast. Generally, there are five classifications of share ratings: buy, hold, sell, underperform, and outperform. Analysts usually set a target price of the share based on the company’s financial results and the expected future growth of the company.
The economy has a repetitive cycle that involves both periods of growth and recession. This, obviously, affect the share market. Simply put, in times of recession, interest rates are decreased to encourage spending in order to keep the wheels of economy turning while in times of growth (inflation), interest rates tend to rise to encourage people to save money and central banks, therefore, can control inflation rates.
When interest rates are low, shares will offer better returns and the opposite. This is why you’ll have to follow economic indicators such as GDP, CPI, Non-Farm Payrolls in the United States, Unemployment rates, and many more.
Step 4: Open a Share Trade
If you’re ready to buy shares, then you can start the buying process through your online stockbroker. Let’s walk through the process of buying shares using eToro, our recommended South Africa share trading platform.
If you use a different broker, the process remains largely the same.
Create an Account and Verify your Identity
First, visit eToro’s sign up page and create an online trading account. To complete the verification process, you must fill in your personal details and submit documentation that verifies your identity.
To deposit funds into your account, click on the Deposit Funds button on the trading dashboard, and select one of the provided payment methods. eToro offers a range of options, including PayPal, Neteller and Skrill.
Buy Shares and Trade
Now the fun part begins. Click on the ‘Trade Markets’ button, and then navigate to ‘Shares’ where you will be to find all the available shares on eToro’s platform.
Once you have decided on a share you wish to buy, click on the Trade button to open an order box.
Within the order page, you can specify how many you want to purchase (or short sell) and set parameters like the leverage ratio and a stop-loss order. Once you’re ready to complete your purchase, click the ‘Set Order’ button.
Pros and Cons of Buying Shares
- You can earn via capital gains and dividends
- South Africa has a developed share market exchange
- The share market is highly liquid
- You can invest small amounts in fractional shares
- Buying shares can be low-cost
- Shares can be used to diversify portfolios
- CFD brokers enable you to short-sell shares and use leverage
- The share market is very volatile
- You could lose money
When it comes to buying shares in South Africa, there are loads of brokers and thousands of shares to choose from. However, while the process of buying shares is simple, it’s vital that you have an understanding of how the market works before you invest any money.
If you do want to buy shares today, we recommend signing up to our recommended South Africa stockbroker, eToro. With 0% commission, the ability to buy shares or trade CFDs, and innovative copy trading tools, eToro is an excellent platform. Simply click the link below to register an account today!
eToro: Best Place to Buy Shares in South Africa
- Buy over 800 shares
- Social and copy trading
- Accepts PayPal
- Strictly regulated
How much money do you need to buy shares?
If you choose one of the recommended brokers above, you can start buying and selling shares with a deposit of $100 (about 1,730 rands). You will be able to buy shares for less than this, but $100 is the lowest minimum deposit required at our recommended brokrs.
What is a stop-loss order?
A stop-loss order is one of the most important trading orders that investors use to manage their risk and control their account balance. In simple terms, a stop-loss order is an order to buy or sell an asset you hold when it reaches a certain price in order to limit your loss.
What are shares CFDs and how do they work?
A contract for Difference (CFDs) is a type of derivative that allows you to speculate on the price of an asset without owning the underlying asset. When you buy share CFDs, you are entering into an agreement with another participant in the market to pay or receive the price difference of the share for the period of time you owned the share.