Thanks for hanging in there investors! We’re almost there! This is the fifth article in a six-part series!
So far, I’ve shown you the economic value in owning shares, your ability to make decisions about what company’s shares to purchase and how to interpret some of the common ratios and jargons. For those of you just joining us, I encourage you to search in the BUZZ archive for On The Money and read through the previous issues. It is now time for you to take that proactive step towards buying and selling shares.
There are three important steps that you will need to take….
The first step is to get a Jamaica Central Securities Depository (JCSD) Account with the Jamaica Stock Exchange (JSE). This is a unique number that is assigned to each account which allows you to trade stocks on the JSE. This account is set up via a broker. Decide on a broker that you wish to set up your stockbrokerage account with. There are several options in Jamaica, to name a few…
Barita Investments Ltd.
Jamaica Money Market Brokers
Jamaica National Fund Managers
NCB Capital Matkets
Sagicor Investments Jamaica Limited
Stocks and Security Ltd
In order to set up this account you will require certain basic information. Guidelines may differ slightly across each brokerage house but generally the requirements are similar.
Proof of Identity (Drivers Licence, Passport or National ID)
Tax Registration Number – TRN
Proof of Address (Voter’s ID, Recent utility Bill, Bank Statement, Justice of the Peace (JP) verification letter etc.)
Proof of Income (payslips, job letter, company financials, JP verification etc.)
Character References (In most cases just the name and phone number of the person will suffice)
Remember this is a broad guideline, so contact your desired brokerage house for their specific requirements.
Now that your account has been opened you will be given three important number:
The brokerage code of your broker (for example, 18 is for Sagicor, 17 is for JMMB)
Your JCSD number
The settlement account number at your broker (this too will be unique to you)
You are ready to trade!!!
Some brokerages will have a minimum amount that you can start with. Often between $5000-$10000. Others will stipulate that you must buy a minimum of 100 units of any stock, so that will be the cost of the units plus fees. The largest fee involved in buying stocks is the broker fee. The broker fee averages around 1.75-2%. However, the JSE has set up an online portal that allows you to log your own buy and sell orders online. If you are so inclined, this will reduce your broker fee down to .75%! The programme is called Jtraderpro, you will require the three numbers I mentioned before to start trading using the platform.
Decide which stock or stocks you wish to buy. For some individuals that may be an IPO, for others it may be an existing company.
Do not wait until an IPO is announced before you arrange for your stockbrokerage account to be in place.
Usually there is a rush to apply for shares in an IPO and given the turnaround time for opening a new account an individual could miss the application period.
Submit application for shares to your brokerage as soon as an IPO’s prospectus and applications are available.
Waiting until the actual opening date may mean not getting through. Yes, technically your application is not processed until the actual opening date, but the Stock Market is based on an order management system where the applications received first are processed first. For example, even though in Fontana’s Prospectus (basically a 100 plus page document telling you about the company, the decision to go public and the terms of the offer) a period of two weeks was stated between the open date of the application and the proposed closed date, the offer was opened and closed in less than fifteen (15) minutes. This is because, in all prospectuses, the issuer always reserves the right to close the application process at any given time. So, if you waited until the day Fontana’s IPO opened to apply for shares then you would have missed out. ☹
This is also true when buying stocks that are already listed on the exchange. Earlier, I noted that the JSE operates based on an order management system. That means when you apply for your shares your order is queued according to the date and time that order was received. If your offer price is better than the guys’ ahead, then yours will be filled first. However, since there is no way of knowing this, just go in early!
Time is Money!
In my final part in this series, I will share with you some of my favourite stocks on the stock exchange and why I believe they should be added to your portfolio. I will also tell you about some exciting IPO offers that should be issued within the next few months! So, don’t miss it!
See you guys next week!