4 Steps Beginners Must Know Before Buying Stocks
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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In this article, we will explain 4 steps for buying stocks that you must know before making the decision to own shares on Bursa Malaysia.
Lately, many people have started getting into stocks.
Many have also become more aware and are taking the wise step of opening a CDS account.
Alhamdulillah. This is a very positive development that will further boost the economic industry in Malaysia.
However, there are several theories related to those who are new to the stock market, one of which is the Theory of 90.
The theory states that "90% of people will lose 90% of their invested capital within 90 days".
This is very concerning because based on this theory, almost all investors are unable to make profits in the stock market, or in simpler terms, they fail in the stock market.
The simple conclusion that can be drawn from this Theory of 90 is that many people jump into the stock market without proper preparation and knowledge about stocks.
So, we have outlined 4 things that must be known by those who are new to the world of stocks.
If you are among those who are still a newbie in the stock market, you must read this until the end!
This is the most basic thing if you want to get into the stock market.
You must know how stocks work, why companies list their shares on the market, and how we can profit from stocks.
Many people have misconceptions about stocks and cannot differentiate between stocks, get-rich-quick schemes, and gambling.
If you want something that is too quick to make profits, such as "buy shares today and become a millionaire tomorrow", stocks are not the place for that.
So, it would be wise for you to read a more detailed article about what stocks are.
Many investors buy a holding without knowing the reason. They depend 100% on luck.
This is very dangerous and goes against what should be done, because to own a holding, we must know at least a little about the background of the company we are interested in investing in.
Let us take a smaller-scale example.
If a friend wants to convince you to invest in a business they have just started, would you immediately hand over a sum of capital without knowing anything about the business?
At the very least, we should be aware of things such as the financial history, a rough business plan, and projected plans for the coming years.
Only then will you not be investing blindly.
The same applies to stocks. In fact, it is easier in the stock market because all financial statements can be obtained easily and completely.
In the stock market, there are many ways or fields of knowledge to evaluate a company before we decide to make it our holding company.
Among them are fundamental analysis (FA), technical analysis (TA), and market sentiment.
Fundamental Analysis is the way for us to read a company. Knowing the intrinsic value of a company, earnings per share, market capitalisation, PE ratio, net tangible asset, and dividend yield (there are actually many more). We can dissect a company''s financial reports based on financial statements that can be easily obtained from this website.
Technical Analysis on the other hand is about how we read charts. By reading charts, we can study a company''s history. In charts, we can also observe the emotions of traders, namely the emotions of fear and greed.
However, it is not easy to analyse charts because there are many things that need to be understood, such as how to read candlesticks, volume and price analysis, how to read indicators, how to determine support and resistance, and how to read trends.
To buy stocks, you must know how to manage the capital you have.
For example, if you have a capital of RM5,000, and then you want to buy a holding, you spend all of your capital on a single company.
Unless you have the power to see the future and are 110% certain that a stock will definitely go up (which of course, normal humans do not have such ability).
There are ways to position your holdings when buying stocks.
In certain situations, we also need technical analysis related to stocks by understanding stock charts along with the use of indicators.
Among the indicators that we will learn about in the future are RSI, Parabolic SAR, and Ichimoku Kinko Hyo.
This requires deeper learning as it is quite subjective and needs a rather lengthy explanation.
Once you know which company you want to buy and how much capital you want to invest, the next step is knowing how to make purchases and sales of stock holdings.
As an ordinary person, we cannot buy a holding without going through an intermediary. The intermediary referred to here is a stockbroker.
There are many brokers in Malaysia, among them are Malacca Securities, Maybank, UOB, CIMB, Bank Islam, and many more.
But you do not need to meet anyone every time you want to make a purchase or sale because today''s technology is very helpful.
You can make purchases and sales easily through online platforms. All you need is the internet and a computer or mobile phone!
Do not worry about how to buy and sell, as this will be taught in detail by your remiser or dealer who registered your CDS account.
Below is an example of a simulation of buying and selling stocks using the Mplus trading platform.
My suggestion is to open a CDS account even if you are still a newbie, because through this CDS account, you can view the platform and study every company traded on Bursa Malaysia.
For example, you may have read news about ECRL, and then you can see how the rise in T7Global shares was related to the announcement that ECRL would continue.
Do not worry, you will not be charged any fees for accessing your CDS account platform.
Not sure which broker to choose? Open one with us, Malacca Securities, as their charges are among the lowest.
Some people prefer to get a more detailed and thorough explanation.
That is one of the reasons why we at Mahersaham also conduct Stock Basics Classes at various locations.
In our Stock Basics Class, we try to simplify the explanation of stocks so that newbies or those who are still new and less familiar with the ins and outs of stock investing on Bursa Malaysia can start investing in the stock market quickly.
What are you waiting for? Come register for a CDS account with Mahersaham and you can join exclusive classes for Mahersaham clients.
The 4 basic steps are: (1) understand what stocks are and how they work, (2) know why you want to buy a particular company''s shares through fundamental and technical analysis, (3) learn proper money management and capital allocation, and (4) know how to execute buy and sell orders through a stockbroker platform.
Yes, you need a Central Depository System (CDS) account to buy and sell stocks on Bursa Malaysia. You can open one through stockbrokers such as Malacca Securities, Maybank, UOB, CIMB, or Bank Islam. The account itself is free to open and access.
The Theory of 90 states that 90% of people will lose 90% of their invested capital within 90 days. This highlights the importance of proper preparation, knowledge, and strategy before entering the stock market.
Fundamental analysis involves reading a company''s financial statements to understand its intrinsic value, earnings per share, PE ratio, and other financial metrics. Technical analysis involves reading stock charts to study price history, trading patterns, support and resistance levels, and trader emotions such as fear and greed.
Want to buy and sell stocks but don''t have a CDS account yet? Register for a CDS account with Mahersaham and join exclusive classes for clients.
Just getting started with stocks? Get the free stock basics ebook here and master the fundamentals of investing with ease.