Lecture 6 (Chapter 1). Broker Types. Trading vs Real Investing

Before we introduce the actual brokers you can use, it's worth clearing up a confusion that trips up almost every beginner: not everything called "share trading" involves actually owning shares.

Real investing: you own a piece of the company

This is what this whole course has been building toward. When you buy a real share on an "Online Share Trading" or "Share Investor" platform, you become the actual, registered (usually electronic) owner of a small piece of that company. You:

• Qualify for dividends
• Have your shares held safely in your name (or a nominee account on your behalf)
• Benefit from any long-term price growth
• Are exposed to genuine business risk — if the company does badly, so does your investment

There's no expiry date, no borrowed money involved, and no one forcing you to close the position. You can hold a real share for 20 years if you want to.

Trading (often via CFDs): you don't own anything. You're betting on price movement

A CFD (Contract for Difference) is a completely different instrument that simply tracks a share's price. When you "trade" a CFD:

• You never own the underlying share - you own a contract with the broker
• Positions are usually leveraged (borrowed money), meaning small price moves create outsized gains or losses
• These products are built for short-term, active speculation - hours, days, sometimes weeks - not long-term wealth building
• You can lose more than you put in, in some cases

Here's a useful real-world illustration: some of the very brokers we'll introduce in the next lesson deliberately run these as two entirely separate businesses. For example, Sharenet operates both "Sharenet Securities" (real JSE share ownership, for investors) and a completely separate "Sharenet CFDs" arm (leveraged trading, for speculators) - same parent company, but fundamentally different products with different risk profiles. Several bank platforms bundle both options into a single account, letting you choose real shares or CFDs on the same screen which is exactly why it's easy to get confused if you don't know what to look for.

One more nuance worth knowing: even some "real investing" platforms use a CFD structure behind the scenes for very small (fractional) purchases because you can't literally own 0.1 of a physical share certificate. This is a legal and technical workaround, not a red flag, but it's worth knowing that "whole share" purchases and "fractional share" purchases aren't always structured identically, even on the same platform.

How to tell which one you're looking at, in practice:

• Does the platform mention "leverage," "margin," or "gearing"? → That's trading.
• Does it mention dividends, long-term ownership, or tax-free savings accounts? → That's real investing.
• If unsure, ask directly: "Do I own the underlying share, or a contract based on its price?"

This course is built entirely around the first path - real ownership, real dividends, real long-term growth. Every broker we introduce next will be evaluated specifically on how well it supports that approach, not on trading features.