Following are 10 very short steps that will guide you through the trading/investing process, broken into 10 Sub-Articles for your reading convenience.
As an interested investor, you might be wondering, "What's the minimum cost for me to start investing? RM10,000?"
Actually, there's no minimum dollar value to investments, apart from other charges applied by brokers and the authorities (to be covered in a while). The only minimum is in the form of the quantity of shares you buy, which is 1 Board Lot, which is 100 Shares.
Multiply this by the price of the share you wish to buy, and you have the minimum amount you need to invest in that counter, plus other charges. For example, to purchase 1 Board Lot of a company with a share price of RM10 will require RM10 X 100 Shares = RM1000; while purchasing 1 Board Lot of a company with a share price of RM0.10 will require RM0.10 X 100 Shares = RM10.
Get the idea? Then let's move on.
To get yourself into the game, you'll need a trading account with an investment bank or brokers. Most of our local banks offer these trading facilities. For the convenience of account management, you may wish to go to one closer to your home or a place you patron often.
First make sure you have a Savings Account (please don't tell us you don't have one).
Then go to the investment bank or brokers and Open A Trading Account, preferably with the one you have your savings account to make things easier for yourself. You will usually be requested to provide a photocopy of your Identity Card and to fill up a form. While most investment banks and brokers do not impose fees for opening a trading account, some do come with a fee of RM10.
Generally, you will Receive Your Username, Password, and Trading PIN Number from your brokers in the form of a letter or email within a few working days. Use your Username and Password to login to your account. Your Trading PIN Number acts as a "trading password", where you're required to key in this PIN into a special column. This PIN is required for every transaction. Without this PIN, you won't be able to trade even if you're logged in. Keep these information safe from others.
If both accounts are with the same bank, doing an online transfer will debit and credit the accounts immediately.
If the accounts are with different banks, you'll need to get the Investment Bank's account number from your brokers, and deposit money into the Investment Bank's account. Take care to ensure that you're banking the money into the Investment Bank's account and not someone else's account. Once the transfer is complete, keep the receipt or reference number, fax or email it to your brokers, who will then validate the transfer and credit the funds to your Trading Account. This process can take from a few hours to 3 working days, depending on the validation process.
Remember to transfer the funds from your Trading Account into your Savings Account if you wish to withdraw them. The funds stays in your Trading Account even after you've sold your investments.
Common practice for funds withdrawal will be to contact the brokers and ask the brokers to make the withdrawal for you. To do so, first you'll have to make sure that all your transactions are already done and cleared, and the funds from the transaction are already credited to your account. Call the brokers, and request for the withdrawal. You'll have to go through a validation process, and a bank cheque will be issued and banked into your Savings Account. This can take from a few working days to 1 week.
Another way would be to fill up and sign a withdrawal form, and fax it to the investment bank. The investment bank will validate your signature and bank it into your Savings Account. This transaction can be completed immediately if your Savings Account and Trading Account are with the same bank.
Study the Counter you wish to invest in. To get complete information about the company, you may visit the Bursa Malaysia website, or the company's own website. Public Listed Companies (PLC) should have an Investor Relations (IR) section, which serves to communicate company information to and interact with investors and shareholders. PLCs that are very active in Investor Relations may have Email Alerts that investors can subscribe to and be informed whenever the PLC lodges an announcement with the Exchange.
Investment banks usually provide basic market data to its customers. Some even provide research done by their analysts. Of course, other media like websites and newspapers also provide basic market data and sometimes insights.
There are also Information Vendors that provide market data in a more comprehensive manner, and with additional tools that could help investors read or analyze the information. The Young Investors team prefers BursaStation.
There are certain columns in your trading platforms and it's in your best interest to at least Understand What The Numbers Mean.
Buy / Bid – This is the highest price that other buyers are willing to pay for the counter, which translates to the highest price you can sell for. Any buying price below this will be in a queue and will only be in place after the current Buy / Bid price matches are completed.
Buy Volume – This is the total number of Lots (or Board Lots? It’s same, people mostly refer to lot) that are in the queue for the current Buy / Bid price. Only when all the Lots in this Buy Volume are sold will the Buy Volume of the next lower Buy / Bid price come up.
Sell / Ask – This is the lowest price that other sellers are willing to sell the counter for, which translates to the lowest price you can buy for. Any selling price above this will be in a queue and will only be in place after the current Sell / Ask price matches are completed.
Sell Volume – This is the total number of Lots (or Board Lots? It’s same, people mostly refer to lot) that are in the queue for the current Sell / Ask price. Only when all the Lots in this Sell Volume are bought will be Sell Volume of the next higher Sell / Ask price come up.
Volume – This is the total transaction quantity that has been completed during the day, in terms of Lots (or Board Lots?).
Turnover – The total value of all trades that have been completed during the day, in terms of the local currency.
Change / Chg – The changes in the price of the counter as compared to the day before, in terms of the local currency.
% Change / % Chg – The changes in the price of the counter as compared to the day before, in terms of percentage.
High – The highest price that the counter achieved that day.
Low – The lowest price that the counter went to that day.
Last Done – The last price that the counter was traded for.
Open – The price that the counter started with that day.
Close – The price that the counter ended with that day.
Market Cap – The Market Capitalization of the counter, computed by multiplying the Total Outstanding Shares by the Current Price (Total Outstanding Shares X Current Price).
Of course, there are a lot more other numbers if you wish to learn more. But these are the basics that you should know at least so you know what's happening to the counters.
How you trade or invest depends very much on your strategy and risk appetite. There are two strategies:
This selection depends on the time and effort you can consistently put in to your trading, and also on personal preference.
Your Risk Appetite will help you decide your investment portfolio. If you are more willing to take greater risks for greater profits, you may wish to invest in Penny Stocks. If you prefer take less risk for lower returns, you may wish to invest in Blue Chip Counters or more stable counters. Do remember, there's no right or wrong, and there's no guarantee that an investment will be profitable however safe you are.
Next up, you'll have to Select the Stock You Believe Has Potential. Generally there are two methodologies:
Fundamental AnalysisFundamental Analysis is analyzing a counter through its Business and Financial Performances. This involves analysis of its Business Model, Management Team, Financial Statements (Revenue and Profit Growth, Financial Position, Sources of Revenue etc.), Business Valuation and Estimation, Industry Valuation and Comparison etc. This should give investors an idea on what the counter should really be worth (if it's Undervalued or Overvalued), or what the counter could be worth in the future, and Set a Target Price (the price the investor feels the counter should really be worth). If investors find the counter to be undervalued and see potential growth in it, investors will then Buy Into the Counter and Wait Patiently for the Counter to Achieve the Target Price (or close). Refer to our Quarterly Case Studies to see how the Young Investors Team does basic Fundamental Analysis.
Technical AnalysisTechnical Analysis normally involves stock selection through one of two methods, and requires constant monitoring of the counters as Technical Analysis rides on Trends, which could change anytime.
Finally we're at the stage where you actually start trading/investing.
The continuous trading sessions for Bursa Saham Malaysia (The Bursa Stock Exchange) is every Monday to Friday (except Public Holidays), from 9am to 12.30pm for the morning session, and 2.30pm to 5pm for the afternoon session.
After Logging In to Your Trading Account, Search for the Stock (usually there's a search bar that'll make it easier for you). Get the Stock Quote, Key In the Stock Price and Quantity (all purchases are in 100's, meaning 1 Board Lot) to the Queue, Enter your PIN Number, and Click Buy.
EVERY transaction will incur three charges, whether it is a Buy or Sell.
For retail investors or traders, the minimum Brokerage Fee is 0.6% of the Contract Value for trades valued below RM100,000 or with a minimum of RM12 (standard charges from most investment banks), whichever is higher. Minimum Brokerage Fee is 0.3% of the Contract Value for trades valued above RM100,000.
There is a special rate called Cash Up Front Rate, which is lower than the standard Brokerage Fees, and is dependent on your trade volume. A Cash Up Front Account is when you trade only with your own cash with no credit facilities.
Case 1: If you purchase 10 Board Lots (1 Lot) of a counter at RM1, then your Contract Value is RM1,000, and your Brokerage Fee will be RM1,000 X 0.6% = RM6. But the minimum Brokerage Fee is RM12, so the Brokerage Fees will be RM12.
Case 2: If you purchased 30 Board Lots (3 Lots) of the same counter instead, then your Contract Value is RM3,000 and your Brokerage Fees will be RM3,000 X 0.6% = RM18.
Another way to make your purchases would be to call your brokers to execute or key in the order for you, which will levy higher Brokerage Fees (normally RM40 or 0.6%).
The normal charges for Stamp Duty are RM1 for every RM1,000 Contract Value or part thereof. Maximum RM200 per contract.
0.03% of the Contract Value. Maximum RM1,000 per contract.
Remember, the three charges above are levied both when you buy AND sell, so always take into consideration the three charges above (twice) to acquire a more realistic view of your profits or losses.
Case 1 Continued: If you sell all 10 Board Lots (1 Lot) from your purchase from Example 1 at RM1.10, this is what it would look like:
You invest RM1,000 (Buy Contract Value) + RM12 Brokerage Fees + RM1 Stamp Duty + RM0.30 = Total Investment RM1,013.30.
You gain RM1,100 (Sell Contract Value) – (RM12 (RM1,100 X 0.6% = RM6.60 but minimum Brokerage Fees of RM12 kicks in) + RM2 Stamp Duty (remember part thereof) + RM0.33 Clearing Fees) = RM1,085.67. Your profit would be RM1,085.67 minus RM1,013.30, which is RM72.37, a good 7.14% returns ((RM72.37/RM1,013.30) * 100%).
After each trade, you will receive a letter (mail or email) with your transaction details and charges within 2 – 3 working days.
If your Trading Account is registered under your own name (Direct Account), you should also receive a monthly letter from Bursa Malaysia that states your account status and stock portfolio. However, if your Trading Account is a Nominee Account, you won't receive this letter because your brokers is the one that is trading on your behalf.
Also, whenever the Public Listed Company you invested in (the counter) calls for a General Meeting, or has released its Annual Report, you will receive the material and details via posted mail.
Remember the Savings Account that you linked to your Trading Account? That is where you will receive your Dividends, if any. On the payment date, Dividends will be paid directly into your account.
Well, now that you've got enough information, it's best to start investing. While reading all this is good, the best teacher is still experience. So go out there and start investing for your future!