The Purple Group, who operates Global Trader (GT247), has launched EasyEquities – an innovative way to trade JSE listed shares. The main selling point is fractional shares, so if you can’t afford a full Sasol share for around R600 you can buy a fraction of a Sasol share, starting at R1 per fraction.
While the fractional share idea is certainly new, I’m not sure this was a problem looking for a solution. Do people really say I would love to have a Sasol share but I don’t have the R600? Maybe for Sasol, but if we use FirstRand as the example, where the share price is only around R43? I don’t think so. The trick I suppose is if you want to spend say only R200 you could get a third of a Sasol share or 4.6 FirstRand shares.
But to my mind the barriers for new investors are in large part fear around the stock market, which can be solved with education and costs. That’s where EasyEquities really stands out – with no minimum, no monthly admin fee and brokerage at only 0.25% (see our infographic on the impact of costs on your investing here).
If you’re doing a +R12, 000 trade, your total brokerage fee at an online broker would start from around 1%, and that’s cheap. But if you want to invest only R100 then brokerage fees will be in the region of R80 or more (over R130 at some online brokers).
At EasyEquities, a R100 trade would cost 25c in brokerage and with taxes etc. it would be under R1 for the trade, making the cost less than 1%. Markedly lower than the R80 or more from the other online brokers.
There are alternatives for those wanting to invest small amounts: Standard Bank has Auto Share Invest that enables investing into individual stocks from R500 per transaction (costing R30 for the R500 transaction); while FNB has Share Builder with no minimum transaction amount (R500 would cost R50). But both of these offerings have a limited selection (about 100 shares for Standard Bank and +20 for FNB). Further the fees are higher and both have monthly admin fees (Standard Bank only charges the admin fee if there is no activity for two months).
Another alternative is to buy Exchange Traded Funds (ETFs) directly from the ETF issuer or ETFsa.co.za. They are cheaper to buy but you’re not buying individual shares, so it’s not really comparable, and there is an annual management fee as a percentage of the portfolio (EasyEquities has zero admin fee).
So… my final verdict? The fractional part does not really excite me, but I can see why it will be useful for smaller transactions. However the pricing certainly offers a totally new dimension and brings entry-level retail client investing to a whole new level. Sure, you may not have the degree of price control, in that you don’t select what price to pay for the share, but for many that is likely is a non-issue; what matters is being able to buy a small Rand value of an individual stock without getting killed by the fees and this is what you get.
** UPDATE **
Now that EasyEquities has been running for a while it seems my thinking that part shares being not exciting is wrong. Chatting with users of the service the concept of being able to buy R100 a month without being limited to shares priced below R100 is a big deal. Whether it be part of a SOL share or R100 in Richemont currently priced at R90 that would buy 1 full Richemont and a tenth of a second Richemont.
