I am almost completely ignorant abt stock trading and share market and all that. I am not even a business/economics/commerce student and I have very very very little idea about all this stuff.
I only understand the basic concept that you can buy stocks and sell them at a profil or loss and so make or lose money. I have been buying the IPO stocks like PPL, KAPCO etc.
I want to go into stock trading as a part time hobby or a secondary job though. And I am in Karachi.
I do know of uncles who were not even educated beyond matric who learnt the ropes by hanging out in the stock exchange and now they are really rich. I can’t afford to spend much time at the stock exchange though since I work full time thruout the day, and anwyays I don’t think females go to the KSE?
Also, I might be moving out of country in less than 2 years, so is it worth it to get into it? Can I continue from overseas?
Khayr…
It seems to be the hottest thing to do these days and a good way to make quick bucks. So how exactly do I get started and is it worth it? Any advice?
Theres a lot more to stocks than just buying and selling and making profits. Actually, the saavy ones dont always buy and sell. They buy and hold.
There are 2 types of players in the game. The investors, and the traders. The trader is the one who makes 10 trades a day, and the investor is the one who makes 10 trades a year. What it means is, that for a trader, this is his source of income, and he needs to buy and sell frequently, not only to make money, but to keep his cash liquid. Whereas an investor is one who buys stocks for the long term.
Gone are the days when you could go to the KSE and learn the tricks of the trades. Gone are the days when 70 year old memons used to line up ranchor lines and kharadar and I-I chundrigar road, exchanging parchis. Since switching to an automated trading system, theres no need for a physical presence on the floor, and one can trade from anywhere in the world. All you need is a net connection, and for brokers, a TWS (trading workstation).
How to get started. If you have some stocks in the form of IPOs, and wish to learn the system, Id advise to hold on to those stocks, and just monitor the market on a daily basis....or just read some business newspapers. Do this for at least a year. What this will do is show you how the price of your stocks reacts to different kinds of news, different kinds of market conditions, and different situations. Some stocks may not be affected by anything at all. Others may go down even if there is a power outage. See how incidents like politics affect the price of your stock. How changes in oil prices affects them. Read their quarterly reports. See how their personal performance affects their prices. And most importantly, see WHEN these effects take place. Sometimes a stock doesnt feel the brunt till days after a particular incidence. Sometimes, it takes the hit a day before the decision is even passed.
3 basic fundamentals for stock trading that one needs to be on top of are knowing what to buy, followed by when to buy it. Final fundamental, which is the most important, is when to sell. Using your current IPO holdings, monitor the market conditions for a year, or at least 6 months, and then figure out what stocks may have been a good buy during this time....which points may have been good for you to buy deeper into these stocks.....and what time would have been best to sell these stocks. Make a list of the indicators that you feel have had the most impact on your decisions.
Use those list of indicators to step into the market on a regular basis, and use them for other stocks. But remember, its always a learning process. The factors that work for one company dont always work for others. Sometimes, there are no factors to work with. You just have to understand the mood of the market. There are millions of traders other than you. You have to work with them in order to understand the mood of the market.
Regarding trading, you can open an online brokerage account, and operate it from anywhere in the world. All you need is a net connection, and money deposited in the account.
Trading has always been the 'hottest' thing. Just that now theres a lot more public awareness.
Wow…thanks a lot for such a detailed reply Akif bhai that was really helpful :k:
My mom has PPL and KAPCO shares right now (both IPO’s). I think I’ll start monitoring those, as you said. Business news is so boring to read but I guess if I want to venture into this world of stocks I should start reading it
Thanks again for your advice
In your other thread you were saying online trading is not really effective in Pakistan…or its not that efficient? Does it cover ALL stocks that are traded in KSE?
I’ll prolly be a trader not an investor at this point.
Another question, you don’t have to answer it, but do you trade in stock exchanges other than the KSE as well? I mean, if everything is done online, then I can even buy stocks for like lets say Google which are being traded in another country right? I don’t have to limit myself to KSE? Obviously though, those stocks are much more expensive…but the profit you get from them is prolly much higer as well.
got it 4 homework na
i mean ma major was Share Holder Value Analysis and da teacher was really determined dat i pass dat coarse so he asked us 2 maintain a portfolio in stock xchange n then submit a report of da outcome, dat was kindda fun
got seriously involved when Al-Falah given da sharez 2 da employees n since then no lookin back, however i dun trade much.
being professionaly involved in a totally different industry m more of da investor kind, havin both short term n long term invstmnts, it needs less time n effort in termz of monitoring da market still 1 has 2 keep his ears always open. I m still learnin how thingz work around here coz u hv 2 look after so many factorz like economy, IR, Govt Policiez n their effects on stox. full time job hay
on da other side da traderz baycharay r alwayz on there toez, sniffin ev where wat da nxt wave is bringin no wonder they reap most benefit being highly vulnerable 2 da risk
Irem, you can always opt for television shows. There are plenty out there. Check out the Business plus channel on cable. Plus, others like Geo and Indus have shows related to daily market activity as well. Listening is better than reading, I agree:)
Online trading covers all stocks yes, meaning, you can buy and sell shares of any of the 770+ companies on the KSE. Regarding the online trading sites in Pakistan, what I said was that they are still maturing, with regards to the resources they offer, like analysis and reviews. As far as trading speed is concerned, frankly, you'd need speed only if you are buying and selling every 30 seconds. Otherwise, the speed and service offered by Pakistani online brokerages is good enough to do the job. Market trades (trades at the market price) take place within 3-5 seconds on almost all sites. Theres nothing to 'fear' about here. Its just that normally, from a brokerage, one would expect some help as well, and our brokerages lag in this department. But you can make that up by watching tv shows, and reading papers.
Its your personal decision, but I would not advise it for beginners. Day Trading, as its called, can be as hurtful as helpful. Prices can plunge as quickly as they go up. And for traders, like I said before, the idea is to keep liquid cash on hand in order to continue making trades, so they are forced to sell out at huge losses at times, just because they need to recover whatever money they have, in order to make other purchases. Besides, day trading is more of a full time job.
Yes, I do trade in the NYSE as well. Im sure there might be some brokerages that offer accounts to foreigners as well, but most of them are meant for US residents. If you have a social security #, and can show a valid address in the US, you can open an account with any US brokerage.
The profits on those stocks are not that much higher. Besides, even when you do make a fair amount of profit, you pay almost 50% tax on it in the US. Compare that to under 5% for Pakistan:) But youre right, you dont have to limit yourself to KSE. But it is advisable to limit yourself to one market. Who wants to monitor multiple markets on a daily basis.
Not necessarily. For starters, investors are those who have alternate sources of income, and use long term stocks as a means of building savings. Good stocks, when held for the long term, can yield many positives. eg. quarterly dividends..bonus shares..right shares. So even if your initial investment is small, it can still grow to a handsome size in say, 5-10 years.
Another good idea is to do what Simply Seema did. Create a portfolio without money. Assume you have Rs. 100,000. Now monitor the market, and make decisions as you would with real money, regarding what you want to buy, and at what price. Play around with purchases and sales, and at the end of 1 month, see how you did? How much more do you have than Rs. 100,000? How much less? Do you have any?:D This exercise will give you an idea of how patient you are, and how resilient you are. If you find that you are very impulsive, and impatient, then stay away from day trading, and stick to investing long term.
Simply Seema...what was the outcome of your portfolio?
Akif, you should probably start writing in a financial journal..
For anyone who wants to INVEST in a company, learning to understand the Balance Sheet is very crucial. Understanding the balance sheet is a boring task... however it pays off and not only helps in the trading but also in other aspects of life!
Following are my favorite indicators about the health of a company whose stock I am evaluating:
Price/Earning: This is the return on your money when holding on to a stock. This is the ratio of the stock price divided by the dividends a company pays. I normally stay away from companies whose P/E is more than 20.
Price/Sales Ratio: which is the total market value of a company divided by the total revenue. A value stock has a lower Price/Sales ration. Look at the aggregate P/S ratio of the index of which the company is a member. For a value stock, I favor those whose P/S is lower than their index.
Free Cash Flow: Esentially, this is the amount of free cash a company has after accounting for all the expenses. More free cash flow is better!
Price/Book Ratio: Lower the price to book ratio, more value a stock has.
More often than once, I have followed the following princial with success:
== Buy when others are selling... Sell when others are buying ==
Grunge thanks a lot for the info but that all went above my head, its too complicated/complex. Hmmm. As someone who doesn't know anything about stocks or economics (beyond bare basics) this info seems too specialised.
Irem baji being an investor already kiya baat hai…
My dad used to invest in the stock back in karachi through a cousin who worked at HABIB Bank as some senior officer…i went to KSE for a day or two cuz my dad ws pushing me but i did not like it there so gave that up…
Eik aur baat …when we were coming here like 4 yrs ago the same uncle of mine said to my dad to buy the PSO shares that were trading i think at 70 Rupees and dad was telling me that those shares are now valued at 250 Rupees…khair my dad did not buy the shares since he thought what was the point since we were moving…
I also know an uncle who was a regular investor..made and lost money in stocks…but my dad always made these investments for long-time basis that was his strategy.
A lot of people forget to consider the most basic element of stock trading and/or investment.
The basic principle is this: Stock prices go up when people collectively are buying more shares of the company's stock than the collective number of shares that are being sold. Stock prices go down when more shares are being sold than are being bought.
PE Ratios, book values, price/sales, positive cash flows etc. are simply tools people believe have been reliable predictors of whether, over time, people will be buying more shares or selling more shares at certain prices. During the high tech boom/speculative days of the US markets, you could throw all these tools out the window because they weren't predictive of the behaviors of buyers and sellers for these issues.
In the old days, dividend paying public utilitiy stocks were considered pretty "safe" investments. The reason was that the purchasers of those stocks were generally buying them to obtain the dividend to supplement their income. Thus, they would buy and hold. Not much sales pressure and the risk of losing money through price drops was low. Likewise, the upside chances of making money due to stock price increase was also low. You would pretty much know what your return on investment would be every year through payment of the dividend. For instance, a certain number of people would take a low risk 9% return per year rather than buying an insured government bond with no risk and paying 6% return per year. When interest rates went up and government bonds got closer to paying 9%, the stock price would drop a little because 9% with risk was not as attractive as 8% with no risk. More people would sell the utility stock and invest in the bond. As the stock price dropped a little, assuming the same dividend amount, the rate of return on dividends would go up until a rate of equilibrium was again reached. If interest rates went down and government bonds started paying say 4%, the utility stock might go up in price a little because more people were attracted to the higher return. But as the price of the stock went up, the rate of return on the dividend would go down until equilibrium was restored. The moves up and down in stock price were not wild gyrations. The prices stayed more in a narrow range.
As to every issue or industry, you've got to determine which factors are important in people's choices to buy or sell the stock. Whether you are a short term or long term investor, if you're trying to make money on price swings, the secret of your success is how well you predict the buying and selling habits of others.
how about bonds? anybody has any experience with mfs? i was recently suggested by my banker to open a 'brokerage' account. each month you pay an amount (min $50) and over a period of time (min 3-5 yrs) you can see the results. also the bank takes 5% each month to cover for the costs of processing. do you have to pay any tax on it? this is not going to make you rich but it sounds like a good start.
imo, investing in stocks requires more time and work.
After coming back, I have seen Pakistani stock exchange is just a casino.. I had vowed never to invest in stocks when I took a core MBA course Portfolio analysis - and saw my Indian professor - guru of stocks getting bankrupt.. all those risky and blue chip stocks ideas are rarely applicable..
I will apply in IPOs and wait when market crashes.. invest in few stocks and sell after few months .
but I guess if I want to venture into this world of stocks I should start reading it 
