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Sharenet College Guide to Profitable Stock Market Investing

What does the course cover?

The course consists of 25 modules, beginning with investment basics and moving through to intermediate and advanced topics.

INTRODUCTION TO TRADING AND INVESTING
Module 1 - Introduction to Investing on the Stock Exchange
Module 2 - The Johannesburg Stock Exchange
Module 3 - The Listed Company
Module 4 - Investment Principles
 
SELECTING, TRADING & MANAGING SHARES
Module 5 - Share Basics
Module 6 - Introduction to Financial Ratios
Module 7 - Selecting a Shortlist of Shares
Module 8 - Share Selection Worksheets
Module 9 - Trading Shares on the JSE
Module 10 - Money Management for Share Trading
 
FUNDAMENTAL ANALYSIS
Module 11 - Introduction to Fundamental Analysis
Module 12 - Understanding the Financial Accounts
Module 13 - Understanding the Annual Reports
Module 14 - Corporate Restructuring
 
TECHNICAL ANALYSIS
Module 15 - Introduction to Technical Analysis
 
UNDERSTANDING THE MARKET & ECONOMY
Module 16 - Tracking the Market
Module 17 - Basic Economic Theory
Module 18 - Economic and Market Statistics
 
ALTERNATIVE INVESTMENTS
Module 19 - Unit Trusts and Exchange Traded Products (ETPs)
Module 20 - Forwards and Futures
Module 21 - Options and Warrants
Module 22 - Contracts for Difference and Financial Spread Betting
Module 23 - Foreign Exchange (Forex) Trading
 
PERSONAL INVESTMENT PLANNING
Module 24 - Tax and Your Investments
Module 25 - Winning Advice from Top Traders and Investors
 
*Click on a specific module to read a more detailed breakdown

INTRODUCTION TO TRADING AND INVESTING

Module 1 - Introduction to Investing on the Stock Exchange

Investing provides an exciting alternative to the traditional way of making money - the first module shows why.

  • Why invest on the stock market?
  • How risky are shares?
  • A simple plan to achieve financial success
  • Where do I start?

Module 2 - The Johannesburg Stock Exchange

You're going to need some background to the JSE and how companies are listed. How does investing on the stock market benefit you? This module answers this question and more.

  • Purpose and benefits of a stock exchange
  • Brief history of the JSE
  • Sectors of the JSE
  • Membership and deregulation of the JSE
  • Listing a company
  • Methods of listing a company
  • Pre-listing statements
  • Advantages of listing a company
  • Investor protection
  • A company prospectus
  • The King reports on corporate governance

Module 3 - The Listed Company

If you decide to invest in the shares of a company, it is important that you know what a company actually is: how it is formed, how it functions and how you play a role. Discover what rights you have as a shareholder:

  • Forms of enterprise
  • Legal entity
  • Characteristics of a public company
  • Formation of a company
  • Share capital of a company
  • Capital maintenance
  • Other types of shares
  • Meetings of shareholders
  • Voting by shareholders
  • Company director
  • Rights of the ordinary shareholder

Module 4 - Investment Principles

It is important that you know your investment goals before you enter the markets, and then put into practice solid investment principles that will ensure success.

  • Decide on your specific investment objectives
  • Remember to diversify
  • Get an indication of where the overall market is trading
  • Don't just buy the shares, buy the whole business
  • Invest in winning companies
  • Invest in management
  • Assess the rate of increase in earnings per share
  • Look at the size of the company
  • Check the level of gearing
  • Assess the cash flow
  • Know the basic facts about the companies that you invest in
  • Evaluate the price graph

SELECTING, TRADING & MANAGING SHARES

Module 5 - Share Basics

You need to know some basics before you can start investing. Learn some important terms, how accurate share prices are and when and why they move up and down.

  • Comparing shares
  • Market value ratios
  • Accuracy of share prices and the discounting process
  • Why prices move up and down

Module 6 - Introduction to Financial Ratios

Financial ratios are historical in nature and are generally a good indicator of how a company has performed in the past few years. Develop a clearer understanding by comparing ratios to previous years and with similar companies.

  • What is a financial ratio?
  • Profitability ratios
  • Debt management or financial leverage ratios
  • Liquidity or solvency ratios
  • Asset management or activity ratios
  • Economic Value Added ratio (EVA)
  • Final note on ratios

Module 7 - Selecting a Shortlist of Shares

Once you have established your investment objectives, the next step is deciding what shares you will select to invest in. Various sources will provide you with the necessary information in order to make this decision.

  • Review shares making new highs
  • Review the top ten shares up
  • Review active sectors
  • Review company reports
  • Study price graphs
  • Keep up-to-date with company news and reviews

Module 8 - Share Selection Worksheets

Complete these three easy to use worksheets as a basis for share selection and how to monitor your portfolio.

  • Share selection worksheet A
  • Share selection worksheet B
  • Share selection worksheet C

Module 9 - Trading Shares on the JSE

You've learnt the basics and now need the hard facts. How do you open a stockbroker's account? How do you purchase and sell a share?

  • Advantages of investing in listed shares
  • Disadvantages of investing in listed shares
  • Opening a stockbroker account
  • JSE trading system
  • Market auctions
  • Purchasing a share
  • Selling a share
  • Tips for the pricing of bids and offers
  • Protection of investors
  • Costs involved in buying and selling shares
  • Broker Deal Accounting system
  • Central depository and electronic settlement

Module 10 - Money Management for Share Trading

There are various risks involved when you decide to invest your money. You need a plan of action and a well-defined investment and money management strategy that will help reduce these risks and maximise your portfolio returns over a long period of time.

  • Hold the optimal portfolio size
  • Use a stop-loss strategy
  • Avoid averaging down when the share price falls
  • Know when to sell winning shares
  • Use pyramid buying when the share price rises

FUNDAMENTAL ANALYSIS

Module 11 - Introduction to Fundamental Analysis

Before you become a shareholder in a particular company, it is necessary that you do careful research about the actual company and its future potential. Learn how to analyse a a company's financial statements so that you can decide whether it will be a worthwhile investment.

  • What is fundamental analysis?
  • Various fundamental factors

Module 12 - Understanding the Financial Accounts

Before you buy shares in a particular company, it is necessary that you know how to analyse their financial accounts. This will give you, as a potential investor, a good understanding of the company and the direction they are taking.

  • Transactions in a company
  • Doctrine of disclosure and annual financial statements
  • Fair presentation of the company's financial situation
  • Double entry accounting system
  • Fundamental accounting concepts
  • Interpretation of financial statements
  • Balance sheet
  • Income statement

Module 13 - Understanding the Annual Reports

Discover how to analyse a company's annual report, and pick out characteristics of a successful or failing company to help you select winning shares (and avoid losers) for your portfolio.

  • Analysing the components of the Annual Report
  • Financial highlights
  • Chairman's statement
  • Corporate governance report
  • Sustainable development report
  • Segmental operations review
  • Value added statement
  • Financial Director's review
  • Independent auditors' report
  • Income statement
  • Balance sheet
  • Cash flow statement
  • Notes to the annual financial statements

Module 14 - Corporate Restructuring

Companies are constantly looking for ways to add value to shareholders. Acquiring companies and then selling them off can make the enlarged company more valuable. However, this corporate restructuring comes with its own set of problems which the investor needs to be aware of.

  • Unbundling
  • Mergers and acquisitions
  • Rights offers
  • Cautionary announcements
  • Share splits and consolidations
  • Capitalisation issues
  • Cautionary announcements

TECHNICAL ANALYSIS

Module 15 - Introduction to Technical Analysis

Technical analysis is based on the assumption that all information pertinent to a share will be immediately factored into the share price, so there is no need to do further research other than examine share charts. This module will equip you to understand charting and make use of technical analysis techniques.

  • Concepts in technical analysis
  • Technical analysis indicators
  • Graphs
  • Trends and trendlines
  • Charting patterns
  • Moving averages
  • Relative strength
  • Oscillators

UNDERSTANDING THE MARKET & ECONOMY

Module 16 - Tracking the Market

You need to be on top of your game when it comes to tracking the stock market. The best way to determine the general direction of the market is to follow and understand what the market is doing every day.

  • Why should you follow market indices?
  • FTSE/JSE Actuaries Indices
  • Net advance/decline ratio and graph
  • Ratio of new highs to new lows
  • Overseas indicators
  • Reading the share details in the media
  • Practical suggestion of how to track the market

Module 17 - Basic Economic Theory

Every business functions in an economic environment. As an investor, you need to have a good understanding of the economy before you consider investing your funds in a listed company.

  • Money flows
  • Government policy
  • Government debt
  • Fixed interest capital market
  • Money market

Module 18 - Economic and Market Statistics

This module details JSE market and economic statistics and explains how to understand and use them to your investment advantage.

  • JSE market statistics
  • Economic statistics

ALTERNATIVE INVESTMENTS

Module 19 - Unit Trusts and Exchange Traded Products (ETPs)

Learn about unit trusts and ETPs, which are essentially collective investments that enable you to pool your money with other investors who have similar investment objectives, to gain exposure to a greater variety of instruments at a lower cost than if you invested directly in them.

  • Definition of unit trust
  • Open-ended funds
  • Closed trusts
  • Advantages of equity unity trusts
  • Types of unit trusts
  • Unit trusts in the media
  • Exchange Traded Products
  • Advantages of ETPs
  • Top ETFs and ETNs on the JSE

Module 20 - Forwards and Futures

This module looks at the more advanced topic of forward and futures contracts. They belong to a group of financial instruments known as derivatives: assets whose value is derived from the movement in price of an underlying asset or index.

  • Definition of forward contracts and futures contracts
  • A brief history of futures contracts
  • Futures trading in South Africa
  • Aspects of futures contracts
  • Types of futures contracts
  • Futures trading process
  • Marking to market and futures pricing
  • Pricing of SSF's and stock index futures
  • Futures trading strategies
  • Practical examples of futures trading strategies
  • Futures price quotations in the media

Module 21 - Options and Warrants

In this module we focus on options for the purchase or sale of financial assets, such as stocks. We also look at the characteristics and advantages of warrants, and explain the trading of options and warrants in South Africa.

  • Definition of an option
  • Types of options
  • Trading options
  • Valuing Options
  • Significant aspects of organised options markets
  • Option trading strategies
  • Hedging with options
  • Option trading in South Africa
  • Warrants
  • Warrant trading in South Africa

Module 22 - Contracts for Difference (CFDs) and Financial Spread Betting (FSB)

Another advanced topic is that of CFDs and FSB. This module explains the nature of CFDs and FSB, appropriate trading strategies, advantages and disadvantages, and costs of trading.

  • CFDs: definition and background
  • Margin trading
  • Dividends
  • Financing and commission costs
  • CFD vs. physical trading
  • Equity CFD trading strategies
  • CFD order types
  • Index CFDs
  • Financial Spread Betting: definition and background
  • Margin requirements
  • Types of bets
  • Equity spread bets
  • Dividend adjustments on equities
  • Stop losses on spread bets

Module 23 - Foreign Exchange (Forex) Trading

The range of investment instruments explored in this course would not be complete without a module on foreign exchange trading a very popular yet highly volatile type of investment. Although it appears very straightforward, especially to a new investor, foreign exchange trading is not for the faint hearted, and you need to be well informed before you set out.

  • Foreign exchange markets
  • Forex trading
  • Bid-offer spread
  • Currency "pips"
  • Spot and forward markets
  • Trading on margin
  • The effect of interest rate differentials
  • Examples of forex trades
  • Alternative methods of forex trading
  • Forex trading in South Africa
  • Determinants of currency exchange rates

PERSONAL INVESTMENT PLANNING

Module 24 - Tax and Your Investments

Investors and active traders need to be aware of various income tax considerations when buying and selling shares. Include this process in your personal planning phase.

  • Income tax on trading and investing
  • Capital Gains Tax on shares
  • How to structure your portfolio to minimise income tax

Module 25 - Winning Advice from Top Traders and Investors

"A successful trader is rational, analytical, able to control emotions, practical and profit orientated." Find out who said this and other inspirational quotes, and collect valuable tips.

  • Develop the qualities of a successful trader or investor
  • Adopt strategies for successful trading and investing
  • Avoid common mistakes
  • Get rid of wrong thinking
  • Be discerning when selecting shares to invest in
  • Use technical analysis to support your research
  • Don't get hung up on luck
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