Getting Started in Shares

1. Getting Started in Shares Brought to you by: JSE Limited & Online Share Trading

2. Why are we providing free education? • A study found that people do not invest in shares when they do not understand them. • An educated investor is more likely to be a successful investor and hence a long term investor. • We want our clients to be successful so that they continue to invest with us. • If you lose money you stop investing and we lose you as a client! • The more people invest with us the lower the fees can be • Our brokerage fees have fallen over the last 4 years

3. Saving vs. investing • Saving is putting your money in the bank and receiving interest. • The capital is not going to grow and the rate of return is modest and largely predictable • Storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies. • Investing is putting your money to work for you • This offers capital growth (with risk of capital loss) and a share of the profit in the form of dividends • Is taking a risk with a portion of your savings such as by buying stocks in hopes of realizing higher long-term returns.

4. Assets Classes

5. How risky is each asset class? Shares Risk Property Fixed Investment Cash Reward

6. How risky is each asset class? Derivatives e.g. Warrants, instalments and Futures Risk Small cap e.g. City Lodge Mid Cap e.g. SPAR Blue Chip e.g. Anglo American Reward

7. Why the share market?

8. Why the share market? • Wealth creation • Long term financial planning • Retirement planning • Children's education

9. Why the share market? • Different types of return: • Growth (reinvests profits to grow the business) • Income (distributes most of profits as dividends) • Liquidity • Ease, speed and cost of buying/selling • Accessibility • 24/7 Online access • Transparent pricing • You know exactly what the costs will be

10. Why the share market? Source: JPMorgan

11. Why the share market? • An investment of R5000 in Standard Bank in 1990 when the share price was R1.77 is now worth R305, 000 now at a share price of R108.00, a return of over 6,000% excluding dividends (386c in 2007 financial year). • Merafe; 131c in March 2007 to 319c in April 2008 • Note that one can also experience extreme losses e.g. • Didata (lost 90% from the highs of 2000) • Nasdaq

12. Managing risk + BIG PROFIT Small Profit Break Even 0 Small Loss Cut Your losses early BIG LOSS - Make sure you do not lose money and you are half way there!

13. Develop an investment strategy

14. Develop an investment strategy • What stage of life are you at? • Single • Married with children • Retirement • What knowledge stage are you at? • Know your risk profile and risk tolerance • Being able to master risk is being able to master the markets. • What is your investment time frame? • Success depends on ensuring that your investment strategy fits your personal characteristics and goals.

15. Understanding the Share Market

16. What is a share? • A share gives you a ‘share’ of the assets and profits of a company. e.g. with Pick ’n Pay you own a small part of every store. • If a company does well (is growing its profits) then its share price should rise. • Likewise if a company is not doing well (is making losses) then its share price should fall. • Owning a share means that you can profit from share price movements and share income (dividends). • You get to vote at the AGM

17. What is a share market? • Like any other market. • Requires buyers and sellers. • Stock is bought or sold when buyers and sellers agree on a price. • Companies gather to issue shares in return for cash in order to expand and grow their business (e.g. Pick ’n Pay may issue shares to grow the number of supermarkets it has).

18. 30 323 All Share +87.1 Nikkei 12 433 +387.7 12 100 +25.9 Dow Jones FTSE-100 5 693 +56.5 What are share indices? • “The market performed well today” – what do they mean when they refer to the “market”? • An index is a way of measuring the performance of a selection of shares across the market. • When an index is up it means that on balance the share price of most of the shares in that index have increased that day. If the index is down then on balance most share prices of the shares on the market have decreased that day. • Indices can be used as market barometers for the market as a whole. Examples of well know indices are:

19. How to make money in the stock market You can make money with shares in two ways: • Buying a share at a low price and selling that share at a higher price at a future date. This is referred to as capital growth • e.g. buying Sanlam on 02 Jan 2007 for R19.00 per share and selling on 02 Jan 2008 for R22.81. A profit of R3.81 per share or a return of 20% over that period of time. • Receiving dividends from owning a share. This is referred to as income. • e.g. Sanlam paid a dividend of 77c in 2007, which is a 4% tax free yield

20. What is a dividend? • Dividends can be seen like tax free interest earned. • Dividends are distributions of a companies’ earnings to shareholders. The dividend earned on shares depends on the profits earned by the company and payment is decided by the company. • The return that you receive from dividends can be expressed as % and is referred to as the dividend yield (like interest). • e.g. if you purchased Sanlam on 02 Jan 2007 you would have received a divided payment of R0.77 per share. This is a return of 4% per share. (R0.77 / R19.00 = 4%) • Income stocks DY 3-8, growth stocks DY less then 3

21. Dividends returns In 1990 Standard Bank was trading at R1.77

22. Choosing companies to invest in

23. Choosing companies to invest in • “The story”- what the company does & what its outlook is (e.g. Pick ’n Pay is a supermarket chain. The outlook could be good for the economy and hence for personal spending could lead to more purchases at Pick ’n Pay hence the profits could be up and hence the share price could go up as well) • “The numbers” – review the financial statements of the company to see how healthy it is. (Look at the income statement to see the profitability of Pick ’n Pay . Look at the balance sheet to see how financially secure it is). Look at the Price Earnings (PE) Ratio. • “The picture” – look at the history of the companies share price in a price chart (e.g. look at the past performance to see if the share is rising or falling, what is its trend?) Fundamental Analysis Technical Analysis

24. The story (e.g. Pick ’n Pay) From the Standard Online Share Trading Website

25. The numbers (e.g. Pick ’n Pay) From the Standard Online Share Trading Website

26. The Picture (e.g. Pick ’n Pay) From the Standard Online Share Trading Website

27. The website (e.g. Pick ’n Pay) We help you by providing a research report that covers: • the numbers • the story • the picture. From the Standard Online Share Trading Website From the Standard Bank Online Share Trading Website

28. The website (research) We help you by providing a range of research reports that covers: • Fundamentals • Stocks • Technical's • Currencies • Economics From the Standard Online Share Trading Website

29. The Website (Profile consensus forecast) From the Standard Online Share Trading Website

30. Share filter (searching for income) From the Standard Online Share Trading Website

31. Share filter results (results for income) From the Standard Online Share Trading Website

32. How do you buy shares?

33. How do you buy shares? • Shares are purchased and sold through a Stockbroker • There are two types of brokers, online (discount) and full service brokers: • Full Service stockbrokers: • Give advice and trade over the phone • Have high fees and minimum investment amounts (e.g.1.3%-1.75% and R300K- R1m) • Online Stockbrokers: • Trade via a website (like internet banking) • Provide telephonic support • Give buy and sell recommendations online • Have low fees (0.6%) and no minimum investment amounts. • Have many tools that help you to manage your share portfolio

34. Costs

35. Online Share Trading Costs • Brokerage is charged at 0.6% of the trade with a minimum fee of R70 plus statutory taxes (detailed below). • Monthly fees of R50.00 (incl VAT). This fee waived if you trade 3 or more times in a month. Worked Example

36. Exchange Traded Funds (ETF’s) • SATRIX 40 is an example of an ETF: is a share that tracks the performance of the top 40 shares listed on the JSE without actually buying all 40 shares. • Satrix40 purchased on 02 Jan 2007 for R22.80 could be sold on 02 Jan 2008 for R26.60. This is a capital return of 16.6%. • You would have also received dividends of R0.5526 or a dividend yield of 2.4% (paid quarterly). • Good “starter” share as it gives you general exposure to the stock market. • Much like a unit trust but cheaper with better performance. • Other ETF’s (db x-trackers, PropTrax and NewGold)

37. Why Standard Online Share Trading ?

38. Why Standard Online Share Trading ? • Lowest minimum brokerage (0.6% with R70 min) • The biggest online broker in South Africa • Education is our differentiator • Buy and sell recommendations and research. • All the information needed to make your investment decisions • High interest paid for any cash kept in the share account. As at Jan 2008 the rate starts at an effective 9.83%. The money is available on demand. • Lots of tools e.g. SMS / email share price alerts to keep you in touch with the market. • Online charts • You do not need to have a Standard Bank account!

39. Educate yourself! Free courses These courses can easily cost around R10,000

40. Online courses • We also have online courses on our website: • Basics of investing (80 page 5 unit PDF document) • Technical analysis (the picture) • Derivatives • Warrants • Share installments • Single Stock Futures • Currency futures • Fortnightly educational newsletter

41. Next Steps?

42. Register Online at www.securities.co.za

43. Attend Free Introduction to investing presentation All courses can be booked online From the Standard Online Share Trading Website

44. Free educational newsletter 7 Pages packed with; • Articles on economics, markets, investing & trading. • Reviews on books, websites & podcast. • Up coming event reminder. • And more, much more. • Sent out fortnightly in PDF • To subscribe send an email to securities@standardbank.co.za with the subject “subscribe educational newsletter”

45. Auto Share Invest (ASI) • For Online Banking Clients • Monthly purchase of shares • R500 minimum per purchase • Low cost structure • R20 + 1% per transaction • Pre-selected companies • 27 well known companies • Can sell once per week • Can stop purchases at any stage

46. Advise vs. Research

47. Advise vs. research • Common sense • Research is easier then you think • It’s already part our regular life • How much time is enough ? • How much time did you spend when you bought your last house or car ? • Hot tips are not a strategy • They tend to be a “self fulfilling prophecy”

48. Disclaimer • The information and opinions stated in this document are of a general nature, have been prepared solely for information purposes and do not constitute any advice or recommendation to conclude any transaction or enter into any agreement. It is strongly recommended that every recipient seek appropriate professional advice before acting on any information contained herein. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or representations. All information contained herein is subject to change after publication at any time without notice. The past performance of any investment product is not an indication of future performance. Online Share Trading is operated by Standard Financial Markets Proprietary Limited Reg. No. 1972/008305/07, a subsidiary of the Standard Bank Group Limited and authorised user of the JSE Limited. .