From A to Z: A Beginner's Guide to Stock Investment

In recent years, the stock market has been increasingly vibrant and dynamic. When production and commercial activities face difficulties, learning about stocks has become a pathway for many investors to seek profit opportunities. In 2022, the number of new investors (F0) participating in the market surged dramatically. To succeed in this field, you need to master fundamental knowledge about stocks, understand the rules of the game, and develop suitable strategies.

What is stock and the main types of stocks

According to the Securities Law No. 70/2006/QH1, securities are documents confirming the lawful rights and interests of the owner regarding assets or the capital of the issuing organization.

Securities include various forms:

Shares - the most common type of security, confirming ownership of a part of the company’s capital. There are two types: common shares (linked to business results) and preferred shares (with priority rights on dividends or voting). Shares can be in paper form or electronic storage.

Bonds - securities confirming the creditor rights and payment obligations of the issuer. This is a form of loan where the issuer commits to pay both principal and interest within a specified period. Bondholders receive fixed interest regardless of the issuer’s business performance.

Fund certificates - confirm ownership when you contribute capital to a public investment fund. This fund pools capital from many investors to invest in securities or other assets to generate profits.

Derivative securities - contracts whose value depends on the underlying asset (such as securities, indices, etc.). Includes options, futures, and forward contracts. Notably, transactions are conducted on the derivatives market, with no limit on issuance volume, and settlement occurs at a future date.

Warrants - secured securities issued by securities companies, allowing holders to purchase the underlying securities at a predetermined price on the maturity date.

Share purchase rights - securities issued to prioritize current shareholders to buy additional new shares at a price lower than the market price.

Depository certificates - created when shares of foreign companies are deposited at a depository bank and then issued as certificates.

How the stock market operates

The stock market is a place where investors buy and sell securities through exchanges or brokerage firms. It is divided into two segments:

Primary market - where organizations and funds raise capital by issuing securities for the first time.

Secondary market - after issuance in the primary market, investors continue to trade securities among themselves, without creating new capital but only transferring ownership rights.

The stock market plays an important role in the economy:

• Promoting the development of joint-stock companies through capital mobilization
• Helping investors evaluate business activities
• Providing high liquidity
• Assisting the government and enterprises in attracting foreign capital

Key concepts and terms you need to know when exploring stocks

Market terminology

• Listed company - a company that sells shares to the market and is listed on the exchange
• IPO - Initial Public Offering, the first issuance of securities
• Market capitalization - the total market value of a company based on the number of shares issued
• Offer price - the listed price of shares during the initial offering
• Stock portfolio - the collection of stocks in your account
• Yield or rate of return - dividends and profits you receive from stocks
• Annual report - the company’s report issued annually
• Alpha coefficient - return rate adjusted for risk
• Beta coefficient - a measure of the risk of a stock or portfolio
• Price-to-Book Ratio - compares market price to book value
• Bankruptcy risk ratio - assesses risk and bankruptcy probability

Trading order terminology

• Limit Order (LO) - buy/sell at a specified or better price
• Market Order (MP) - buy at the lowest selling price or sell at the highest current price
• ATO - execute at a specified price at market opening (before 9:15 am)
• ATC - execute at a specified price at market closing (2:45 pm)
• PLO - execute at the closing price after ATC
• Break - a sharp increase in stock price significantly surpassing previous levels
• Matching price - the price you set when trading
• Long/Short - trading bullish/bearish in derivatives
• Stock filtering - selecting stocks based on criteria like upward momentum, market capitalization, liquidity
• Safety margin - the difference between market price and intrinsic value

( Price terminology

• Par value - the face value printed on the security at issuance
• Market price - the buying/selling price on the market
• Listing price - the initial listing price of the stock
• Opening price - the previous day’s closing price
• Floor/ceiling price - the lowest/highest price during trading sessions
• Settlement date - T+3, three days after matching )funds credited to account(
• Price trend - the market has three types: Uptrend )rising###, Downtrend (falling), Sideway (horizontal)

( Main indices and trading forms

• Index - a statistical measure based on a list of stocks with a certain weighting. Vnindex represents the entire HOSE floor, VN30 is an index of the top 30 stocks by market cap
• Margin - margin trading, borrowing money from securities companies to buy stocks
• Trading volume - the number of shares traded within a period
• Short selling - selling securities you do not own by borrowing from others
• Price fluctuation - on HOSE ±7%, on HNX ±10% compared to the reference price

Participants in the stock market

• Issuer - issues securities to raise capital
• Individual investor - individuals with capital participating to earn additional income
• Institutional investor - investment firms, insurance, financial, and banking companies with large capital scale
• Securities company - supports management, consulting, brokerage, and underwriting
• Regulatory agencies - State Securities Commission, exchanges, credit rating agencies

Basic operating principles

The stock market operates based on five main principles:

• Competition - issuers compete to sell securities, investors compete to buy at favorable prices
• Fairness - everyone must comply with common regulations
• Transparency - issuers disclose complete information about securities
• Intermediary - transactions occur through securities companies
• Centralization - transactions only take place at official exchanges, closely monitored

Trading hours

The Ho Chi Minh Stock Exchange )HOSE(, Hanoi )HNX###, and UPCOM operate from 9:00-11:30 in the morning and 13:00-15:00 in the afternoon, from Monday to Friday (excluding Saturdays, Sundays, and holidays).

How to read stock price tables

When exploring stocks and starting trading, the price table is the most important factor:

• Green color - price increase compared to reference price
• Red color - price decrease compared to reference price
• Yellow color - price equal to reference price

How to buy and sell stocks

You can place buy/sell orders in two ways:

• Manually entering orders via the trading software of your securities company
• Placing orders through a broker

To get started, you need to research and choose a reputable securities company. Compare transaction fees, margin ratios, and interest rates on margin loans applied by each company. You can open an account directly at a securities company, bank, or brokerage firm.

Information to provide: residence address, email, phone number, bank account. After opening an account, you will receive an account number and instructions for depositing funds. With a balance of 500,000 VND or more, you can start trading.

Important notes when trading

Vietnam currently has three main exchanges: HOSE (Hồ Chí Minh), HNX (Hà Nội), and UPCOM (unlisted companies). Additionally, many international exchanges also operate in Vietnam.

Regardless of which exchange you choose, you must:

• Select a reputable exchange with a long operational history
• Be regulated by domestic or international securities authorities (ASIC, FCA, SEC, CySEC,…)
• Master the three basic orders: ATO, ATC, LO before learning other orders like MP, MTL, MOK, MAK

Advice for new investors

When starting to learn about stocks, you should:

• Study more knowledge and experience to be quick to market fluctuations
• Begin with small transactions to gain practical experience
• Understand risks before each investment decision
• Never overlook monitoring market news and company reports
• Build a personal strategy suitable for your financial situation and risk tolerance

To succeed in stock investing, patience, discipline, and continuous learning are key. Start with a solid knowledge foundation and keep improving your trading skills.