Wally Lambert
If you’re thinking about trying your hand at the stock-market game – we’re not talking unit trusts here – you’ll be pleased to know it’s getting easier and cheaper for the man in the street to buy shares. Unlike shopping for bread in the supermarket, buying shares on the stock exchange requires the assistance of a third-party stock exchange member, usually a stockbroking firm or bank.
Ultimately these entities charge some kind of fee for the service they render – even if you transact over the Internet, you’ll be working through the website of a broking firm that will charge you some kind of fee – so be wary about charges and inquire beforehand what you will have to pay.
Generally there will a brokerage fee leveraged – more of that later – on which value-added tax is payable as well as a 0,25% marketable securities tax (MST), which is unavoidable. Some firms will also charge a “safe custody” fee for holding shares on your behalf, which can be as much as R300 a year.
The brokerage fee will differ from stock-broking firm to stock- broking firm, with many of the larger and better-known firms refusing to deal with clients with less than a certain amount of money to invest. (In some cases you might have to have at least R250E000 to get a stockbroker’s attention.)
Of course, these firms are hardly going to admit to the world that they’d rather not deal with smaller clients, so you’ll find instead that their brokerage fees are prohibitive for smaller players. For amounts of up to R15E000, if the firm will transact on your behalf, expect to be charged a brokerage fee of about 1,6%, and for amounts between R15E000 and R150E000, around 1%. “Generally amounts of under R5E000 would work out to be uneconomical,” one representative of a firm dealing for larger clients says.
However, all is not lost: there are some brokerage firms that are very welcoming of the smaller client – after all, a small fish of today is often a big fish of tomorrow.
Several such firms recommended to the Mail & Guardian included Lomberg, Pulford and Company, Cahn Shapiro and Martindale Stacey du Toit. One of the friendliest when approached was Martindale Stacey, which has a reputation for charging among the lowest rates in the industry. Company representative Rob Turner says Martindale Stacey charges a flat 0,75% brokerage fee, subject to a minimum of R75 – in other words, any transaction of R10E000 or less costs R75. While there is the obvious MST, Martindale Stacey does not charge a safe-custody fee for holding shares on your behalf, which is also good news for the small investor.
Incidentally, the charge of a deal is related to a specific batch of shares. In other words, if you wanted to buy R10E000 worth of shares, but included in that bundle three different types of shares, the charge would be R75 multiplied by three – R225.
If you’re familiar with the Internet, you’ll be pleased to know that it is possible to buy shares the Nineties way. Martindale Stacey for example, has a website at to facilitate this – about R215-million has been transacted over the site since its establishment in December 1996.
Basically what is required is for an account to be opened with the relevant firm, at which point trading can take place. According to Turner, while still waiting for the technology that will allow orders over the Internet to be transacted immediately, buying shares over the Internet can give you a timing advantage compared with other clients.
“Basically you can sit at home on a Friday evening and go over what your shares have done in the past week and what you wish to do and place your order in the queue at that time.”
Also available on the website is information about companies, graphs and market reports, most of which are for free, and which can be of great use to the individual investor.
Don’t forget that when you purchase shares on your own behalf the risk is all yours. Obviously one of the advantages of investing in unit trusts is that there is a fund manager whose full-time job it is to monitor market and company trends.
So, armed with the knowledge of how much it will cost to invest on the stock exchange, the world of shares is ready for conquering.
Just remember that there are risks attached and that whatever goes up, will inevitably come down.