According to the BlackRock website, one common investing myth is that it’s primarily for the wealthy. Here’s where we debunk that myth. Haydn Johns, Head of PSG Life and PSG Invest at PSG Wealth, emphasized the importance of starting with what you have and staying consistent. Haydn also recommended investing at least 15% of one’s income, stressing that the most important thing is to start. In this guide, we’ll explore how you can buy shares for R100, how it works, as well as the potential risks and benefits involved.
How R100 Can Get You Started
While investors typically purchase a single share from a company, fractional shares, just as the name suggests, allow you to buy just a fraction of a single company share. This means you can buy shares for R100 and still gain exposure to companies whose full share prices may be out of reach.
If you’re looking for the best place to buy shares for R100, several brokerage platforms make this possible. Some reputable platforms include:
- Interactive Brokers
- MEXEM
- XTB
What we love most about fractional shares is that they have lowered the barrier of entry for investing. South Africans can now buy shares for R100, making it easier than ever for the broader population to build wealth without having to a large upfront investment.
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How to Invest R100 in Shares
There are several ways to put your R100 to work in the stock market. Below are some smart ways to get started on your investment journey.
ETFs
ETFs (Exchange-traded funds) allow you to own a slice of many companies, commodities, and bonds, in a single purchase. Satrix 40 ETF, for instance, tracks the performance of the 40 largest companies in the JSE (Johannesburg Stock Exchange), hence letting you have instant diversification in your investments without the need to purchase full individual shares.
How to Invest with R100
- Create an account on SatrixNOW
- Deposit R100
- Choose an ETF that suits your investment goals and buy a fractional share
Small-Cap Shares
Small-cap shares are smaller companies listed in the JSE that are often more affordable compared to blue-chip stocks. Small caps usually carry with them a higher level of risk but have a higher potential for long-term growth.
How to Invest with R100
- Open a low-cost brokerage account in platforms like FNB Share Builder or EasyEquities
- Look for small-cap shares priced under R100
- Buy small-cap shares using your deposited capital
This method lets you purchase full individual shares rather than fractional ones.
Unit trusts via Debit Orders
Unlike ETFs, unit trusts aren’t traded on the stock exchange. Instead, investors participate directly through a dedicated fund manager.
Unit trusts pool money from several investors, making them ideal for investors who prefer a hands-off approach to managing their assets. When you buy shares for R100 through a unit trust, your contribution becomes part of a professionally managed portfolio, offering diversification and convenience without the need for active trading.
How to Invest with R100
- Choose a fund manager like Nedgroup Investments, Allan Gray, Ninety One, or Coronation.
- Set up a monthly debit order for a fixed amount of R100
- Each month, R100 is automatically deducted to purchase unit trusts
- Over time, the value of your units grows as the fund generates returns.
What You Can Earn with R100
Curious to know about the earning potential of your R100 investment? Here’s a quick look at how that small amount can grow.
- Dividends
When you buy shares for R100, even if it’s just a fraction, you’re still entitled to a proportional share of dividends, just like with full individual shares. Dividends are cash payments that companies distribute to their shareholders as a portion of their profit.
- Capital growth
Another way for your R100 investment to grow is through capital appreciation. This pertains to the increase in the share price of the stocks you own. Let’s say you bought a share for R100, and by this time next year, the share price has grown by 10%. That said, your stock would be worth R110.
- Compounding over time
The real power of investing lies in compounding interest. Think of investing as tree planting. Your initial R100 is the first seed you planted. Over time, the seed grows into a tree and produces fruit, your first returns. If you take the seeds from those fruits and plant them, they’d grow into separate trees and begin producing fruits of their own. With time, you don’t just have one or two trees. You have an entire garden, each contributing to your harvest.
In investment terms, even if you just buy shares for R100 and it earns interest, that return gets added to your original amount. By the following year, you’ll be growing your funds not just on the initial R100 but also on the growth it generated.
Risks of Starting Small
Even though buying shares for R100 is a great way to begin your investing journey, it’s important to be wary of potential pitfalls that come with investments, even small ones. Investments like fractional shares only make the entry point more accessible, but it doesn’t eliminate any challenges investors may face. Below are some risks every investor should be aware of before getting started.
- Market volatility
Market volatility means the stock market doesn’t move in a straight line. It fluctuates, going up and down. That said, if you buy shares for R100, your investment could grow to R200 or drop to R90. This can be extremely disheartening, especially for new traders. But the good news is that fluctuations are usually temporary, and the market tends to recover over time. The key is to enter the market with a clear strategy and not to let short-term dips urge you to make emotional decisions.
- Fees that eat into small contributions
One of the key disadvantages of buying shares for only R100 is the impact of fees. Even when using low-cost platforms, investors need to understand the fees charged by brokerages. Monthly account fees, withdrawal fees, or even trading fees can easily eat into your R100 investment before it even has the chance to grow.
- Behavioral risks
Building wealth takes time, not overnight. Some new investors panic when they see the share price drop and abandon their strategy by selling their stocks. Others grow impatient and stop investing altogether when market conditions don’t improve quickly enough.
Benefits of Starting Small
Despite the risks, starting small also comes with several benefits, some of which are listed below.
- Accessibility
Thanks to brokerage platforms that let you buy shares for R100, you can begin your journey with wealth building without needing to reach a specific income level. This shift makes investing more accessible to the general majority and no longer reserved just for the wealthy.
- Hands-on learning experience
Starting with a small investment enables you to experiment with ETFs, unit trusts, or even fractional shares, without the fear of losing a large sum of money. This lets you have first-hand experience in trading and investments, building confidence before committing to larger investments.
- Habit-building for long-term financial discipline
Money gets you through the door, but the key to long-term wealth building is consistency. A monthly commitment to buy shares for R100 may seem small, but it’s a powerful habit that helps build the financial discipline needed for larger, more consistent contributions in the future.
Final Verdict
The idea that investing is only for the wealthy is becoming increasingly outdated. Thanks to fractional shares, ETFs, small-cap shares, and unit trusts, regular South Africans can now buy shares for R100 and begin their investing journey.
While the barrier to entry has been lowered, it’s important to understand that there are still risks to investing, like market volatility and emotional decision-making. But by starting small, let’s say when you buy shares for R100 for example, and then you gradually scale up as your income grows and stay disciplined, you can overcome these challenges. In the end, waiting for the “perfect time” often leads to missed opportunities. The best way forward is to take that first step and begin your investing journey today.
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