In an increasingly digital world, online share trading (OST) has taken off. You can buy and sell shares conveniently on your computer or smartphone wherever you are, whenever you feel the need to check or adjust your investments.

This is not to say that OST comes without challenges – you will need to do your homework on stock markets and the various financial instruments on offer. But it’s a worthwhile type of investment vehicle to consider if you want more control over which individual companies and industries you invest in. Alternatively, it’s also a vehicle to consider if you want your investment growth to be more responsive to shifts in the stock market, and you feel you have enough knowledge and experience to ‘play the market’ on your own.

Whatever your motivation, OST may be a better money choice if you have sufficient expertise on your side. Buying and selling the shares of your own choosing, rather than investing in the stock market through a shared-risk product like unit trusts (for example), may help you grow your investments faster.

But note those qualifiers: ‘if you have enough knowledge … experience … expertise …’ Like all stock market investments, OST also exposes you to different levels of risk, which we’ll return to shortly.
 

Is online share trading the same as investing?

Yes and no. Yes, in that when you buy shares online, you are hoping the value will increase so that you’ll make a profit when you sell them. Alternatively, you might sell shares expecting them to lose value, so that you can afford to buy back more shares when their value starts to rise again. Investing is similar. When you invest in a unit trust, for example, your monthly payment is pooled with that of the other investors in the trust. The trust investment experts then use it to make stock-market trades with the same long-term goal: buying low and selling high to maximise long-term returns.

But OST is also unlike investing, in that when you invest in a unit trust, you hand your money over to the trust’s experts to manage according to best practice and the fund’s risk appetite. You’ll have no day-to-day control over how that money is invested, no matter what the stock market is doing. OST, on the other hand, allows you to buy and sell various financial instruments available on the stock market directly, digitally, and in real time.

That does not mean you can’t use OST in a long-term investment strategy. There’s nothing to stop you approaching the stock market just like the fund manager of a unit trust would – you can use OST to buy a range of financial instruments that balance high, medium and low risk, then review your investments once a month to ensure they’re delivering steady growth.

However, OST offers you the option of another investment strategy: you can buy and sell shares more frequently based on data you receive on your OST platform. Because you can track the performance of shares in real time, you can buy and sell with greater confidence. It’s a fast-paced world – you can buy and sell stocks every minute, if you have the funds and the knowledge to trade aggressively.

That pace might be too frenetic for most investors, but you can still build a rewarding OST strategy around hourly or daily updates, buying and selling accordingly as the market changes. Provided you know how to read the data and mitigate your risk, you could stand to earn decent returns trading shares online.
 

Is OST for you?

We’ve mentioned risk several times now, and with good reason. It all boils down to your appetite for risk. It requires a lot of dedication to stay focused on the movements of the market all the time, and you can never predict which shares will rise or fall with 100% certainty. Products like unit trusts have more predictable returns precisely because they take a long-term view. If you consider a graph of stock-market performance over the past 100 years, the trend is steadily upward.

In the short term, of course, that graph fluctuates up and down constantly. To make OST a successful part of your investment strategy, you need to be able to judge which way it’s likely to go next. When you guess wrong, you need the financial reserves and the fortitude to ride it out until the market turns again and your investment recovers.

If you are willing to learn and invest your time and money in OST, you might consider including it as an element of your investment strategy. If you’re not comfortable committing that much of your time to managing your investments, or taking on that level of risk, consider other financial instruments offered by financial services providers, like unit trusts, in which experts manage stock market trading on behalf of a shared-risk investment. It all comes down to your personal circumstances and your financial goals.
 

Explore OST on the Nedbank platform

You can explore further on Nedbank’s OST platform, available through Online Banking or the Money app. One of the best ways to learn is to get involved, and the new interface and easy-to-use dashboards make it easier and simpler for you to learn the basics of OST. Use your Nedbank ID to create an account on the platform, and once you’re verified, you’re all set to start trading.

Don’t, however, simply dive in and start making random trades with your hard-earned money before you have a decent grasp of how the various financial instruments work. Nedbank experts say it’s essential that you first gain some baseline knowledge of the different financial instruments, and they recommend that you adopt a 5-year strategy on any investments you make through OST.

Your strategy might be to focus on one company or one commodity – but remember that trading digitally makes it easier to spread your investments over different risk categories. On the Nedbank OST platform you can learn more about spreading your risks, and how to read the trends reports and stock price charts prepared by financial experts, to help you make more informed decisions. You have access to insights from Nedbank OST experts, enabling you to make more calculated decisions when it comes to buying and selling.

The platform gives you free access to online training modules that cover how to trade shares for beginners. You can also choose to receive real-time access to company news and information from reputed sources such as Reuters and Nedbank. Or set up your profile to receive alerts via SMS or email if there’s a hot stock you’re tracking, so that you know how it’s moving while you’re busy with something else.

For more information or professional advice about Nedbank OST, you can email nedbankonlinetrading@nedbank.co.za. If you’re ready to start OST, you can register now. Follow the prompts on the platform to get in touch with an OST expert if you need help.