CHAPTER 11
THE MECHANICS – PLACING THE ORDER
STEP 1
OPENING A SHARE DEALING ACCOUNT
Once you have decided that you want to deal in shares, you have to open a standard share dealing account, which usually is free. The basic share dealing account offers certain services for free , that means “ No ADVICE “ they would simply buy or sell as per instructions given. They allow you to trade over the phone or thru internet
If you have opened an account with your broker then you have to send them money stating which and how many shares you want to buy. They would charge you certain brokerage fees for their services. Also few of them charge trading fee, if there is no activity for a certain period of time as inactivity fee.
If you are trading through a web site, then it would ask for a username in which you want to open an account and then a password, that’s it and you are on. Once you put the username and the password , it would ask you which companies shares you want to buy, how much you want to buy it would then give you a share quote , if acceptable to you .they get their research on the trading charts and
You can always think and come back again. If the quote is acceptable to you u confirms it and in return you will get an email confirmation by the broker and the deal is done.
Yes, it sounds a little tensed but you will get use to it over a period of time.
CHAPTER 12
RESEARCH STOCKS
STEP2
RESEARCH STOCKS
It is very important that you do proper research on the stock because the stock markets behave in weird ways and you should have proper knowledge to it. Never buy the stocks at random, as the market is not random and it works on lots of principles and attributes. If you want to succeed in the stock market you have to do proper research. Either you do the research on your own or you can hire someone to do it for you.
5 VITAL ISSUES
Fundamentals about the company. How is the company doing, is it a profit making company and a sound company.
What is the price history of the stocks of that company, i.e. how much are the investors paying for the stocks.
Price target is also a vital factor; you have to see how much the investors would pay for the stocks in future.
What catalysts would change the investor’s perception of the stock?
The most important of all compare the stocks with others in the same industry.
So, to sum up we can say that it’s important that as an investor you should have understanding of wider markets trends, knowledge of individual sectors. Also you should be able to analyze the financial records. You should not be able to have access to rumors and upcoming deals. Last but the most important is No emotional bias, generally this last point is overlooked.
Research before buying the shares; this can be done in many ways,
Go through the TV SHOWS and the newspapers, they have all the details of the shares which are doing well.
Take valuable tips from friends and family members who have the knowledge of the subject,
Never take any decision in HASTE and do not ignore any ADVICE.
Full service brokers also help to do the research, they hire the stock analysts and they in turn find out which would be the ideal stocks purchase for the client. They charge a specific fee for their services.
Interviews of the owners, CEO’S, directors etc also are helpful as they normally give the correct synopsis of their company.
In today’s world the internet technology has made the things easier for the investors to the research on their fingertips, they can research on trading charts and platforms. Some of these charts are available for free and some have costs attached to it.
It is of very important that you get all relevant and correct information on time so as to grow in the market and make maximum profits. You should be aware of that in the stock trading wrong and unreliable information is very dangerous.
CHAPTER 13
HOW TO READ QUOTES
HOW TO READ SHARE QUOTES IN NEWSPAPERS / INTERNET
Most of the people track their stock trades in the business sections of the newspaper or on the internet. The information provided on the stock table is the most current data available.
The stock table looks something like below
STEP1
Column 1 and 2 are the 52 WEEK High and Low – This is the highest and the lowest price paid for the single stock over the last 52 weeks i.e. one year.
STEP 2
Column 3 is the Companies name and the Type of stock – This column lists the name of the company. If there are no special letters or numbers following the name it is considered to be a common stock, but For example “pf” is return then it means the preferred stock, different symbols imply different types of stocks.
Step 3
Column 4 is the Ticker Symbol (SYM) – This is the unique alphabetic name which identifies the stock issued by the firm. If you are looking for the stocks quotes online you should search for the company by the Ticker Symbol.
STEP 4
Column 5 is the Dividend per Share – This indicated the annual dividend paid for each share, but if the space is blank then the company is not paying any dividends.
STEP5
Column 6 is the Dividend Yield –This is the percentage return on the dividend. Some companies do not pay dividends regularly; the Board of Directors decides how much to pay on quarterly basis calculated on annual dividend of the share divided by the price per share.
STEP 6
Column 7 is the Price/ Earnings Ratio –Mostly commonly known as P/E, this is calculated the current stocks prices by earnings per share from the last 4 quarters. The higher the P/E, the more investors are paying for the company’s potential.
STEP 7
Column 8 is the Trading Volume –The figures shows the total number of shares traded for the day, listed in hundreds. To get the actual number traded add”00” to the end of the numbers listed or multiply the number in the column by 100
STEP 8
Column 9 and 10 are the Days High and Low – This indicates the maximum and the minimum people have paid for the stock in a day
STEP 9
Column 11 is the Close – The close is the last trading price recorded at the end of the day, i.e. at market close.
STEP 10
Column is 12 is the Net Change – This is the dollar value change in the stock price then the last day’s closing price. If the + (positive) sign indicates rise and a – (negative) sign indicates a drop in the price.
