Comprehensive Guide: 6 Effective Stock Investment Methods in Vietnam

What is stock market and why has it become the most popular investment channel today? Although many potential investors still do not fully understand the nature of stocks or how to start trading effectively in the Vietnamese market. This article will help you gain a deeper understanding of the definition of stocks, different types of stock investments, as well as the benefits and risks of each type.

What Is the Stock Market? Detailed Definition

Stocks (also called shares) are financial products with recorded value in the form of paper certificates, electronic records, or digital signatures in ledgers. They confirm the ownership rights and legal interests of investors in the issuing company.

Stocks are traded on separate stock exchanges, forming an efficient market system. Additionally, stocks serve as a foundation for other derivative financial products such as indices, futures contracts, investment funds,…

Since stock prices constantly fluctuate according to market conditions, this is considered a potential investment channel with higher profitability compared to traditional investment methods.

6 Popular Online Stock Investment Forms in Vietnam

The Vietnamese stock market today is quite diverse, with a full range of products similar to international markets, including indices, options, ETFs, and many other financial tools.

1. Initial Public Offering (IPO) - First Time Stock Issuance(

This type of stock is issued by companies or enterprises to the public for the first time to raise capital. It is common stock, usually issued in certificate form. IPO holders will enjoy basic rights of the company.

Advantages:

• Significant long-term growth potential
• Low purchase price with high profit potential
• Transparent stock prices, easy to monitor

Limitations:

• Very difficult to buy stocks at the time of issuance
• Strong price volatility, higher risk than regular stocks

) 2. Investing in Individual Stocks

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

With common stocks, you have the right to participate in shareholder meetings, vote on company decisions, and run for the board of directors. However, you do not have the right to withdraw capital, only transfer.

Preferred stocks offer additional rights such as lower purchase prices and priority payments. However, you will not have voting rights or the right to run for the board.

Advantages:

• Relatively low cost, only paid when buying or selling
• High long-term profits compared to other investment methods ###gold, silver, etc.(
• Full control over buy/sell timing and stop-loss strategies
• High liquidity, easy to trade on exchanges

Limitations:

• Difficult to diversify the portfolio due to large capital requirements
• Limited capital makes it hard to buy many different types of stocks
• Requires a long time for research and portfolio management
• Easily influenced by personal emotions leading to poor decisions

) 3. Stock Index###

A stock index is a collection of certain stocks or bonds representing a specific segment of the market.

In Vietnam, VN30 is the main index, including the 30 strongest stocks on the market, accounting for up to 80% of market capitalization, listed on HoSE. Internationally, S&P 500 includes 500 top US stocks (covering 75-80% of market cap), or DJIA comprising 30 leading companies weighted by average.

Advantages:

• Risk diversification: buying an index essentially means buying a basket of many companies’ stocks
• Cost savings by reducing the number of transactions
• Saves effort and time, no need to research individual companies
• Reduces risks of emotional decision-making, more stable profits

Limitations:

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

( 4. Exchange-Traded Funds (ETF))

ETFs are investment funds holding various underlying assets. You can buy and sell ETF shares just like trading company stocks on the exchange.

In Vietnam, FTSE Vietnam ETF was the first established in 2008. Currently, there are 7 active ETFs, with the top 3 ###including foreign and domestic funds( accounting for about 90% of the total scale.

Advantages:

• Effective diversification of investment portfolio
• Easy trading, low costs, periodic dividend payments
• Some ETFs can be traded with options or Long/Short orders

Limitations:

• High commission rates )depending on the trading platform(
• Usually low trading volume, leading to wider bid-ask spreads
• Some funds are subject to high taxes

) 5. Stock Index Futures(

This is a derivative financial contract where the buyer and seller agree on the price of a stock index at a future date. When the contract expires, the seller is obliged to sell at the predetermined price, regardless of the actual market price.

In Vietnam, futures contracts are based on VN30 with various maturities )1 month, 2 months, or longer-term###.

Advantages:

• Allows short selling without owning the stocks beforehand
• Can use leverage to increase profits
• Suitable for implementing various investment strategies

Limitations:

• Large lot sizes, not suitable for small investors
• Requires continuous portfolio monitoring
• Complex trading methods for beginners

( 6. Contract for Difference (CFD))

Stock CFD is a contract where you do not own the underlying asset (stock), but instead sign an agreement with the provider. Unlike trading actual stocks, CFDs allow high leverage to boost profits.

Advantages:

• High leverage, access with less capital
• 24/7 trading, global tools
• Instant, continuous intra-day trading
• Low margin requirements

Limitations:

• Greater risk of losing more than initial capital if leverage is misused
• CFD owners have fewer rights than actual stocks ###no voting rights(

Stock Trading Venues in Vietnam

) Leading Exchanges and Brokerage Firms

According to HOSE statistics, the top 10 largest domestic securities brokerage companies include:

• SSI Securities Corporation
• Ho Chi Minh City Securities Corporation
• Bản Việt Securities Corporation
• VNDirect Securities Corporation
• Mirae Asset Securities Corporation
• VPS Securities Corporation
• MB Securities Corporation
• FPT Securities Corporation
• Maybank KimEng Securities Limited Liability Company
• Investment and Development Bank Securities Corporation

Domestic brokerage firms mainly provide stocks, fund certificates, warrants, bonds, and indices like VN30, HNX30, operating on the main exchanges HoSE and HNX.

Important Terms in Stock Investment

Bonus Shares - A method of capital raising by splitting shares. For example, 1 share with a face value of 100,000 VND can be split into 2 shares each with a face value of 50,000 VND.

Treasury Shares - The company repurchases its own shares from the market to reduce outstanding shares, thereby adjusting dividend distribution.

ESOP Shares - Preferred shares issued to employees at preferential prices to retain talent.

OTC Shares - Unlisted shares that are not officially listed on the exchange, sometimes valued higher than their actual worth.

Bluechip Stocks - Shares of leading, stable companies with strong finances and large market share. Examples include stocks in VN30, HNX30.

Penny Stocks - Very low-priced stocks with high volatility issued by small companies, offering high profit potential but also high risk.

Defensive Stocks - Stable, low-risk stocks from essential sectors like electricity, water, pharmaceuticals.

Derivative Financial Instruments - Besides stocks, you can invest in CFDs, futures, indices. These tools are more flexible, larger markets, allow leverage, 24/7 trading, and support various strategies.

Getting Started: Learn and Practice Stock Investment

To make money from stock investing, you need to:

• Dedicate time to deep learning about what stocks are and how to trade online
• Master technical and fundamental analysis
• Always stay updated on market trends
• Accumulate trading experience through practice

Start with a demo account to hone your skills in a safe environment without risk. This will help you better understand how the market operates before using real money.