Read this before you buy shares
I am sure most visitors to this blog are people who are looking for some way to earn an extra income.
There are hundreds of ways to make money and I am not going into that in this post.
Today I would like to focus on those who are looking into share trading as a way to earn an extra income.
There is a general myth and hype about share trading. Especially the people selling share trading software will tell you how “easy” it is. “You just buy low and sell high”, “Invest in Blue Chips”, “Penny shares offers the best return”, etc etc.
The truth is……..
Buying and selling shares are not as easy as the software sellers make it to be. There are many factors to consider even if you base your decisions on technical analysis.
I have been playing around with shares for many years. I made lots of money and I lost lots of money. I studies technical analysis, listened to hot tips, tried penny shares, tried blue chip shares but my success remained average.
I know that the tru blood technical analysis gurus will differ from my view. They say that you determine your entry and exit signals purely on technical analysis, execute you trade, set your stop loss and exit values and then leave the trade on its own.
This all makes sense but for the novice trader there is one crucial component the avid technical trader do not take in concideration and that is the emotional element. A novice trader is excited, eager and also scared to death. Even though he knows what to do it is still his emotions which control the little buy and sell button and his emotions can at any time overide the stop loss and exit pointers.
That is why I always encourage new traders in both the forex and share market to always trade a dummy account untill you are constantly making a profit. If you cannot make a profit on a dummy account you will not make a profit on your real account.
If you are new in share trading or if you are considering trading shares I would encourage you to first read “The Warren Buffet Way” by Robert G Hagstrom (Click here to get it). Robert Hugstrom is a huge Buffet fan. He studies the Buffet way of investing and he explains it in this book. In case you do not know, Warren Buffet once was the richest man in the world and he obtained his wealth by investing in the right way. I am sure we can learn something from him.
This book changed my outlook on share trading and today I make far less mistakes than a year or two ago.
I also recommend this book to those who think that they are going to be technical traders. Before you can apply your technical analysis to a share you first have to select a share to watch. If the share you select is a good share, one that makes sense and one of which the company is stable and run properly, then your chances even as technical trader on making a success is far better. If you read “The Warren Buffet Way” you will know what a good company looks like.
One last tip. I wish Standard Bank would start paying me for this because I gave this advice to many people before. There are many companies offering expensive introduction share trading courses. Share trading, like forex trading, is not for everyone. There is a chance that you will attend one of these expensive courses just to find that your do not fit the profile of a share trader. Standard Bank’s share trading platform is one of the most affordable ones in South Africa. It only cost a basic fee of R50 per month. BUT when you are a member you get access to various free share trading courses. These courses vary from basic share trading, to complicated technical analyses courses. So before you buy any software or attend any R6,000 courses, sign up with SBK and make useof their service. If you then find that share trading is for you and you like what you see, then you can go for the more expensive courses if you still feel like you need them. I attended many of Standard Bank’s share trading courses and found them to be extremely informative and professional. You will find them at http://securities.standardbank.co.za/
So, if you are new to shares or want to start trading:
1. Read “The Warren Buffet Way”
2. Trade a dummy account until you make constant profits.
3. Open a trading account with Standard Bank and make use of their free courses.
The Warren Buffet Way
Wealth Creation | Pieter | June 4, 2009
Hi. Good Post. I haven’t read “The Buffet Way” yet, but I’m also quite a fan of Warren Buffet. I’ll be sure to put that book on my reading list. I’ve read “The Snowball” – Schroeder and “The Intelligent Investor”-Graham & Dodd. I would recommend the intelligent investor to anyone who wants to invest in shares for the long term. I also have a site, Creative Wealth that aims to help new investors and entrepreneurs to get started. Check it out. You may find it useful.
Hi Jay, you site looks good. I will pop in often and see what news you have.
Hi Pieter. My name is Agmad Kafaar. Im 21yrs old. Ive been doing research on trading shares 4 da past few weeks, weighn pros n cons. Id like to effectively plan for my future, bt I am so confused, i dnt knw if im eligible to trade or not, I am stil a student. Do I have to hav a fixed amount of income? Or do I hav to hav a capital x? Ive read so many articles on trading shares 4 beginners n it hasnt realy shed light in my quest. I know you mentioned mentioned standardbank. Id appreciate if u cud guide a broke student on his way to success
@Akafaar One do not need a fixed amount of income to trade if you do it yourself. You can use a online broker like StandardBank (https://securities.standardbank.co.za/ost/ ), deposit funds and trade. BUT my experience taught me that trading small amounts yourself is not really worth it. Your broker account will cost you at least R50 per month plus you will pay a brokerage fee each time you buy or sell shares. So you have to make a huge amount of profit to make it worth your while. Because of the brokerage fee my opinion is that trading lots smaller than R1,000 is a waste of time (for me personally).
If I were broke and just wanted to get started I would rather go for something like Satrix or StratEquity. With Satrix you can start with a once off deposit ( I think the minimum is a R1,000) or R300 per month debit order. StratEquity is R225 per month. Satrix buys you shares in the top 40 companies on the JSE and StratEquity buys shares in companies they selected.
To answer your question, you do not need a fixed income to trade but YES, you do need money.
TIPS: 1. Never trade with borrowed money
2. Nether trade with food money – the money you use to trade must be extra money, not money you need to survive
3. Read “The Warren Buffet Way” before you start investing, you can get it
at http://www.businessbooks.co.za/warren-buffet/
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