How to pick shares in 2026

 

Overview

With the Covid-19 pandemic, there has been a surge in the number of people who have become interested in shares and the stock market. Knowing how to buy shares and which shares to pick is a large advantage when you want to start investing, and there is so much information available about stock trading.   However, with the amount of information available, comes a lot of confusion and even a sense of being overwhelmed. To help cut through all the noise, and to help you in the process of picking the right shares, the following article will help you know how to pick the best shares on the JSE.  

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A quick overview on how to pick shares on the JSE

• ✔️Shares – The Basics
• ✔️How to pick the perfect shares for your portfolio
• ✔️What is the next step?
• How to choose shares from the JSE
• FAQ

 

Shares – The Basics

What are shares?

Stocks, shares, or equity investments represent legal ownership in a company. When you buy a share, you become a part owner of the company whose shares you purchase and depending on the type of shares you own, you even have the right to cast votes during important meetings, earn dividends, and other advantages.   Companies issue shares to raise money and there are two types of shares that you can buy, common or preferred. Common shares entitles a shareholder to proportionate share of the profits or losses of the company.   Preferred shares come with predetermined dividend payments, and between the two, common shares are the main types of shares that you can buy today.  

What does share investment entail?

You can profit when you buy and own shares either when the value of your shares increase or when you earn quarterly dividend payments. Investments can accumulate over time, and it can yield a solid return as result of compound interest, allowing your interest to start earning interest.  

Why do stock prices fluctuate?

The inner workings of the stock market can be compared to an auction. Buyers and sellers of shares are either individuals, corporations, or governments. The price of a share will decrease when the number of sellers exceeds that of buyers, whereas the price will increase when buyers exceed sellers.   The performance of a company will not directly influence the price on a share, it is the reaction of investors to the performance which determines the fluctuation of share prices. More investors will be interested in a share if the company performs well, increasing the price, and the opposite will be true if a company underperforms.  

Market Capitalisation

The market capitalisation of a company, or market cap, refers to the sum of the total shares which are outstanding, multiplied by the price of shares. For example, if a company’s market cap is R100 million, it means that there are one million outstanding shares priced at R100 each.   Even though this seems quite simple, it is important to note that market cap has more meaning than merely the share price. Market cap also allows you to evaluate a company in relation to similarly sized companies in its industry.   A small cap company with a capitalization of R500 million cannot be compared to a large cap company which is worth R10 billion. In South Africa and according to the Johannesburg Stock Exchange (JSE), companies are typically grouped by market cap as follows:  

• Small cap – When market cap is below R1 billion.
• Medium cap – When market cap is between R1 billion and R10 billion.
• Large cap – When market cap is above R10 billion.

 

Stock Splits

A stock split occurs when a company increases its total number of shares by dividing up the ones that it currently has, typically according to a two-to-one ratio.   Stock splits also often occur when prices are increasing ins such a way that it deters and disadvantages smaller investors. The company can also keep the trading volume up by creating a larger buying pool.  

How to pick the perfect shares for your portfolio

The process involved with picking the right shares for your portfolio consists of several considerations which will simplify the process and make it less tedious.  

Determine your Investment Goals

Before you start investing and consider choosing your shares, you need to understand the purpose behind your investment and portfolio. Each investor has their own reason; however, the main theme is towards making money, growing wealth, and generating an income supplement during retirement.   Each investment goal will have its own strategy and before you can proceed, you must evaluate what type of investor you are.  

Determine which type of Investor you are

There are three main types of investors such as income-orientated investors who focus on the buying, and holding, of shares in companies who pay regular and decent dividends. These companies are solid but low-growth companies found in sectors such as utilities.   Investors who are aimed at wealth preservation have lower tolerance where risks are concerned, either by nature or as result of their circumstances. These investors prefer to invest in stable blue-chip organisations. These investors also “zero in” on consumer staples who are companies who do well in both challenging and good times.   The type of investor who seeks capital appreciation will consider shares in companies that are still in their best early growth years. Investors such as these are willing to take higher risks for the chance of earning larger returns.  

Portfolio Diversification

Any of these investor types may use either one or a few investment strategies, which is at the core of portfolio diversification. While a conservative investor devotes a small portion of their portfolio to growth stocks, an aggressive investor will earmark a percentage for solid blue-chip stocks, allowing them to offset any losses.   While deciding on the category in which you fall as an investor is easy, figuring out which stocks you should pick to achieve your objectives remains more complicated.  

Keep your eyes open

One of the important things you should do while you decide on your stocks, is keep informed on market news as well as opinions of experts and analysts. You can gain valuable insight by reading financial news and keeping updated on industry blogs of financial writers, as a form of passive research.  

The “story” behind picking a stock

Investors can deduce that, with the increase in the demand for a service or product, some producers of the product or providers of a service may prosper. This type of analysis forms a “story” behind investments, which can justify the purchase of a share or number of shares.   Simultaneously, it is crucial that you are critical of your own assumptions as well as theories. When you are comfortable and convinced of typical arguments after you have performed qualitative research, you can use investor presentation reports and corporate press releases of companies to help you choose the right shares.  

Find a company

You can conduct a search on companies, either by finding exchange-traded funds (ETFs) which track the performance of industries that interest you and viewing the individual shares that these funds are interested in.   You can also use a market screener to filter shares according to specific criteria such as industry or sector. Market screeners provide investors with additional features such as the ability to sort companies according to their market cap, dividend yield, and other useful metrics.   Lastly, you can search the blogosphere, stock analysis articles, and financial news releases for news, reviews, and comments on certain companies. However, when you do this, remember to be critical of everything that you read and to analyse both sides of the argument.  

Look at different corporate presentations

When you are convinced that the industry that you are interest in is one that offers a solid investment and you are familiar with the major players, you can turn your attention to investor presentations of certain companies.   These presentations are not as comprehensive as financial statements, but they tend to provide a general overview of how companies make their money. They are also much easier to absorb that sophisticated, complex financial reports.   In addition, these reports also provide forward-looking information on the expected direction of the company along with the industry in which it operates. When you browse company websites and read through their presentations, you can easily refine your search and pinpoint the best additions to your portfolio.  

What is the next step?

Once you have concluded your research, you will either be left with a single investment prospect, or you will have a list of ten or more companies. You can either find, at the end of your search, that the industry is not a suitable match, meaning that your research prevented you from making a bad investment.   Knowing when not to invest is an integral part of the process involved with share investment.  

How to choose shares from the JSE

The Johannesburg Stock Exchange, or JSE, facilitates the buying and selling of company shares along with stocks and several types of commodities. Even though companies are listed with the JSE, you cannot buy shares directly from the JSE as they have specific regulations in place to prohibit these types of transactions.   Investors can only purchase shares from the JSE by using a stockbroker which will buy the shares on their behalf. The process involved with choosing the right stockbroker may seem tedious, but when you consider the following important factors, you can easily choose the right broker for buying shares:  

• Regulation and authorisation. Only use brokers who have valid regulation with the Financial Sector Conduct Authority (FSCA) in South Africa.
• Consider the costs and fees involved and make sure that it aligns with your own financial planning and restrictions. This relates to trading fees including spread, margin requirement, trading commissions, and others as well as any non-trading fees.
• Online security and account protection. Make sure that the broker can protect your information by using the latest, innovative protocols such as two-factor authentication, multiple signatures, biometrics, and others.
• Trading software and platforms.
• The type of accounts that the broker offers along with the trading conditions.
• The ways through which deposits and withdrawals can be made.
• Customer support and communication channels.
• The training, education, and research materials, tools, and resources offered by the broker.
• What others say about the broker – in the form of reviews and comments by other traders.

  When you choose companies and their respective shares from the JSE, it is advisable that investors invest in companies that show record of good governance as well as continuous growth. Apart from shares, investors can also consider market-related indices, which are different companies that are pooled into one group in which the investor can place their capital.   These indices can either be in the same industry, such as the JSE Top 40 index, which includes the 40 largest companies by market capitalisation. When investors place their money in an index, it means that they spread their funds across all companies in that specific index, providing their portfolio with diversification.   This means that, in case of loss in one industry or company, that there are others which can offset this loss, ensuring that an investor’s capital is safe.  

FAQ

What are shares?

Shares represent a unit of ownership in a company, with two main types of shares namely common and preferred.  

Can I hold more than one share?

Yes, you can hold more than one share in a company, or across several companies and industries. You can also consider investment in ETFs, Mutual Funds, and investment in market-related indices.  

Is it expensive to buy shares?

No, there are cheap shares that you can buy with a small investment.  

How can I purchase shares?

You can purchase shares through a stockbroker which is regulated by the FSCA.  

Can I make a profit from buying shares?

Yes, you can make a profit from buying shares when they are cheap and selling when the price increases, or you can make long-term returns by holding shares over an extended period.  

Can I buy shares with R100 and less?

Yes, there are many shares from popular companies in South Africa which are listed on the JSE of R100 and less.  

Can I buy shares through a broker?

Yes, it is the most popular way to buy shares.

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