How to buy international stocks from South Africa

Update: I once wrote about eToro as an investing platform, available to South Africans. This is no longer the case, nor my recommendation and I have updated this article.

If this is the start of your investing journey, you’d be wise to spend a few hours to brush up on the basics. It’s not difficult (what some in the industry will want you to believe) and you can absolutely do it by yourself. Start by reading a few articles on Investopedia and understand the difference between stocks (also called shares or equities), ETFs (also called index-tracking funds) and mutual funds.

TL;DR: there is a lot of nonsense and risky things you can put your money in. In this article, I’ll only show you how to buy low cost index-tracking funds with Easy Equities.

Although some banks have trading platforms available to South Africans, all of them fall short in two ways: they’re too expensive and they’re too complex to use. I’ve been using EasyEquities (and even got my 70 year old dad to sign up and use them without my help, so I’m sure you’ll be fine). That said, do some research and compare platforms. These are some the things to search for:

• Customer support. Is it local, fast and high quality? Easy Equities offers email and phone-in support.
• Taxes. Don’t worry about the amount of taxes you’ll pay (if any at all), but make sure you’ll be given the right tax documents. All South African-registered platforms (like Easy Equities) will have to provide you with these, but few offshore platforms will.
• Sign-up fees. Some platforms charge you a once-off admin fee for signing up (EasyEquities doesn’t).
• Trading fees (also known as broker fees). This is the price you pay when you buy or sell shares/ETFs. This can be as high as 2% of the transaction, but with Easy Equities you pay 0.25%, the lowest I’ve found in South Africa.
• Monthly platform fees. This might be a few hundred rand per month with your bank, to have access to the platform and see the performance of your shares/ETFs (sort-of in the same way that banks charged us to use online banking). There are no monthly platform fees with Easy Equities.
• Admin fees. This is the most important one to look for (and avoid). Many financial institutions charge you a usage/administration fee (they get creative with the names sometimes), where they charge you a percentage of the investment balance you have with them. This can be as high as 2%, which in the case of a R100,000 investment means you’ll pay R2,000 in fees every year, even if you (or they) did nothing with your investment. It gets worse: if  your investments grow to R150,000, you’ll pay R3,000. It gets worse yet: even if you did nothing and your investments go down in value, you’ll still pay this fixed percentage. Note: there are zero annual/administration fees with Easy Equities (and a handful of reputable South African platforms).

Step one: Sign up

Platform: EasyEquities
Registered in: South Africa

Easy Equities allows South African investors to open a South African rand (ZAR) and/or a US dollar (USD) account with them. After signing up for a free account, you’ll be required to send in some information (proof of identity and proof of address) before you can use your account.

You’ll also be given a demo account, where you can invest with fake Monopoly money to see how the platform works. Of course, these aren’t actual gains and losses that you’re incurring, but it the performance of your virtual account is exactly the same as if you would have used actual money.

Step two: Make a deposit

To fund your ZAR account, simply make a deposit to Easy Equities’ bank from your South African bank account. You’ll be given a unique reference number, it’s important that you use this (so that they can allocate the money to your account).

If you also have a USD account, you can either make a deposit from your USD bank account to the Easy Equities USD bank, or you can use your ZAR deposit and buy dollars with it, straight from the platform. Note that the exchange rates offered by Shyft (by Standard Bank) are usually much cheaper, but it does involve signing up with another platform just to buy US dollars. Depending on the amount you’re looking to send, you could save thousands of rand by doing so, however.

Step three: Buy some ETFs

No, before you buy anything, do your research. Don’t ever put all your money in one single stock. Don’t buy a stock, buy the market.

If you want to invest in the South African market, the cheapest way to do so is to buy the Satrix 40 ETF. This way, you’ll own a small share in all the top 40 South African companies. If you want to invest in the US market, buy an S&P500 ETF. That way, you’ll own a small share in 500 top US companies.

Here is how to do so in under twenty seconds (note that my R500 investment cost me less than R2 in trading fees):

Over time, you’ll notice that your ETFs will pay dividends. This amount will be paid directly into your Easy Equities account. You can use it to buy more ETFs, or withdraw it to your bank account.

Step four: returning the funds

Once you’ve made some gains and you would like to sell some shares, you can do so, again with a few clicks.

(I don’t need to tell you this, because you did your research, but stocks/ETFs are volatile. It’s best to ignore the news and the short-term fluctuations and take a long view (the “set it and forget it” investment strategy). The longer the investment period, the higher are your chances of success when you invest in the overall stock market.)

You can withdraw money from the trading platform to your local South African bank account, or if you have a US bank account, you can withdraw it to that account.

Notes:

• This is not investment advice and purely for educational purposes.
• Discuss large financial matters with a registered financial planner. Pay them once-off for advice, not ongoing amounts.
• Pay the least amount in fees (because of compound interest).
• Don’t invest in a single stock, buy the entire market.
• Read up on this stuff. It’s simple and might just help you retire more comfortably one day.

Did I miss anything? Let me know below!