An online share trading competition, run by Sanlam iTrade and Summit TV during the volatile months from June to September 2008, saw 7 500 traders dealing in virtual portfolios of R1 000 000 each. Favourite shares for the top traders included fast movers Control Instruments, Eastplats and Wesco Investments. The most traded shares by value were Sasol, Anglo Platinum and Merafe.The ‘field’ consisted of both amateur and professional traders.
Amateur winner, Neville Maling, an IT professional from Kensington, Johannesburg believes that the virtual money he used to trade helped his nerve considerably. “My strategy in the competition was slightly different to how I trade in real life. I looked for opportunities to buy shares that had dropped on low volumes and bought these before they recovered. In reality, my view is slighter longer-term and more cautious.” His R1-million virtual portfolio grew to R2,68-million in four months, making full use of market volatility in cheaper shares. He just beat Christo Kok whose portfolio grew to R2,62-million.
In real life, Maling, a computer programmer, whose prize money was R100 000, will sit tight in the markets and try to find a few nice ‘little nibbles’– stocks which are cheap but likely to climb quickly in price as the market recovers.
A panel of eight professional portfolio managers started a month later than the amateurs, playing by the same rules as the amateurs. The objective of having the professional investors involved in the competition was to offer education and strategic tips to the amateurs and, even though they were outperformed by amateurs – most likely because they were not able to speculate as regularly. Winning professional, Ursula Maritz, a senior portfolio manager at Sanlam Multi Manager International, who only lost 3% while the market lost 11% for the three months to September believes that her strategy of having a diversified portfolio of good valued companies led to her success. Her R10,000 prize will be donated to Maritz’s chosen charity, CHOC, the child cancer associaltion that also benefited from another R13,500 donation by Sanlam iTrade linked to the competition.
“My advice to online traders is to do a lot of reading, both about the individual companies and about the bigger picture of industries and the economy. Spend time on the annual reports of companies which can be found online on the Sanlam iTrade website and ensure there is a solid balance sheet, strong cash flow and good management team. Traders should also ensure that their portfolio is diversified to reflect the different sectors of the JSE,” said Maritz
Referring specifically to how traders can weather the current market mood swings, Maritz believes that the strategy would definitely depend on the risk appetite of each individual investor. “If an online trader has a good appetite for risk and does not depend on the income from their share portfolio, I would advise them to stay put because there will soon be some exciting value to be found on the markets. However, the investor who depends on the income from their trading would probably be better advised to switch to cash until there is more stability and returns are more dependable.” Maritz just beat Wayne McCurrie of Momentum, Chris Gilmour of Absa, Craig Massey of Sanlam Private Investments and others to the top professional spot.
Gerhard Lampen, head of Sanlam iTrade, which falls within the Sanlam Private Investments’ stable, said that the virtual nature of the competition and the fact that trading volumes were not restricted did skew figures, but that interesting info on habits and appetites had still emerged.
“This competition is a great way to educate individuals about how to trade online, devise strategies and make good decisions. We had an exceptionally positive response – because it gives individuals the chance to try their hand at trading without using real money. A number of these participants will now have the confidence to trade online with their own capital.”
Online share trading in South Africa is made up largely of long-term investors with a peppering of speculators. “On the whole, we recommend this longer term view and, in particular at this time of uncertainty, having the patience to ride out the volatility is likely to pay dividends.”
Lampen concluded that the control and immediacy offered by online share trading can benefit the investor because they can jump on opportunities to trade rather than loosing time by phoning a stockbroker to trade. “When the market starts to swing upwards, online traders will be well placed to buy up bargains and reap the rewards.”
Visit www.sanlamitrade.co.za/eng/
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