Financial & Ind. 30
When it comes to choosing which companies to invest in on the Johannesburg Stock Exchange (JSE), financial and industrial companies should be around the top of your list. Especially the companies listed on the Financial & Ind. 30 index.
The financial companies listed on this index are the major players in the South African financing industry. Names like Absa, Firstrand Bank, Old Mutual and Sanlam are on this list. These are all companies with a history that shows growth and advancement. Companies such as this are no longer in their infancy, they are stable. As such, it is a solid bet to invest your money in the financial companies on this index.
The industrial companies on the Financial & Ind. 30 index is focussed on the production of foodstuffs and clothing. These companies produce and distribute the basics that every human needs to survive. Food, drink, clothing and telecommunications services. The British American Tobacco group is listed under this index, as well as Vodacom and MTN. Big companies that are well known across the globe.
Mega companies such as the ones found on the Financial & Ind. 30 index is a safe way for you to invest your money. These companies provide low-risk investment solutions, because they do not depend on funding from shareholders to grow, nor do they take unnecessary risks to develop new products or expand into new territories. They are settled and grow organically, in and of themselves.
Under South Africa’s current economic conditions, the Financial & Ind. 30 index has shown a slow decrease in yields. However, companies that provide basic human needs and financial services will always be in demand, so the index should pick up again as soon as SA’s economy stabilises.
When looking to invest your money on the JSE, we highly recommend that you talk to one of our investment brokers. Apart from that, you should also do your own research into the companies that you intend to invest in. Most brokers will tell you that it is wise to invest over a wide range of companies, and not to put all of your proverbial eggs in one basket. So before you start investing, take the time to read up about the three sectors under which trade takes place on the JSE.
These are the three sectors:
- SA Financials: All of the JSE listed companies belonging to the ICB Industry Financials
- SA Resources: All of the JSE listed companies belonging to the ICB Industries Oil and Gas
- SA Industrial: All of the JSE Listed companies that do not fall into the first two categories.
When you are buying shares, especially if you are just starting out, it can be safer to buy from an industry that you are familiar with. This will help you when you want to track the growth of the company you have invested in and it will help with spotting the trends which might appear and benefit you, further down the way.
The Financial & Ind. 30 only differ slightly from the other companies featured in the industrial sector and financial sectors of the JSE. This is basically a list of the combined top 30 companies of those two sectors. This categorisation helps when you are looking to invest in a mega-company rather than an up and coming company.
Firstly why should you invest in shares?
Over the years many South Africans have made money from the Johannesburg Stock Exchange. Founded in 1887, the JSE has been South Africa’s only stock exchange and as of 2003, it had over 700 companies listed. Companies can list themselves on the JSE, provided they meet a few requirements. Companies entering in the small cap are normally those in need of a capital boost so that they can expand their company and grow. Capital accumulation is one of the biggest reasons why a company will list on the stock exchange while bigger companies have other reasons. However, even bigger companies listed on the stock exchange need to raise money.
So why invest?
Well, there are two reasons why you should invest in those companies listed on the JSE, especially those on the Financial & Ind 30 index. When you purchase shares you are helping private companies to grow. When these companies grow, more jobs are created and the economy keeps on moving, which we definitely want in South Africa. But investing in shares is far from a selfless act. Depending on the company you invest in, you could be making more than your initial investment.
The index in which you invest your money is likely to give you an indication of whether or not you are going to receive dividends. Companies listed in the resource index often plough their profits straight back into the company, sometimes with no dividends paid to investors. Companies in the industrial and financial sectors are however different in this regard as they have fewer overheads and less of a need to buy new equipment. This means that your dividend payouts are higher and you could actually make a reasonable income provided your investment portfolio is correctly structured. If you are not sure if your portfolio is profitably laid out, you can always get in touch with one of our brokers.
The benefits of investing in the Financial & Ind. 30
Now that you have a better idea of why investing your money is a good idea, here are some reasons why you should choose the Financial & Ind. 30 index.
These are some of the categories within the industrial and financial sectors:
- Investment banking
- Medical and life insurance
- Banking services
- Lending services
- Food & beverage services
- Electronics manufacture
By knowing which categories you can invest in, you will be in a better position to be able to make better choices with your investments. For instance, if you work at a bank you should already know something about the finance world. It would be easier for you to start off by investing in a financial services provider.
Take care not to just include companies from the mid and large caps, when you invest. Small cap companies can have great potential and their shares could be worth so much more if you hold onto them.
Before you start investing, read these tips
Entering into the investment world is an exciting thing to do and more so, it can be a journey that is very profitable and rewarding. Some invest in helping companies grow and they make some money in doing so, while others invest because they love the excitement that can only be provided by the stock market. Here are some tips to think about before you invest.
- Don’t invest without thought, know exactly why you are buying shares. With a clear goal in mind, you will be able to make more informed choices which in turn will help you to clearly define what your risks will be.
- Know when it is the right time to sell. Holding onto shares when you should actually be selling them could damage your goals and cost you money.
- Have your long term goals and your short-term goals. With your long-term goals, you will have more time to plan, and you will see your investment grow knowing that you will have the money down the line. With this kind of investment, volatile shares are not an option. With your short-term goals, you can buy and sell in a shorter period and make your money back when you need it.
Remember to always be logical with your investments. Making mistakes is part of investing and although it can play on your emotions when you make a bad decision, you shouldn’t give up.
Ready to start investing? We are ready to help you make great choices! Speak to one of our stock brokers today to set up your portfolio. Our team of professionals can also help you if you are already an investor and you are looking for a new investment angle.