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Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to the Share Market Webinar.

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Presentation on theme: "Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to the Share Market Webinar."— Presentation transcript:

1 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to the Share Market Webinar Shaun van den Berg Head of Client Education Wednesday, 15 th May 2013

2 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Agenda Introduction to the Share Market What is a Stock Exchange? What are Shares? Different classes of Shares What are Dividends? Why Invest In Shares? Advantages & Benefits Investor Protection Rights of a Shareholder How does Trading take place? Dealing Costs Things You Should Know Choosing Your First Shares Summary & Conclusion

3 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Refer to Online Tutorial #1 Step 2 Select Tutorials Step 3 Select Tutorial #1 Step 1 Select Resources

4 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to the Share Market What is a Stock Exchange? The role of the Johannesburg Stock Exchange (JSE) What are Shares? Different Classes of Shares What are Dividends?

5 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 What is a Stock Exchange? Stock exchange - Forum or market place where shares, in listed companies, are bought & sold. A company is "listed" on a stock exchange & shares are issued therein. Investors acquire a portion of the ownership - Purchase of shares. Proceeds are used to finance expansion projects or reduce debt. Investors can divest of their 'ownership' by selling to other investors. Allows investors to realise some profit should they be able to sell the shares at a higher price than what they originally paid. Stock exchanges all around the world: London, New York, Hong Kong, Sydney, Paris, Nairobi, etc. Stock exchange in South Africa - Johannesburg Securities Exchange (JSE).

6 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 What is a Stock Exchange? JSE consists of two markets which carry on their business side by side: Primary Market - Companies sell shares to the public in order to raise funds; and Secondary Market - Members of the public buy & sell these shares between themselves. Once company has sold its shares in the primary market - Derives no further direct benefit from the trading of its shares in the secondary market. Essential to have a healthy secondary market before the sale of shares in the primary market can be successful. People are usually unwilling to buy shares from a company unless they know that they could sell them again in the secondary market if they wanted to.

7 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 JSE provides a regulated trading platform where buyers & sellers trade; JSE protects investors through its rules & regulations & guarantees all trades transacted on the JSE; JSE provides a wide choice of companies & products for the investor to invest in; and JSE provides an active & liquid market. The role of the Johannesburg Stock Exchange (JSE)

8 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 JSE trading floor closed on the 7th June 1996 Replaced by automated system Called Johannesburg Equities Trading System (JET) Designed by the Chicago Stock Exchange. JET system replaced in 2002 with the London Stock Exchange's (LSE) automated trading system called SETS. All listed securities are successfully dematerialised & migrated to the STRATE electronic settlement environment Rolling, contractual & guaranteed settlement for equities taking place five days after trade (T+5) Order-driven centralised automated trading system JSE SETS Buy orders from investors are matched with orders from investors to sell. “On-screen trading floors" operated by dealers entering buy & sell orders into the trading system via remote terminals or workstations.

9 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Significant improvements for investors, listed companies & JSE itself - greatly enhanced investor protection. Improved transparency Increased capacity Real-time surveillance capabilities Security Comprehensive audit trails Brokers allowed to acquire shares & sell them to their clients Act as a "principal“ as opposed to “agent”. Most brokerage houses chose not to act as principals. Advantages: JSE SETS

10 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 What are Shares? Companies expand - require additional capital to finance expansion projects. Raise necessary capital by selling "shares" in the company to investors. Each "share" represents a portion of ownership in the company, normally entitling the holder to vote on important corporate matters & to receive dividends if dividends are paid. Investors who purchase shares are termed "shareholders". Shareholders may receive dividends if a company's board of directors declare that the company has made sufficient profits & that some of these profits should be returned to shareholders. Shares are also known as equities, stocks, securities, etc. There is a direct relationship between the number of shares you own & your portion of ownership in the company i.e. the more shares you own, the greater amount of the company you own.

11 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Ordinary shareholders have voting power & ultimate control over company. Ordinary shareholders have no right to the profits of a company until dividends are declared by the board of directors. Each ordinary shareholder entitled to an equal share of dividends as & when they are paid. On the winding-up of the company, ordinary shareholders have only a residual claim against the assets of the company after the settlement of all other claims. Ordinary shares have no specific maturity date, no fixed income, are subject to great price volatility & assume greater risks than holders of preference shares or debentures. The majority of shares listed on the JSE are ordinary shares. Companies usually issue ordinary shares when they commence business. Subsequent expansion plans often entail the issuing of other classes of shares. Different Classes of Share - Ordinary Shares

12 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Preference shareholders have preference or 'first option' when dividends are declared & paid (i.e. have a prior right over ordinary shares in the distribution of dividends). Preference shareholders are guaranteed of specified percentage dividends if the company makes a profit. Preference shareholder have a prior claim to repayment of capital on winding-up of the company (i.e. paid out before ordinary shareholders). Various classes of preference share, including cumulative, convertible, redeemable, participating, fixed or variable rate etc. Because the dividend rate on preference shares is usually fixed, the dividend is more regular & stable than on ordinary shares. Preference shareholders have disadvantage that they normally do not have any voting power. Who would buy preference shares? Investors that are looking for a hybrid debt & equity investment exposure or are looking for medium risk & return (risk is higher than debt instruments but lower than ordinary shares). Different Classes of Share - Preference Shares

13 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Debentures are 'fixed-interest-bearing securities' issued by a company. Generally viewed as a loan contract by the issuing company. Represents a promise by the company to pay interest on regular intervals & to repay the capital amount at a specific future date/s. Debentures are akin to fixed bank deposits as they pay interest & not dividends. Debentures classified according to their security, term or yield. Various classes of debentures: Fixed or variable interest, secured, unsecured, guaranteed, redeemable, convertible, participating, income etc. Different Classes of Share - Debentures

14 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Bank deposit attracts interest, shares attract dividends. Dividends are paid out of a company's profits to shareholders. Dividends distributed as a cash dividend or a scrip dividend. Cash dividend are usually paid to a shareholder by cheque or bank transfer. Scrip dividends paid in the form of additional or new shares instead of cash. A company would do this to conserve cash-flow. The amount of a dividend is not fixed as it remains within the discretion of the directors of the company: Decide what portion of the profits should be retained for future expansion What portion is to be distributed as a dividend amongst shareholders. Listed shares generally declare dividends every six months. Mid-way through the financial year an interim dividend, based on the company's anticipated profits for the financial year under consideration, is declared & paid. At the end of the financial year, a final dividend is declared, based on the actual trading results for the full financial year. What are Dividends?

15 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Shares offer another type of return: Growth of your initial capital investment. A share investor expects a relatively low dividend return to be enhanced by means of an increase in the share price. Capital growth generally holds more appeal - Prospect of an increased dividend distribution. Management of a company may believe that the dividend money is best reinvested into the company for research & development (R&D), capital investment, expansion, etc. Proponents of this view & critics of dividends per se, suggest that an eagerness to return profits to shareholders may indicate having run out of good ideas for the future of the company. Studies have shown that companies that pay dividends have higher earnings growth, suggesting that dividend payments may be evidence of confidence in earnings growth & sufficient profitability to fund future expansion. What are Dividends?

16 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 5 Dividend dates to remember Declaration date The date on which the next dividend payment is announced by the directors of a company. Includes the dividend's size, ex-dividend date & the payment date. Also referred to as the "announcement date." Once authorised, it is a declared dividend Becomes company's legal liability to pay it. Last day to trade (LDT) date Last day (usually a Friday), which is one trading day before the ex-dividend date (usually the following Monday), where the share is said to be cum- dividend (with or including dividend). Existing shareholders & anyone who buys it on this day will receive the dividend Any shareholder selling their share lose their right to the dividend. After this date the share becomes ex-dividend.

17 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Trading Ex-dividend date This is usually a Monday & typically four trading days before the record date. This is the day on which all shares bought & sold no longer come attached with the right to be paid the most recently declared dividend. This is an important date for any company that has many shareholders, as it makes reconciliation of who is to be paid the dividend easier. Existing shareholders will receive the dividend even if they now sell the share, whereas anyone who now buys the share will not receive the dividend. It is relatively common for a share's price to decrease on the ex-dividend date by an amount roughly equal to the dividend paid. This reflects the decrease in the company's assets resulting from the declaration of the dividend. The company does not take any explicit action to adjust its share price; in an efficient market, buyers & sellers will automatically price this in. 5 Dividend dates to remember

18 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Record date This is usually the following Friday. A company determines who its shareholders are & to see who is entitled to receive a dividend or distribution. Essentially, a date of record ensures that the dividend payments get sent to the right people. Payment date This is usually the following Monday. This is when the dividend cheques will actually be mailed to the shareholders of a company or credited to brokerage accounts. Dividend dates to remember

19 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The salient dates for holders of ordinary shares are: Declaration date: Monday, 11 March 2013 Last day for trading (LDT) to qualify for & participate in the interim dividend (cum dividend): Friday, 5 April 2013 Trading ex-dividend commences: Monday, 8 April 2013 Record date: Friday, 12 April 2013 Dividend payment date: Monday, 15 April 2013 Dividend Dates: Sasol Example

20 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Why Invest In Shares? Advantages & Benefits Investor Protection Rights of a Shareholder

21 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 You do not need large sums of money to invest in the share market. It is relatively quick & simple to liquidate any sums of money which you have invested in shares. Shares entitle you to share in the profits of the company without the need to get physically involved in its day-to-day management. As a shareholder you only share in the profits of the company - you are not responsible for any losses incurred by the company. The risk to which one exposes oneself when investing in shares can be limited by following a sound investment approach. Selection of quality shares will generally result in higher returns than endowment policies. The exact value of your investment can be determined at any time. Advantages & Benefits

22 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Strict membership requirements in terms of legislation & the JSE rules. Ensuring the capital adequacy of its members. The institution of monitoring systems aimed at the measurement & control of risk attributable to share market transactions. The maintenance of strict procedures regulating the administration of discretionary account (where the broker manages your portfolio) monies. The central automated trading system results in improved transparency, security & audit trails which greatly enhance investor protection. The establishment of a JSE guarantee fund which serves to meet qualifying claims by investors in the event of default by a stock broking firm. Fidelity insurance cover for individual broking firms against qualifying losses, including losses arising from fraud or theft of their own or a client's securities, or cash. Investor Protection

23 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Right to receive dividends should dividends be paid. Right to vote (ordinary shareholders) at all general & shareholder meetings, and may even force the company to convene a meeting under certain circumstances. Right to equal treatment at all times, regardless of whether you are a controlling or minority shareholder. Entitled to competence, integrity & honesty from all company directors. Entitled to be kept informed of any relevant information regarding your investment. This is usually done through the Stock Exchange News Service (SENS) or the financial press. Rights of a Shareholder

24 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 How does Trading take place? The Order Book Dealing Costs Buying & Selling Costs Tax Implications

25 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The share price is the price at which a particular share can be bought or sold. The share price is determined by supply & demand. More buyers than sellers - prices usually rise - Shares are in demand. More sellers than buyers - prices usually fall - Oversupply / easier to buy. If a company is very profitable, a share in that company will become more valuable because more people think that it is an investment. Factors such as the economic & political environment also influence prices. Dealers manage their orders through a centralised order "book" by entering their buy & sell orders into the book via trading workstations linked to JSE SETS. The orders are immediately included in the summary display showing the aggregate of the orders in the order book for all dealers to view. If a dealer has not entered his order in the book he may not partake in trading. How does trading take place?

26 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 How does Trading take place? The order book can be viewed by private clients via an online broker. Clients are able to enter & manage their orders themselves. Order book organised on the principle of "price & priority" Orders are ranked first at the best price / Time sequence of entry. The buy orders making up the 6 000 shares at 99 cents, consist of : Highest to Lowest Lowest to Highest

27 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The SETS System continuously attempts to match the bids & offers, comparing the orders& generating trades whenever the terms of the orders match. Those orders which can be matched (fully or partially) by an opposing order are automatically traded. The dealers are advised of the trade immediately following matching. For example a member firm enters a sell order of 5 000 shares @ 99 cents: How does Trading take place?

28 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The highest priced buy orders & lowest price sell orders are matched first. The sell order for 5 000 shares @ 99c is matched with the buy orders of 6 000 shares @ 99c The shares are automatically traded, taking into account the time sequence of entry of the sell orders. How does Trading take place? The outcome is as follows: One member firm has purchased 3 000 shares @ 99c Another member firm has purchased 2 000 shares at 99c & remains a buyer of 1000 shares (3 000 - 2 000) @ 99c A third member firm has sold 5 000 shares @ 99c Order Book - ABC Ltd. Buy (Bids)Sell (Offers) QuantityPrice Quantity 1 0009910015 000 5 500981011 000 12 0009710217 000

29 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Brokerage refers to the fee or commission that goes to the broker who buys or sells shares on your behalf (i.e. acts as your agent). Dealing charges are calculated using brokerage sliding scales. Brokerage Sliding Scales excludes 14% VAT. Dealing Costs – Brokerage Fee

30 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Mandatory costs & charges are levied on transactions: 14% VAT - Payable on the brokerage, settlement costs & the protection levy. STT (Securities Transfer Tax) - Charged at 0.25% on the value of share traded Only levied on share purchases (No STT when shares are sold). STRATE settlement costs of 0.005459% of the value of shares traded (Min R10.92 / Max R54.59). Investor Protection Levy of 0.0002% of the value of shares traded. Dealing Costs – Mandatory Costs & Charges

31 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 An investor wishes to buy 1 000 shares at R15/share. Assume the following fees, at the following rates: A brokerage fee of 0.90% on all amounts below R25 000 (according to sliding scale). 14% VAT on brokerage fee Securities Transfer Tax (STT) at a rate of 0.25% Dealing Costs – Buying Shares 1.Value of specific transaction1 000 x R15= R 15 000.00 2.Brokerage(0.90% x R15 000)= R 135.00 3.Plus 14% VAT on brokerage(14% x R135)= R 18.90 4.Plus STT(0.25% x R15 000)= R 37.50 Equals Total Cost= R 191.40 (1.28%) Total Buying Cost= R 15 191.40

32 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 An investor wishes to sell 5 000 shares at R25/share. Assume the following fees, at the following rates: A brokerage fee of 0.90% on all amounts below R25 000 (according to sliding scale). 14% VAT on brokerage fee No STT on selling! Dealing Costs – Selling Shares Value of specific transaction5 000 x R 25= R 125 000.00 Transaction charge equals... Brokerage (0.90% x R 25 000)= R 225.00 (R 25 000 to R 100 000 = 0.85% X R 75 000)= R 637.50 (R 100 000 to R 250 000 = 0.75% x R 25 000)= R 187.50 Total Brokerage charges= R 1 050.00 Plus 14% VAT on brokerage (14% x R 1050)= R 147.00 Equals Total Selling Costs= R 1 197.00 (0.96%)

33 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Active Management View < 3-years – Position Trading – Swing Trading – Jobbing (Speculating) Capital Growth – Buy Low & Sell High – Sell High & Buy Low Higher Brokerage Costs Income Tax – 40% Investor or Trader (or Both?) TraderInvestor Passive Management View > 3-years – Buy & Hold – Quality, Undervalued Shares – Balanced Portfolio Capital Growth Dividend Income & Growth Low Brokerage Costs Capital Gains Tax (CGT)

34 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Tax Implications Capital Gains Tax (CGT) R100 000 Capital Gain Less R30 000 Exemption Equals R70 000 Taxable Gain Inclusion rate 40% x 33.3% Equals 13.32% Equals R9 324 Tax Payable Dividend Withholding Tax (DWT) Cargo Example: Notice is hereby given that a gross final cash dividend of 20.0 cents per share (2012: 8.0 cents) has been declared for the year ended 28 February 2013. The dividend has been declared out of income reserves. The dividend will be subject to a dividend withholding tax rate of 15% or 3.0 cents per ordinary share. As no STC credits are available for utilisation, shareholders, unless exempt or qualifying for a reduced withholding tax rate, will receive a net dividend of 17.0 cents per share.

35 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to the Share Market What are the risks involved? How can you manage risk? How do you know which shares to buy? The two main approaches to share market analysis

36 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Investing on the stock market is riskier than some other investments. Taking a risk that is greater than putting your money into a bank fixed deposit. You should be rewarded for taking that risk - Risk & return should rise together. Measuring your return is easy: Capital gain - the difference between your buying price & your selling price, Plus your Dividend. Sum expressed as a percentage of the price you paid for the share & annualised. If you have bought a share for 1000 cents, sold it six months later for 1500 cents & taken a dividend of 50 cents in the middle, then your total return is 550 cents or 55% made in six months - which is an annualised 110% rate of return. The two principles governing the return on investment are: The greater the risk, the greater the return expected by investors; The longer the money is tied up, the greater the return expected by investors. Measuring your risk is much harder to do - Investors leave it to their "gut-feel". What are the Risks involved?

37 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Market risk - Share price falls as a result of a fall in the stock market generally Investment specific risk - a share price falls as a result of some event or circumstance specific to that company Interest rate risk - a share price falls as a result of a rise in interest rates Default risk - the investment becomes worthless, e.g. the company becomes insolvent, the share is suspended & listing is terminated Inflation risk - the real value of the investment & Income from the investment fall as a result of inflation. No investment is entirely risk free - Triple A-rated government bonds - Safest form of investment - affected by inflation. One of the objectives in constructing a portfolio is to determine the level of risk acceptable to the investor & maximise the return for that level of risk. Risk can be regarded as a scale: Government bonds at the very safe end Speculative, unquoted shares & derivatives (SSF & CFD) at the very risky end. Main Risks

38 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Avoid putting all your eggs in one basket. Choose investments from a variety of sectors, companies & investment products. Do research on the stock market through regular reading of financial literature, attending investment courses & seeking qualified experts' advice. Be committed to your investment objectives. Determine the investment period you are prepared to wait for a return & be patient. If a share does not perform you may need to review your strategy. Determine your risk profile & look for products that you are comfortable with. Invest with money that you can afford to lose, i.e. your disposable income after all your needs have been taken care of. Although investing allows you to make a good profit you should also be prepared for the risk involved in losing your money. Market risk is the risk of market movements or market segment movements. Asian Crises (1998) & Sub-Prime Crises (2008) caused many markets to fall heavily – This cannot be diversified away - Stop loss strategy. Investment specific risk reflects factors specific to the company. Rainbow Chicken were affected by the Newcastle disease that killed most of their chickens - Can be eliminated or reduced by a well-diversified portfolio. How can you manage risk?

39 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Diversification Investment specific risk is reduced through diversification. Diversification involves spreading risk by investing in a number of shares with uncorrelated returns (different market sectors e.g. chemical, beverage & transport sectors). Only need 12-15 shares to remove most of the diversifiable risk. Diversification cannot remove all risk. If an investor held all the shares listed on the share exchange they would still be subject to the risk of the market as a whole falling (market risk). Hedging Market risk can be reduced by investing in different sectors or markets & through the use of hedging instruments. Hedging usually involves using derivatives such as CFD & SSF as a form of insurance. How can you manage risk?

40 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Enhance your knowledge of the stock market through research on the stock market through regular reading of financial literature, attending investment courses & seeking qualified experts' advice. This will enable you to make educated decisions on which shares to invest in. Any investor is faced with three important considerations: Which shares should I buy? When should I buy such shares? When should I sell such shares? How do you know which shares to buy?

41 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fundamental Analysis Fundamental analysis is concerned primarily with analysing the future profitability of the company in whose shares we are considering investing in. Fundamental analysis addresses the question of "which shares to buy". Fundamental analysts take into account a vast array of factors such as economic variables, political factors, labour relations, management expertise, technological advancements, etc. Technical Analysis Technical analysis is concerned with the use of graphs & statistical techniques to study historical price & volume patterns in order to predict the future course of share prices. It serves to determine "when to buy or to sell" shares. The two main approaches to share market analysis

42 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Getting Started Choosing Your First Shares Things that you should never do What to do next?

43 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Blue Chip Shares - Large stable, well-established & well managed companies: Anglo American, ABSA, etc. People who are attracted to this class of shares are usually security conscious investors seeking a sound medium- to long-term investment as a hedge against inflation. They offer a reasonable, steady growth in the market value of the, coupled with a steady growth in investment income in respect of increasing dividend declarations made out of increasing profits. Blue chip companies are also generally more well-known & have a reputation for honest & fair business practices (e.g. in relation to tax authorities, labour disputes, lawsuits etc.). Investing in blue-chip shares will substantially reduce your risk. Speculative Shares - Companies with a scant track record. Share price can soar or plummet, literally overnight. They have a high potential for return coupled with a high degree of potential loss. Investors who go for speculative shares are normally out for a 'fast buck' like punters who are prepared to take a risk in the hope of winning. More often than not their investment decisions are based on rumours, which could result in a substantial profit or an enormous loss. A sound company should show consistent growth & dividend distributions over the previous three years & have a record of uninterrupted dividends over the previous five years. Choosing Your First Shares - Always choose quality

44 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Blue chip shares are usually highly liquid - Can be traded within a matter of hours. The problem with highly liquid investments is the natural temptation to convert them to cash just when they start to do well. The proceeds are misappropriated into some or other costly fantasy, such as an overseas holiday or a new car. Such action obviously has a major detrimental effect on one's long term planning. Shares should be held with a definite view to the long term & should not be sold in the short-term purely to release cash. Choosing Your First Shares - Always choose tradable shares

45 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Once you have identified the shares you wish to buy: Never buy shares on a whim or following the crowd. As a rule the highest returns are earned: Through the careful accumulation of shares when most people are too scared to buy. Take the time to analyse price movements in the market By using technical analysis as to when to buy. Choosing Your First Shares - Always choose your timing

46 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Never buy shares on "hot tips" alone Buy after researching the share Would you have bought it even without the tip? Always justify your purchases by backing them up with reasons Write down your reasons - Examine them with hindsight. Never be greedy! Do not let your emotions rule Do not get excited when you make money Despondent when you lose money Never marry your shares Get too attached to your "winning" shares Shun your "losers” Never buy shares with borrowed money. Things that you should never do

47 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 What to do next: Your Financial Education Online videos & Online Trading Course (Tutorials) On the PSG Online website (www.psgonline.co.za), find the link called RESOURCES.www.psgonline.co.za On the next page, click TUTORIALS and / or VIDEO TUTORIALSVIDEO TUTORIALS Start reading through the online course material at your own pace to gain the theoretical knowledge. Attend a Webinar The webinars are aimed at the intermediate investor & trader. On the PSG Online website (www.psgonline.co.za), find the link called RESOURCES.www.psgonline.co.za On the next page, select webinars.webinars. Read through the information available and then select the webinar dates and times to register for the next webinar.webinar dates and times There are no costs. (Note: space is limited to the first 100 people).

48 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Upcoming Webinars** Technical Analysis Explained: Point & Figure Charts Date: Wednesday, 29 May 2013 / Time: 13h00 to 14h00 Investment Strategies: Value & Growth Investing Date: Wednesday, 12 June 2013 / Time: 13h00 to 14h00 Trading Equity Derivatives: SSF, ALSI & CFD Date: Wednesday, 26 June 2013 / Time: 13h00 to 14h00 Trading Currency Futures Date: Wednesday, 10 July 2013 / Time: 13h00 to 14h00 Technical Analysis Explained: Elliot Wave, Cycle Analysis, etc. Date: Wednesday, 24 July 2013 / Time: 13h00 to 14h00 **Please note: limited to 100 people

49 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Please visit the PSG Online website at www.psgonline.co.za and then click on the LOGIN button in the top right-hand corner. www.psgonline.co.za Once the page has redirected, click on the “REGISTER” button in the top right- hand corner of the page again. On the registration page, find the section called 30-day FREE TRIAL. In the next section called Personal Information - enter your personal details and select a Username and Password (It is important to please write this down for future reference!). Enter your email address, select SA citizenship and enter your ID number. Click Next. After 30-days, your 30-day Free Trial account will expire. You can register and open a trading account (BDA account) and this will cost only R40 per month. For this you will have access to all the trading facilities, the online trading course, research, Watch Lists & trading simulator. Remember, that you do not need to start trading straight away! What to do next: PSG Online registration

50 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 To access the Trading Simulator, you must first login with your Username & Password. On the landing page, find select the SIM account by clicking on the drop-down arrow key from the “Select Account” section in the top-right hand part of the screen. Click on the blue PORTFOLIO button to check that you have R100 000 ‘monopoly money’ to trade with. If not, please click on the RESET ACCOUNT button. Select New Order. Enter Share Code. Select the “Buy” option. Enter number of shares or Quantity. Enter Price. Click Submit button. What to do next: Trading Simulator

51 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Charting software helps you to track the trends on the markets & help you to time your buy & sell transactions. The Wen Professional Plus charting software is FREE provided that you subscribe to the DataShare download for at least 6-months. You can order the software directly from the PSG Online website (www.psgonline.co.za)www.psgonline.co.za Click on OUR OFFERING and then find ESSENTIAL TRADING TOOLS. Select the WEN TECHNICAL ANALYSIS SOFTWARE option. Scroll down on the next page and click on the button, SUBSCRIBE TO DATASHARE. Select REGISTER ME NOW and complete the process by entering all your personal details. To keep your Wen Professional Plus database up-to-date, you will need to subscribe to the DataShare download service at R169 per month. Once we receive the order - We courier the CD to a physical address Takes about three to four working days. What to do next: Wen Professional Plus software

52 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Once you have gone through the online videos & tutorials, we also suggest that you register for our monthly Traders Forum, where we discuss the market in general. Note: it is aimed at the intermediate investor & trader. On the PSG Online website (www.psgonline.co.za), find the link called RESOURCES.www.psgonline.co.za On the next page, select THE TRADERS FORUM.THE TRADERS FORUM Read through the information available & then select the Dates and Times link to register as seating is also limited.Dates and Times link There are no costs. What to do next: Attend a Traders Forum Meeting

53 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Upcoming Traders Forum Meetings** Johannesburg Traders Forum Date: Tuesday, 28 May 2013 Time: 18h00 to 20h00 Pretoria Traders Forum Date: Tuesday, 25 June 2013 Time: 18h00 to 20h00 Johannesburg Traders Forum Date: Tuesday, 30 July 2013 Time: 18h00 to 20h00 Cape Town Traders Forum Date: Wednesday, 21 August 2013 Time: 18h00 to 20h00 **Please note: Seating is limited – Book early

54 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Summary: Introduction to the Share Market Objectives – Maximise Returns Do your homework (Fundamentals & Technicals) Capital growth & Dividend income Quality & Value Objectives – Minimise Risk Investment Specific Risk – Diversification Market Risk – Stop loss / Hedging

55 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Conclusion: Introduction to the Share Market Objective of this webinar was to lay a foundation Explain some basic share market concepts. Share selection process very basic at this stage Aim is to give the novice a quick overview of the process. As you gain more knowledge with regards to fundamental & technical analysis, you will add stricter criteria to your personal share selection process & over time, hone your abilities even further. Good Luck & Happy Trading!

56 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Contact Us Thank You Shaun van den Berg Shaunvdb@psg.co.za (011) 996 5254

57 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Disclaimer This publication has been issued by PSG Online. It is confidential and issued for the information of clients only. It shall not be reproduced in whole or in part without our permission. The information contained herein has been obtained from sources which and persons whom we believe to be reliable but is not guaranteed for accuracy, completeness or otherwise. Opinions and estimates constitute our judgement as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This report is provided for informational purposes only. No information contained herein, no opinion expressed and no recommendation made constitutes a representation by us or a solicitation for the purchase of any of the securities mentioned herein and we have no responsibility whatsoever arising here from or in consequence hereof. Securities, financial instruments or strategies mention herein may not be suitable for all investors and investors must make their own investment decisions using their own independent advisers as they believe necessary and based upon their specific financial situations and investment objectives. The employees of PSG Online may from time to time own securities mentioned herein. Analyst Certification The research analyst who prepared this report certifies that the view expressed herein accurately reflect the research analyst’s personal views about the subject security and issuer and that no part of his compensation was, is or will be directly or indirectly related to specific recommendations or views contained in this report.


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