Why is investing in shares a key consideration? 

Of all the asset classes available to investors – i.e. equities (shares), bonds, cash and real estate – shares are the single asset class that consistently beats inflation over the long term. For any investor who wants to achieve returns that contribute positively towards their financial goals, and who wants to ensure they can retire comfortably, investing in shares is a necessary step towards achieving these goals. Shares provide the investor with the benefit of capital gains and regular dividend income over the long term, and these gains are compounded where dividend income is reinvested in shares. 

What should my platform offer me?

Once an investor has decided to start investing in shares, they need to choose a platform that meets their trading and investing needs. The list below is not exhaustive, but in my opinion should offer the investor a platform that caters for both current and future requirements as the investor’s share portfolio gains in significance. 
The platform should provide the investor with the ability to:

• Trade and view their portfolio online or via a mobile application 
• Invest in local shares and exchange traded funds (ETFs) and have direct market access, with the ability to view live and delayed market data
• Invest in offshore shares and ETFs across multiple exchanges
• Externalise funds offshore and repatriate funds from abroad to their local share portfolio
• Transfer local and offshore shares from other platforms should the investor wish to consolidate investments
• Borrow against a local portfolio to leverage the existing portfolio and to enhance returns from purchasing shares
• Trade in listed and unlisted derivatives
• Research content to support trading and investing both locally and offshore. 
  What types of risk should I be aware of and how does it impact my portfolio?

In general, the bigger the financial risk of an investment, or simply put, the greater the amount invested, the greater your chance of potentially earning higher returns. Higher financial risk will also increase the losses you might face on your investments. However, investors also face other risks they don’t necessarily choose when investing in specific asset classes – for example, ‘market risk’ or volatility in the case of investing in shares. An investor who is comfortable to invest in shares needs to understand the concept of market risk. This is the risk that arises from movements in share prices, exchange rates and interest rates. 

The three most common market risks are:

1. Equity price risk: Equities, or shares, tend to be riskier than many other types of investments. Equity price risk simply refers to the chance that a particular stock will decrease in value after an investor buys it. 
2. Interest rate risk: When a shift in overall interest rates occurs, your investments can be affected too. Most platforms offer an overnight cash solution for funds yet to be invested in the market. Movements in interest rates will impact the amount of interest earned by investors, which in turn impacts the returns on the portfolio. 
3. Currency risk: Whenever there’s a significant change in the price of different countries’ currencies compared to each other (their exchange rates), currency risk is an issue – the ZAR/USD exchange rate is a popular rate that investors monitor. This will impact the performance of an investor’s portfolio when they have both local and offshore shares.

These three risks impact the performance and thus the gains and losses earned on an investor’s portfolio, so it is important for investors to understand these risks. The savvy investor understands the importance of leveraging these risks for future gains – for example, when the rand has strengthened against the US dollar, investors may wish to externalise more funds offshore for investment in offshore shares. 

Conclusion

As an investor in shares, you will be well positioned to benefit from capital gains over the long term. Ensure that you understand the importance of having access to local and offshore shares, and understand and leverage any risks where possible to set your portfolio up for success. Remember that investing in shares requires a long-term approach to reduce the impact of short-term market risks and offer you the best route to outperform inflation.