6 Effective Methods for Playing Stocks Online - A Detailed Guide for Beginners

Stock market is one of the most popular investment tools today, but many new investors still do not fully understand the different types of online stock trading and the opportunities this market offers. This article will help you grasp basic knowledge about stocks, the various types available in the Vietnamese market, as well as the advantages and disadvantages of each.

What Is Stock? Basic Definition

Stock (or shares) is a financial product with value that the owner can trade on the market. This asset can exist in the form of paper certificates, electronic records, or ledger entries, confirming the legal rights of the owner over the issuing company.

Stocks are traded on specialized exchanges - the stock market. Moreover, stocks are the foundation for more complex financial products such as indices, futures contracts, exchange-traded funds, and many other derivatives.

Because stock prices constantly fluctuate with market changes, this is an important investment channel that can yield superior returns compared to traditional investment forms.

6 Popular Ways to Trade Stocks Online in Vietnam

The Vietnamese stock market today features a comprehensive collection of stocks and derivative financial products similar to international markets, including indices, options, ETFs, and many other tools. However, each type of stock has its own characteristics. Below are the popular products that investors can participate in within the Vietnamese market.

1. IPO Stocks (Initial Public Offering)

IPO stocks are shares issued by a company for the first time to the public to raise capital. This is common stock, usually issued in certificate form. IPO shareholders enjoy standard company rights.

When a company issues additional shares later to raise more capital, these new shares are called SPO (Seasoned Public Offering).

Advantages:

• High growth potential in the long term
• Buy at low prices, potentially high profits
• Transparent and clear stock prices

Disadvantages:

• Very difficult to buy at IPO due to high demand
• Large volatility, higher risk compared to regular stocks

2. Single Stocks - Traditional Online Stock Trading Method

Single stocks allow shareholders to confirm ownership of a part of the company. There are two main types: common stocks and preferred stocks.

Common stockholders have voting rights at shareholder meetings, can participate in voting on company decisions, and can run for board positions. However, they cannot withdraw capital but only transfer their shares.

Preferred stockholders enjoy additional benefits such as purchasing at lower prices and receiving dividends before common shareholders. But they do not have voting rights or eligibility for leadership positions.

Advantages:

• Low cost - no management fees, only transaction fees
• High long-term returns compared to gold, silver, and other assets (based on 80 years of data)
• Full control over transaction timing
• High liquidity, easy to buy and sell on the exchange

Disadvantages:

• Difficult to diversify a portfolio with limited capital
• Requires extensive research and management
• Easily influenced by personal emotions, leading to poor decisions

3. Stock Index (Stock Index)

A stock index is a collection of stocks or bonds representing a specific market segment. For example, the VN30 index in Vietnam includes the 30 strongest stocks, accounting for about 80% of market capitalization and listed on HoSE.

Globally, the S&P 500 index includes 500 top US stocks (accounting for 75-80% of market capitalization), listed on NYSE and NASDAQ. The DJIA (Dow Jones) consists of 30 of the most powerful stocks weighted by price.

Advantages:

• Automatic diversification - buying an index means buying 30 or 500 stocks with one investment
• Long-term risk reduction through diversification
• Cost savings on trading fees
• Time and effort savings compared to selecting individual stocks

Disadvantages:

• Cannot achieve super-high profits because the portfolio may include weak companies

4. Exchange-Traded Funds (ETFs) (ETF - Exchange-Traded Fund)

An ETF is a fund that invests in many underlying assets. You can buy and sell ETF shares just like trading regular company stocks. On the exchange, ETFs are often marked in green.

Some stock indices are also ETFs, such as S&P 500 and DJIA. In Vietnam, FTSE Vietnam ETF was the first established in 2008. Currently, there are 7 active ETFs, including 3 main funds: foreign funds like VNM ETF (VANECK), FTSE, and domestic VFMVN30 ETF, which together account for over 90% of the total scale.

Advantages:

• Automatic diversification into many assets
• Easy to trade, low costs, dividend payouts
• Some ETFs can trade options, Long/Short orders like forex

Disadvantages:

• Commissions can be high depending on the platform
• Low trading volume leading to large bid-ask spreads
• Some ETFs are subject to high taxes

5. Stock Index Futures (Stock Futures)

Stock index futures are agreements to buy/sell a stock index at a future date. These are derivative instruments where both parties agree on the index price at a future time. When the contract expires, the seller must fulfill the contract at the predetermined price, regardless of the current market price.

In Vietnam, there is VN30 index futures with various maturities: 1 month (VN30F1M), 2 months (VN30F2M), June (VN30F2006), July (VN30F2007),…

Advantages:

• Can short sell without owning the underlying asset
• Use leverage to increase profits
• Similar trading to forex, applicable with various strategies

Disadvantages:

• Large lot sizes, difficult for investors with small capital
• Requires continuous portfolio monitoring
• Trading methods can be complex for beginners

6. Stock CFD Contracts (Stock CFD)

A Contract For Difference (CFD) is a trading type where investors do not own the underlying asset but sign an agreement with the CFD provider. Unlike actual stock trading, with Stock CFD you can use high leverage to generate large profits.

With an initial margin, you can open Long-Short positions similar to forex. Thanks to flexibility, Stock CFD is an excellent choice for professional traders.

Advantages:

• High leverage - access large markets with small capital
• 24-hour trading, global tools
• Instant, continuous intra-day trading
• Low margin requirements

Disadvantages:

• Can lose more money than the initial capital if leverage is used improperly
• CFD owners have fewer rights than regular stocks (no voting or candidacy)

Leading Stock Trading Platforms in Vietnam

According to Hanoi Stock Exchange reports, the top 10 largest brokerage firms in 2020 remain familiar names. The list includes:

• SSI Securities Corporation
• Ho Chi Minh City Securities Corporation (HSC)
• VCSC - Bản Việt Securities
• VNDirect Securities (VNDS)
• Mirae Asset Securities (MAS)
• VPS Securities
• MBS - Military Bank Securities (MBS)
• FPTS - FPT Securities (FPTS)
• Maybank KimEng Securities
• BIDV Securities (BSC)

Domestic brokerage firms mainly provide stocks, fund certificates, warrants, bonds, and VN30 indices, operating on the HOSE and HNX exchanges.

Important Terms When Investing in Stocks

Stock Bonus - a method of issuing additional shares to raise capital. For example, if you own 1 share with a face value of 100,000 VND, after the bonus issue, you will receive 2 shares each with a face value of 50,000 VND.

Treasury Stock - when a company repurchases its own shares from the market to reduce the number of shares outstanding, thereby optimizing dividend distribution.

ESOP Stock - preferred shares issued to employees at below-market prices to retain talent.

OTC Stock - unlisted stocks not traded on official exchanges. Since not regulated, their prices can be inflated beyond actual value.

Bluechip Stock - stocks of leading companies, stable operations, growing finances, and significant market influence. In Vietnam, stocks in the VN30 and HNX30 baskets are considered Bluechips.

Penny Stock - very low-priced stocks from small companies with high volatility. Investing in them can yield high profits but also involves high risks.

Defensive Stock - stocks of stable companies with low risk. Essential sectors like electricity, water, pharmaceuticals are often considered defensive stocks.

Financial Derivative Instruments - besides traditional stocks, you can invest in CFDs, futures, indices, and many other tools. These products are usually more flexible, with larger markets, leverage options, 24/7 trading, and support for various strategies.

Learning Path and Starting to Trade Stocks Online

To profit from stock investments, you need to spend time learning how to trade stocks online, understanding technical analysis, keeping up with market trends, and most importantly, accumulating real trading experience.

It is crucial to start with a demo account to practice skills without risking real money. Regular practice, thorough research of companies before investing, and always following risk management strategies will help you build a solid foundation for your investment career.

Begin your journey today. With patience, proper skills, and comprehensive knowledge, the stock market will open up profitable opportunities for you.