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By Carly Barnes
You’ve made the decision to invest and you now find yourself at the starting block feeling chuffed but bewildered – what now? How do you go about picking investments? This is your hard earned cash and you want it to work for you. You want it to grow and make you rich and happy. Some of your peers have been in this game for years already and spin enough jargon on the subject to make you feel down-right daunted (and maybe even a little dumb). The good news is that we live in a world where a wealth of information is but a URL away and there are plenty of resources to help you switch to an informed investing mind-set.
What are you into?
Before you scan the odd 400 shares on the JSE, think for a moment about the companies and brands which naturally occur in your universe. You may not realise that you have an untapped resource of information already at your disposal. Why is it that you opt for one clothing brand or mobile service provider over another? What are their differentiating characteristics? Nilan Morar, Head of Trading at GT Private Broking, a subsidiary of The Purple Group Limited, believes that if you can translate those brands and companies into some index of quality that you have for your personal well-being, then it makes sense to have ownership in them. Once you have made that distinction you can begin to dig a little deeper.
Fundamental and Technical analysis: the sweet spot.
If it’s a share of a company you are looking to invest in, fundamental research will help you understand when it makes money, when doesn’t it make money, what peripheral stuff in the economy affects it; who the directors are; how it has performed previously; and what the dividend yield is. “A guy like Mark Ingham, whom we use to present fundamental analysis, will look at those elements to ascertain a point of view; whereas our technical analyst Colin Abrams wouldn’t do any of that. He’d simply look at price actions and how the company has traded graphically. From that picture he’d look for chart patterns which would project a view of what he needs to buy and when he needs to buy it,” says Morar. “For me – deciding what to trade and applying research to your investment position has to initially be about understanding what it is you’re trading. And you do that initially through fundamental analysis and then using technical analysis to try and time the entry into that asset.” Quite often an investor will lean towards one approach or the other, but historically successful investors use aspects of both to make their investment choices.
Online tools of the trade
There are varying schools of thought when it comes to methods of analysis, which is why online tools such as Google Finance provide a useful portal for investors to view all of that information in one place. This includes historical information, financial numbers, company news and charts. “You can get a good idea and understanding of what’s happening at a particular company just by looking at one page,” says Lee Scott, Sales Consultant for The Purple Group. “Not all brokers or charting packages provide historical numbers and with Google Finance you can view that for free. You can see any open and close or high and low of any share. You’ve also got access to not only the South African market but the US, UK etc. It’s actually extremely powerful tool.”
In addition, Google Finance shows you how other companies in the same sector have performed over a certain period and gives recommendations on similar stocks. It also allows you to export your portfolio – so if you’ve got shares on EasyEquities and you want to see how they are doing holistically and graphically, you can export your portfolio into Google Finance and it does it all for you.
You can also gather a lot of information by looking at SENS announcements. JSE listed companies publish any major news through SENS announcements.
Just do it
If you want to be an expert at something, it’s in the doing. Familiarity helps to better guide your instincts, allows you to make logical deductions using the available research and is able to steer your knowledge in a direction that aligns with your goals. “Once you are invested you have a different frame of mind in that you know you own a part of a company, so you pay more attention to it – certainly more than previously. You become really interested so you read up on it where you can and if you don’t understand something you investigate further. That’s what changes when you apply your own cash to something,” says Morar.
