The capital market regulatory authority of the country, the Bangladesh Securities and Exchange Commission (BSEC) is observing the World Investor Week 2017 this year from 2-8 October. The theme of this weeklong programme is "Investor Literacy and Protection''.
One should invest in the capital market only when one is capable of taking the risk. However, it is likely to reduce the risk when the investment is done after understanding, observing and having in-depth knowledge. Keeping an eye on this, BSEC has been overseeing investment literacy activities across the country. Once investors become knowledgeable, our capital market will be in a position to influence the economy in a positive manner. Before investing in the capital market, our financial capabilities should also be taken into account, and then we should pay attention to make ourselves prepared. Here are some key issues that have to be kept in mind for those interested to invest in stocks:
- Before investing in the capital market, analyse all related facts. Learn about the stock market conditions of the company and its shares you want to invest in. There is no scope for investing there based on estimation.
- Keep track of all potential information about the company where you are interested to invest. Monitor closely the company's business status, profit and loss information. If possible, read newspapers regarding capital market and collect as much as information about the company in which you're going to put your money, analyse the numerical information and keep note of them for future use.
- When any stock price starts to fall, it is more rational and wise to leave the shares on a temporary basis, even at some loss. In some cases, loss can be taken as a strategy without being scared of any rumour or news. This money can be tried to benefit from investing correctly in other shares.
- When the price is amended in the capital market, invest money for the time after keeping some money in your hand. Here's my personal suggestion that someone should always keep a portion of money in his/her hand from investable fund.
- When the prices of your shares start soaring, keep selling them at a fair price. And when the price starts to decline, try to re-invest prudently understanding the condition of the market.
- If the value of any share falls, you may invest your investable money again in the same share and can abate the average price of the share.
- Change your investing strategies in order to adapt to time and situation. The same technique may not work in all the shares.
- Before finalising the investment decision of purchasing a company's shares, you may gather all possible information and data that is published by the company.
- In some cases, it may be wrong in making a decision even after considering all possible analysis. You should try to rectify the mistakes as quickly as possible with least damage.
- When a stock price starts rising or decreasing abnormally, try to unearth the reason.
- Most of the people get scared by abnormalities of the market. Warren Buffett once said that as an investor it is wise to be fearful when others are greedy.
- Watch the price and earning (P/E) ratio. The less the P/E ratio, the less the investment risk. P/E ratio is a measurement of how many times of the price a company is selling its shares. If other facts remain same, it is more adaptable to invest as much as possible with less P/E shares.
- See Net Asset Value per share (NAV) of the company. With this, there should be a consistency of market prices.
- See the Earning per Share (EPS) of the company. The more EPS the company has, the better for an invester. If the company has more EPS, you have the opportunity to get more dividend.
- In most of the cases, taking a decision in the capital market should not be delayed. What's a good decision for today might not be so tomorrow.
- Buy well reputed company shares that are relatively underestimated.
- Examine the authorised capital and paid-up capital ratio of the company. Issuing of bonus and right share is quite difficult if these two types of capital stay close. In this regard, authorised capital has to escalate first. Those investors who have an interest in bonus dividend, should have a look at this.
- Most of the time market price of the share may be higher than the face value of a share. Therefore, the dividend rate does not indicate the original return. The dividend yield is the correct return of shares. A dividend expressed as a percentage of return on investment with current share price is termed dividend yield. The higher this yield, the more the investor gets.
- Watch the last 3-4 years record of accomplishment. Observe how much dividend has been offered, and see the annual average price. Try to buy at a price near that price.
- DSE now publishes earning reports of every company after every 4 months. It's quite easy to assume how much profit can be made at the end of the year.
- At the time of buying shares, you should consider the goodwill of the company and its directors' social and political views. How well a company will run business, what is the prospect of profit and expansion of business-- all depends on the vision, skills and sincerity of company's entrepreneurs.
- If the share price increases relentlessly, try to learn that whether it has a rational cause or not. Regulatory bodies --BSEC, DSEC and CSEC-- have taken some stern measures to control the abnormal surge of share price.
- Thinking carefully whether you'll accept the company's dividend or not. In most cases, before the record date, it is better to release shares at the height of price rise. If you think it's more reasonable to keep after the record date, then you can hold it.
- If you reasonably want to gain from the share market, firstly, learn about the negative and harmful aspects of it.
- In rising markets, you should not buy shares at an excessive higher price. Don't think that this share will never be available at this rate.
Capital market is a very sensitive place. Investing wisely depends on how best one explores the market, understands it and is also able to analyse the situation at a given time.
The writer is Group CFO& Company Secretary, Super Star Group.
