For years, I’ve harboured a dirty little secret on my bucket list (i.e. a list of 101 things I want to do before I die). Smack-dash between item no 25 (buy a private jet) and item no 26 (have coffee with Nelson Mandela) is sky-diving. How does this relate to stock market trading? It’s all about risk-management.
Bid price, book value, bear market… if (like most people), you don’t understand these terms, then you’re probably not an economist, or a stock market trader. So in a bid to simplify my understanding of share portfolios, here’s the Student-Bloggers-Dumb-Ass Guide to Risk-Management (on the Stock Market).
S: Safety first. Make sure you know what you’re getting into.
In South Africa, the beginners guide to the JSE explains why and how you should get involved in the stock-market. Once you’ve registered on site – in the personal finance section – you can access privileged areas of information. Registration doesn’t require an identity number or any form of verification. You can then personalise the daily information that you’d like to receive. I selected Key Indicators such as gold, Platinum, Rand-Dollar, Rand-Euro, All Share index, and Nasdaq (these are the major determining numbers which indicate shifts in the market). The site also offers news baskets -daily news which you can select – and simple charts. All for free!!
K: Keep the tears at bay
No one likes to take a leap of faith alone so get some help: Not a person – a computer program. The JSE offers a share tracker, so you can see how your (hypothetical or real) investments are performing. For this trial run, I’ve invested in 13 companies including ABSA, Truworths, Edcon, Pick and Pay, AngloGold, The City of Johannesburg, Caxton, Telkom SA and Lesotho Unit. Please note at this stage I’m more interested in share performance on the JSE than it’s business. You can also invest in cities, commodities, oil and gold, large companies and franchises and BEE business-interest.
JSE online also offers company information on listed companies, so it’s easier to research entities you may invest in. For example, a thorough company review of Pick and Pay, an franchised investment holding company which that retails food, clothing and general merchandise in Southern Africa and Australia is available.
You can even download PicknPay Chairman, Raymond Ackerman’s Statement in Microsoft Word format and performance charts.
Unfortunately, you will have to check each company’s data on a separate page. With thousands of public companies, it may be time-consuming and frustrating to keep track so maybe you could invest through local banks.
Not all local banks offer stock-market investments. For example, FNB does not offer online share-trading services but focuses on savings instead. Standard Bank offers a free course on share trading in all major South African cities. PSG Consultants, an international stock-broking company, also offers free “getting started” workshops for new traders.
ABSA’s meager services allow you to register for online trading in three simple steps, so you have complete control over your shares. But the bank’s online share trading page also warns that short-term investors should not trade unless they can afford to lose some or all of their investment.
Like freefalling, the first step is the hardest. Once you’ve taken the leap then the focus shifts to buying/selling or just maintaining.
Y: Yeehahhhh!
So you’re ready to get going! After all the preparation and research, you’ve got your portfolio up and running, you’ve been keeping updated on its performance and strategizing with other investors. Now what?
D: Don’t give up. It’s important to keep up an eye on your share’s performance if you plan to change any information.
Most local newspapers update their financial pages daily, which makes it difficult to keep track of the overall trends. Also, the newspapers market updates are generally cluttered and confusing for example, the key for acronyms used are placed in a corner on the middle page of the business section. Online market updates use graphs to show trends and information from specific shares you’ve invested in. Business Day’s online local market updates are simple and professional, however information is a bit delayed because it’s in a newspaper. This could affect your stocks negatively. For example, should the market crash, you may choose to sell your shares as fast as possible. A delay in information could limit the possible pool of local and international traders who would be willing to buy your shares and may be aware of it’s value sooner than you are.
I: I’ve made my bucks.
What now? It’s surprisingly difficult to find information on how to cash in your returns from online trading… Watch out for an upcoming post on this topic.
V: Virtual updates.
Sanlam itrade online share trading is an easy-to-use online portfolio website, which allows you to buy/sell shares, share data and create charts from your portfolio.
Sanlam itrade is the online portal which allows you to check your investment’s performance as often as you’d like – provided you’ve subscribed to their services.
Sanlami-trade also lets you know what services they offer on their site.
E: Evolveyour portfolio.
You can get online information on share performance through lots of companies on the internet. You can even receive trade updates on your Google or Yahoo! home page. Online trade is personalised, selective, simplified and uncluttered. But there’s still no guarantee that you’ll make money.
But with online (and mobile) technology, you have the added option of receiving market updates whenever it’s most convenient for you. That’s risk-management.
Cash Cow 