A quick guide to investing on the Jamaica Stock Exchange
Hey g uys! Let me start off by apologising for the missing article last week. A few of you have told me were looking for an article then and didn’t see one. So, I’m making an extra effort to ensure that this week doesn’t become two weeks in a row.
Today, I’m giving you guys a quick guide to getting started with investing on the Jamaica Stock Exchange (JSE).
A lot of people might think this might be a very long, complicated process but it really isn’t. In fact, it’s about as easy as opening a bank account, and much shorter, in my humble opinion. I’ve spent an entire day trying to get a bank account open, I still don’t understand why this hasn’t been simplified by the banks as yet…but I digress. Let’s get started.
So, you’ve heard the good news about investing on the local stock market and want to join in, or maybe you just have some extra cash you want to earn some money on but don’t want to get the microscopic interest rates on savings accounts. And they really are microscopic, as of April 2019 the average interest rate given to consumers on a regular savings account in a commercial bank in Jamaica was 0.65 per cent per annum.
This means that if you left $10,000 in one of those accounts for one year you would get $65 back in interest on top of your money…then the fees and taxes would come out.
So, you see that a savings account is definitely not the way to grow your money.
Before we begin though, it’s important that you know that this is just the start. Opening the account won’t magically turn you into a stock whiz, but after that first step is out of the way, everything gets a little bit easier. I’ve simplified the process for getting started down to 3 steps. Here they are:
STEP 1. YOU NEED A BROKER
Buying and selling shares on the JSE requires a middleman of sorts. You can’t just trade shares off the exchange on your own, you have to instruct your broker to trade for you.
The broker then checks the exchange, sees if the shares you want are available, buys them in your name, and charges a small fee for doing this, along with collecting any applicable taxes for the Government.
Having a good broker is important, as they are going to be your constant touch point when investing. The JSE has 13 registered brokerage houses.
Different brokers all have different pros and cons, so you’ll have to do your research on choosing the one that’s right for you based on your needs and their benefits.
Most brokers list their benefits on their websites and all are willing to take your calls and explain what they offer in terms of features, customer requirements, and trading fees. Note that while each brokerage house has their own process, the general sign-up steps and requirements for all will be very similar.
STEP 2. OPENING THE ACCOUNT
So you picked one of the 13 brokers and you’re ready to get started. You want to go in office and ask to open an equity account (or stock trading account or securities account).
Many brokers call their equity accounts different things, but once you explain that you want to trade stocks, they’ll know what you mean — then they may try to dissuade you.
I’ve found that brokers often prefer to put your money in one of their pre-packaged investment products for whatever reason. They usually use the lower risk of a managed product (like a fixed deposit or a mutual fund) as a selling point.
Look out for this, it will likely start like, “Are you sure? Stocks are dangerous, you could lose all your money! You need an expert to analyse the market for you. Why not try our XYZ Product instead?”
Don’t get caught by this.yes stocks aren’t as simple as a fixed deposit and it is true that they carry more risk, but you already knew that, you’re going to be doing your research, you’re not going in blindly. Press on and get your account opened.
They will likely require the following things:
1. Completed application form
2. Proof of identity
3. Tax Registration Number
4. Proof of address
5. Proof/source of income
6. References for you (This varies depending on the broker. Some brokers accepts references from other long- standing clients, whoever you choose will tell you who they accept if needed.)
7. Money. All accounts require some money to get started, the minimum is set by your broker. You don’t lose this money, rather it is placed in your equity account after the broker creates one for you. And just like at a regular bank, it remains your money to use how you wish.
Be prepared to supply these things to get the account open.
If your broker has an online trading platform (its 2019, so they should have one) then you will also want to sign any indemnity forms that they may have. These forms allow you to instruct your broker on trades using electronic communication tools (e-mails, faxes, phone calls etc.). Ask for and sign every applicable indemnity form they have. This may save you a world of headaches later on.
STEP 3. RESPECT THE RESEARCH!
You now have the broker, the account and the money. Technically, you can start trading right away, but a smart investor does their research first and prepares their tools before acting.
As a new investor you want to be smart, not reckless. Stocks are influenced by information, so be prepared to read and learn about the companies on the JSE. Three key places for your attention should be:
• Business news — The Jamaica Observer’s business section is a great place to find out industry happenings and stock market information.
• JSE’s Website – www.JamStockEx.com is the stock exchange’s official online home and there you get, not just market news and listed companies’ financial reports, but they also have a wealth of further learning tools there, educational resources and much more. No stock holder should ever be unfamiliar with this website.
• Your stock broker – A good broker doesn’t only carry out trades on your behalf. They should also provide information like valuations of companies, upcoming market events like Annual General Meetings (AGMs) etc or dangerous picks to avoid and other things like that.
A good broker should especially be telling you about upcoming market opportunities. Is there a good IPO coming? A good broker lets you know early and advises you on not just what they think is good, but also tells you why something is good, and when to expect the benefits from it.
There you have it, those are my three steps to getting started. Hope they helped you, and remember, we’re in this to make money. Never forget that profit is the motive and financial literacy is the key. Follow the steps, get the account open, and you’ll be on the right path to profit. See you next week!
Randy Rowe is a Strategy Consultant and Lead Writer for www.everymickle.com. He started teaching himself to invest almost 20 years ago and is still learning to this day. He believes slow learners are underrated. He may be biased.