If you have ever heard about investing in Pakistan Stock Exchange but have not been able to do so due to lack of adequate information, this blog should help simplify your concerns. A Capital Market is a type of Financial Market that deals with exchange of stocks, bonds, commodities etc. These securities are mostly long-term investments that yield fruitful returns in the long run. A stock market is a subset of a Capital Market that only deals with the buying and selling of shares issued by a corporation. The buyer and seller are both kept anonymous when these transactions are being made. Warren Buffet, one of the most successful investors till date stated, “All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies”. This blog aims to educate you on 10 different ways to generate passive income from the comfort of your home.
Opening an Account with a Brokerage Firm
The first step to buying stocks in Pakistan Stock Exchange, is to open an account with a reliable brokerage firm. It is essential to have complete knowledge about the brokerage firm you are investing with, in order to avoid any fraudulent attempts by them. They must hold a Trading Right Entitlement Certificate (TREC) which is a certification that allows a broker to trade. The brokerage firm that you have chosen will ask you for relevant details before moving forward. After your documents are done being successfully processed by the brokerage firm and Pakistan Stock Exchange, you will receive the license to trade in the stock Market. Once you have deposited money into your account, you may then start researching on which stocks look the most appealing in terms of investments.
It is important to have a good understanding of the market before you start investing. The basics to this include, trends. The market can either be in a bullish or upward trend which means that the overall prices in an industry’s stocks have risen. The other type of trend is called a bearish or a downward trend which means that the overall prices in an industry have fallen. Most investors recommend buying when everyone else is selling for example when a company’s position does not look as stable. That is when sellers do not pay much attention to the prices that they are selling at and it is encouraged to buy then. It is also essential to be aware of the type of investment you want to make. You can either make a short-term investment, a medium-term investment or a long-term investment. Day trading or short-term investments refer to transactions being made on a day-to-day basis. Long-term investments refer to investments usually within a range of 7 to 10 years. Medium-term investments are encouraged in Pakistan, which refers to investment being made for about 2 to 4 years. Short-term investments are usually discouraged in Pakistan as there is a lot of volatility involved in the process.
Online Trading Applications
In order to make trading easier for you, most brokerage firms now have online trading applications that you can use to trade with by just a click of a button. For example, the KASB KTrade App, allows you to access the ‘Research Portal’ that gives you an overall view of the market indices, dividend yield and payout. You can also manage and monitor your portfolio using this application. Such trading applications will also most likely have a watchlist option that allows to you add your preferred companies to it and view their performances through visual daily, monthly or yearly charts. Some applications will also allow you to trade virtually. This is for new and uninformed investors that can trade using dummy accounts in order to get an experience of what the trading world looks like before they start investing actual money into it. These apps also permit the convenient buying and selling of stocks. Buying and selling stocks have never been this convenient. With just a few clicks, you will be able to select the stock, enter the number of shares you wish to buy or sell and execute the order by entering your password. You can either place a limit or a market order. A limit order is one that allows you to set a specific threshold for the price that you would like to buy or sell at. The order is only executed once the limit is met. A market order however, is supposed to be executed instantly at the current market price.
Diversification and Advantages
It is encouraged to diversify your portfolio when you are investing in the Stock Market. Successful investors recommend investing in multiple companies depending on your disposable income. It is crucial to do your research on the different types of industries and which firms are leading in their specific industry. Companies with a ‘Defaulter’ label in front of their name have committed irregularities, hence most investors discourage investing in such stocks. There are multiple advantages of investing in the stock market. One of the advantages include shareholders being rewarded with dividends by most companies annually, depending on company policy. Another benefit includes capital gain. Capital gain is the profit from the sale of your shares and so is encouraged instead of just accumulating wealth that stunts capital growth. Shares also have more liquidity compared to most other assets as they can be bought or sold instantly. Some companies also offer discounted services to shareholders which is an added incentive to invest in a stock. An added advantage in investing in Pakistan Stock Exchange as compared to depositing money in banks is that you have a chance to earn more from investing in stocks with the same amount of risk.
It is important for an amateur investor to have financial literacy before they can start investing in order to make informed decisions. There are multiple videos available online to guide you further about how to invest in the stock market.