HOW TO INVEST IN THE LONDON STOCK EXCHANGE WITH CFDS FROM SOUTH AFRICA
LSE is an attractive financial market to invest in due to its long tradition. Shares of 3,000 companies from 70 different countries are traded on it. Learn about your options to operate in the UK from here.
Best Brokers for UK Shares Trading available in South Africa
Can I Buy UK Shares from South Africa?
We have had several questions from readers on whether investors in South Africa can buy British stocks being a non-UK resident. The UK law system regulates UK Stocks and bonds, yet, you do not have to be a British citizen to trade in the London Stock Exchange, in other words, you may buy UK shares being a South African citizen. No specific laws prohibit South Africans (Or other non-UK citizens) from investing in the different UK stock markets. Many investment firms cater to international clients. You will be (generally) only subject to UK tax on limited local source income and gains; on the resulting profit when trading those shares, that is.
London Stock Exchange: Buying Shares of a Global Power
Although some of the comings and goings that the United Kingdom is experiencing regarding Brexit cleared after it came to effect on Dec 2020, it remains a world power at all levels, military, economic and financial. The UK has a considerable number of world-renowned companies in a large number of sectors: energy, minerals, banking, among others. The British economy is among the most innovative, efficient and business-friendly economies. Their products and services are in very high demand globally for their quality, especially on their former colonies.
In addition to this, investing in British stocks involves gaining exposure to the British pound (GBP), one of the most robust and most stable currencies globally. For these reasons, investing in British stocks listed at the London Stock Exchange is an excellent option for diversifying a portfolio of stocks.
Shares of giant British Corporations are some of the most sought after financial assets by global investors. Below we list [Some of] the most popular stocks:
Royal Dutch Shell: The giant oil company
HSBC Holdings: The big bank
BP: Another big oil company.
AstraZeneca: If you have lived on the earth during Covid times, you know who AstraZeneca is.
GlaxoSmithKline: A pharmaceutical owner of half of the brands you hold in your bathroom.
Diageo: An alcoholic beverage producer, owner of some of the most well-renowned whiskies, rums and vodkas.
Unilever: An industrial colossus that produces articles of mass consumption.
Rio Tinto: One of the largest mining companies globally.
Reckitt Benckiser Group: Another mass consumption industrial giant.
Vodafone Group: The company that revolutionized the mobile business by globalizing it needs no further introduction.
Prudential: One of the largest global insurers and asset manager. As of 2019, they managed around 540 billion US dollars (That's a lot of zeros).
Lloyds Banking Group: Another traditional British Bank.
The previous is an unfinished list of the most well-renowned shares; there's a significant number of internationally recognized companies and brands available to invest at the LSE. A rounded way of investing is to invest in the FTSE100 index, which groups the top 100 companies that trade at the London Stock Exchange.
FTSE100: The Index that Best Expresses the UK market
Financial Times 100 Index, also known as FTSE100, or Footsie, is one of the most extensively respected stock market indices globally. The FTSE100 is the most representative index of the UK financial markets.
The index is constructed from the market capitalization of 100 large companies that issued shares at the LSE. It represents a market capitalization of approximately 1.8 trillion pounds (Around 70% of the stock market as a whole). The FTSE Group, a subsidiary of the London Stock Exchange maintains and balances the index components and weighting.
Investing in a financial instrument that replicates the FTSE100 Index is (the best?) an excellent way to invest in a good portion of the British economy through the shares of its corporate giants.
Brokers like AvaTrade allow trading UK Stocks in a straightforward way
What is the minimum amount to invest in UK Shares from South Africa?
Unlike most general public thinks, the answer to this question is that many stockbrokers do not have a minimum deposit (or a tiny amount of cash); which means no minimum amount. Also, to gain more clients, many brokers do not charge a commission to acquire UK shares.
How to Open a Trading Account to Invest in the London Stock Exchange from South Africa
Opening an investment account with an Online Broker is a process that is completed online and requires:
First, choose the broker that best fits your investment goals.
Upload an ID and a proof of address (electricity, water bills, etc.), through the Broker's App or via email.
Make sure to choose the right base currency of the account. With some brokers, changing it once you open it, can be painful. The base can be in US Dollars (USD), Euros (EUR), Pound Sterling (GBP), Swiss Franc (CHF), Australian Dollar (AUD) as the base currency. Practically, all of them offer US Dollars or Euros as an option and most of them also in Sterling.
Once the broker has approved the account, it's time to deposit cash. The depositing and withdrawing money methods are usually Credit Cards, Bank Transfers or eWallets (PayPal, PaySafe, Skrill, SafetyPay, Neteller, among many others). The available options to deposit funds will depend on each broker. A vital fact to mention is that all of the Brokers presented above allow you to use a simulator on their platform; they allow testing their Demo account, totally Free. In other words, you can open a Demo account, try the platform, and then decide whether to deposit money or not.
But I am not an Investment Banker, is it easy to invest?
Online Brokers allow investing in the London Stock Exchange straightforwardly through optimized apps that grant easy and fast access to the UK financial markets. Most platforms resemble a social network or any other phone app: They are designed so that the investor can learn and start trading very quickly, without the need for much prior knowledge. To buy shares of, for example, bp, or to invest in a financial instrument that replicates the FTSE100 index, you have to:
open a trading account as explained before,
Search for "BP" or "FTSE100" on the Broker's Trading platform, and
press the "Buy" button.
And, done, you are officially investing in British related financial assets. If you wish to move forward, check out the four options that we have presented initially, which are, in our opinion, the best ones to deal with in South Africa.