What should you know before buying stocks?

Before investing in stocks, it is important to be clear about key concepts, understand the process, and be aware of the risks involved.

In an economic environment like ours, where interest rates are lower than inflation and savings accounts yield negative real returns, it is natural to look for other ways to return savings.

In this situation, some people prefer to move to a mutual or investment fund, where the efficiency lies in the fund manager's expertise and opportunities for asset distribution. Others want more control over their portfolios, have a higher risk appetite,s and therefore invest in individual securities.

The principle that should always be kept in mind when investing is that in order to get a return, you have to take a risk, but a higher risk is not a check for a better return.

Stock markets are moving fast and can be stormy. Therefore, there are a few things to keep in mind before investing:

1. Objectives and time frame of investment

Short-term positions and speculation are costly and require both market knowledge and a strong presence.

Long-term investments test more patience and the ability to ignore short-term fluctuations, as well as the ability to stay calm.

2. Risk tolerance

Equities carry more risk than bonds or funds, so investors who choose this route must have good risk tolerance.

Younger people generally have a higher risk tolerance than older people, but this can also be very personal. It is not advisable to invest money that should not be lost in stocks at all.

3. Asset distribution

When compiling a portfolio, it is good to keep diversity in mind, both in terms of asset classes and underlying activities. By buying shares in 10-20 different companies that even operate in different industries, the risk of the portfolio can be significantly reduced.

Adding funds and/or bonds to the portfolio is also something worth considering.

The simplest way to use online banking

Online trading is the simplest and cheapest way to trade domestic equities. Before it is possible to trade, you must have an agreement on securities trading, but the agreement is signed electronically under " Securities " in the online bank. Trading on the Dhaka Stock Exchange is open from 9.30 to 15.30 every working day, but opening hours for other stock exchanges can be found on their websites.

A market price or offer price?

During the Exchange's opening hours, it is possible to place bids and offers at a market price or an offer price. Orders at the market exchange rate are processed as soon as possible at the best exchange rate that the market offers at that time. It is also possible to specify a specific exchange rate at which the customer wants to trade, and this is called the offer exchange rate.

Orders for an offer price enter the market immediately and are valid there throughout the day or until trading takes place. Outside opening hours, orders can only be submitted at the offer price, but they will then be sent to the market upon opening the next working day.

The settlement will take place two days later

Securities transactions are generally processed T + 2, which means that settlement is two working days after the transaction takes place.

Thus, transactions that take place on Tuesday are processed on Thursday, while transactions on Thursdays wait until Monday.

When purchasing, it is very important that on the settlement date there is enough balance in the account to be able to charge for the transaction.

The transaction is accompanied by a receipt stating the exact amount and settlement date, but receipts can be found under electronic documents in online banking and the app.