Introductory

Lecture Modules - Introductory

The twenty lecture modules in this section aim to give the complete beginner a solid background knowledge of the Johannesburg Stock Exchange, beginning with the motivation for share investing, the mechanics of the stock market, how to open a stockbroking account and how to buy and sell shares. Two of these lectures deal with the Stock Exchange Handbook as an important resource for the private investor. Other lectures deal with such important topics as stop-loss and mental posture.



Your motivation

This lecture makes the case for investing in equity instead of other investments like property. It explores why you should invest in the share market. It also looks at how to build a capital base, make your capital work for you by beating inflation, the growth potential of the JSE, getting rid of debt and saving.

Planning to be rich

In this lecture we look at establishing a goal to reach financial independence, living within your income, setting a "daily allowance" for yourself, setting and sticking to a budget, allowing for unexpected expenses, saving for a capital base and using a spreadsheet for budgeting.

Buying and Selling Shares

In this lecture we deal with establishing a stock-broking account, discretionary and non-discretionary accounts, mandates, counter-parties, limit and market orders, settlement, the depth of the market, dual capacity, corporate actions, trading over the internet, the JSE Trustees (Pty) Ltd, the dealing costs of trading on the JSE, capital gains tax and what is your optimum transaction size.

Some basic ideas

This lecture looks at some basic ideas like return (equal to income plus capital gain), annualising your return, nominal and real return, risk, primary and secondary markets, opportunity cost, compounding, the nature of shares and factors influencing share prices.

Types of shares

In this lecture we consider the various types of shares including blue chips, secondary and speculative shares, authorised and issued shares, ordinary shares, black and green chips, various types of preference shares - cumulative, convertible, redeemable, participating, suspended shares, cash shells, cyclical and defensive shares and "n" shares.

Sources of Information

This lecture deals with the many sources of information available to the investor such as your daily business newspaper, your charting software, the Stock Exchange News Service, the radio, television programmes, internet web sites, downloading PDF files of companies' financial statements, visiting listed companies, tip sheets and many other sources.

The Companies Act

In this lecture we examine the Companies Act which governs all companies registered in South Africa. We look at the concept of a "legal persona", the separation of ownership from management, the Companies and Intellectual Property Commission, the memorandum of incorporation, disclosure, the prospectus, annual financial statements, fraud on the minority, the role of directors, the business judgement rule, the doctrine of solvency and liquidity, business rescue and the changes introduced by the new Companies Act.

Stoploss Strategy

This lecture deals with the important concept of stop-loss. It begins by explaining the simple 10% stop-loss and continues with the idea of cutting your losses and letting your winners run, the benefit of efficient markets and homogeneity, establishing a stop-loss percentage and beating the JSE overall index.

Fundamental and Technical analysis

In this important lecture we cover the relationship between the two major schools of thought on share assessment - fundamental and technical analysis. In the process we deal with discounting a the flow of future dividends, defining the market price of a share and definitions of fundamental and technical analysis. This may be the most valuable lecture in the entire series.

Mental Posture

In this lecture we examine your emotional responses as a result of investing. We consider your response to your shares and to the market. Then we consider the two primary forms of over-investing and look at examples of bad mental posture and how to achieve professional objectivity.

Other Investments

In this lecture we look at other investments, aside from shares, and consider their advantages and disadvantages. We deal with the advantages and disadvantages of krugerrands, exchange traded funds as an alternative investment, types of unit trusts, fixed income investments, alternative assets and unlisted public companies.

Indexes

This lecture deals with local and international indexes. In the process we look at the origin of Indexes and specifically at the Dow Jones, scaled and weighted indexes, paasche indexes, the concept of "free float", tradable indexes, the nikkei, The FTSE and the S&P. We then consider the JSE indices such as the ALSI40, mid-cap and small-cap, and the nature of index funds.

Using your Stock Exchange Handbook - Part 1

In this lecture and the next we look at the Stock Exchange Handbook - one of your most important sources of information. In this lecture we look at the various tables and lists at the beginning of the handbook, the alphabetical details of listed companies, the components of each JSE-listed entry, the ISIN code, the short and long names, the nature of business, major shareholders and capital structure.

Using your Stock Exchange Handbook - Part 2

This lecture completes our examination of the Stock Exchange Handbook. We look at a financial year-end and changes to it, International Financial Reporting Standards, the abbreviated financial statements, the balance sheet, income statement, per-share data such as the net asset value, the financial ratios, and the beta.

Prospecting for Good Shares

In this lecture we deal with the problem of selection. How do you choose the right shares? We cover five methods of "prospecting" - moving from the general to the specific, using financial media, fundamental selection, technical selection and rumours or tips. Finally, we discuss the phenomenon of stock market gurus and their opinions.

Selection Criteria

This lecture tries to give you a structured approach to investing on the JSE. It deals with the "universe" of shares, developing a "watch list", establishing a portfolio, and formulating investment criteria including volume, size, quality, earnings, exposure to union activity and to the currency.

Types of Investors

In this lecture we consider the various types of investors who patronise the JSE. We look at their various approaches to share assessment from the best-informed to the least. We examine the rights of shareholders and their risk profile. Then we look at institutional investors, "widows and orphans" and speculators. Finally, we examine the concept of internal rate of return

The Johannesburg Securities Exchange

This lecture deals with the Johannesburg Securities Exchange, its history going back to 1887, its relationship with the London Stock Exchange, its security and guarantees, its various divisions (like the Alt-X, Africa board, DCM, VCM and BEE board). We look at the krugerrand market, the nature of secondary and inward listings, de-listings and suspensions.

Strate

This lecture looks at South Africa's central securities depository, known as STRATE. We look at how it evolved, how it came into being through the process of dematerialisation and what it does. We look at controlled and non-controlled clients. the mechanism of share transfers, nominees, own-name registration, the "safires" system, Strate's custodial role, and its function in corporate actions like rights issues and dividend payouts. Finally, we consider the settlement process and periods.

Raising Capital in the Primary Market

This lecture deals with various primary-market mechanisms used by listed companies for raising capital. We consider the relative merits of permanent versus loan capital and the factors which influence the timing of an initial public offer, the advantages and disadvantages of listing, the structure of a new listing as well as the multiple, tradability, minimum subscription and underwriting. Then we look at rights issues, nil paid letters and how these processes work.