Why Invest In Stocks?
Investment is using your initial money to generate or making more money in future. Investing in stocks is considered one of the most famous and profitable way among all the available investment tools because it offer a higher risk higher return investment platform.
The benefits include:
- Immediate Buy/Sell liquidation of your money anytime. Very low transaction cost.
- The freedom to work at your own place, at your pace in your own time.
- Easy monitoring –online log in to the stock market from anywhere in the world.
- Being able to maximise returns while spreading your risk.
- A predictable form of investment if you know what you’re doing.
- Putting you in control and freeing you of fund management fees.
- Considerable tax advantages.
Things to watch out for:
- The market can be a high volatile trading place.
- You must acquire knowledge of what you are doing.
- You must always monitor your investments.
- You must learn the discipline to enter and exit the market on entry and exit signals.
What types of stocks are there?
- Ordinary Stocks
When purchasing an ordinary stock, you own a share of the company. This entitles you to receive profits from the operations of the company in the form of dividends. You have voting rights at the annual general meeting (AGM).
- Preferential Stocks
A preference stock is different from an ordinary stock. Preference stockholders receive dividends before dividends on ordinary stocks are announced. If the company is winding up, preference stockholders rank above ordinary stockholders in the distribution of assets. It has a fixed dividend rate.
- Bonus Issue
This is a free issue of stocks to the stockholders based on the number of stocks already owned.
- Rights Issue
A rights issue can be granted to stockholders to buy stocks in the company, often below market price.
Warrants, like options, derive their price from the parent security. Warrants though are issued by banks and other financial institutions and are classified based on whether they have an investment or trading purpose.
Warrants may be issued over securities, a portfolio of securities, a stock price index, currency or commodities.
- Call Warrants
Gives holder right to buy the underlying share at a specified price within a limited period of time.
- Put Warrants
Gives holder right to sell the underlying share at a specified price within a limited period of time.
Buying and Selling Stocks
One essential thing to know is that you must go through a broker to buy and sell stocks, only a licensed broker can deal directly with the stock market.
Get a Broker
Share broker can also advise you on your trading. However, you should not depend on them for market knowledge and must do your own research to succeed in the market.
- For list of brokers:
List of participating organisations
Alternatively, you could look around for recommendations from friends or contact me.
The Role Of A Broker
To buy or sell shares on Bursa Malaysia, you need to use a registered license broker who is a member of Bursa Malaysia. You cannot deal directly with Bursa Malaysia as only brokers have direct access to the market.
- A broker acts as your agent – much like a real estate agent that sells your house.
- He/she earns a commission on the value of shares you trade – just like a real estate agent earns commission on buying and selling houses for people.
- A broker can also be involved in the listing of a new company by underwriting the float and marketing the float to their group of clients.