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Johannesburg - For the first time, South Africa retail investors will be able to invest directly - and at a low cost - into JSE-listed shares without having to buy unit trusts, share schemes or other forms of collective investments. Standard Bank has developed what it calls the Auto Share Investment ASI , an online share investment product that is designed to help its customers build their share portfolio as they see fit.
Auto Share Invest enables Standard Bank customers to invest as little as R a month in shares of their choice from a pre-determined listed of 20 highly rated, well known, liquid South Africa shares including companies like Pick 'n Pay, Sasol and Satrix This is a low cost product that will enable the general public easy access to and the opportunity to invest directly in shares on the JSE. Until now, retail investors, who do not necessarily have large sums of free capital to invest, could not really benefit from purchasing shares directly.
Most brokerages charge an average minimum fee of about R including taxes all fees, no matter how small the transaction. Gain access without high costs "This product, however, allows retail investors access to some top 40 shares directly without that high cost," explains head of online share trading at Standard Bank, Richard Seddon; the brains behind the concept.
Although unit trusts and other collective investment products offer retail investors exposure to equity markets, the investment gain is often reduced by the fees and legislation on collective investments which limits the proportions of the fund that can be invested in particular share, sector, or asset class.
There are no monthly administration costs to the product however a R25 charge is levied on accounts that are inactive for more than 60 days. ASI is housed within the Standard Bank internet banking offering and allows users to sell or buy shares on pre-determined dates or change the shares they invest in once a month, allowing them complete control over their chosen portfolio.
Pros and cons Of course there are both pros and cons to such products for investors. The obvious benefits are the lower cost of investment: The product also allows customers to have direct ownership of a particular share where as with unit trust clients only hold a unit of the fund and therefore they do not enjoy the benefits affording to shareholders.
The second benefit is complete freedom with no limitations on the term of investment and on how much you can invest in particular share, sector, or asset class. The flip side to this, however, is that with a limit of 20 shares your portfolio can never carry the kind of market diversity that unit trusts offer, thereby increasing the level of risk carried in your portfolio. Furthermore, a product like this requires a market savvy investor who is completely comfortable with assessing company performance and is in tune with all the dynamics of the South African equity markets.
Investors who don't possess this knowledge are probably better suited to unit trusts, which are managed by experienced fund managers on your behalf. However, it is important to remember that unit trusts are only beneficial to investors with longer investment time horizons, of at least 3 to 5 years. Educational tool Seddon says ASI has also been designed as an educational vehicle to allow South African consumers to better understand share trading and the benefits of investing directly in the equity markets: A first for retail investors