Author Topic: Basic stock market  (Read 1722 times)

Offline Risktaker

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Basic stock market
« on: November 21, 2006, 01:02:50 AM »
Dear Experts,

STOCKS MARKET! These two words are totally mean a new thing for me to learn about it. I never buy any stocks except mutual funds coz I dunno how does it works.So I need some basic lessons from you all folks :).

1) What is the minimum lot that I can buy for one stock? Is it one lot represent one share?
2)  Let say if buy price is RM5 pershare, so what is the minimum shares that I can buy and how much does it costs?
3) If I have money RM5000 and I want to buy company A at price RM5 pershare, so is it possible to buy that share with that amount of money and how many lots that I actually buy?
4) what is Margin call? Does it means if my investment is in loss position then the stock broker call me to put a some margin? What if I want to stay in market for a long term regardless what is the market situation...is it possible? (does it same like mutual fund concept of investmet?)

Actually I have a lot things to ask but if you guys can recommend me what books to read or websites that I can get a lessons...I highly appreciate it...TQs




Offline uvirra

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Re: Basic stock market
« Reply #1 on: November 21, 2006, 07:29:11 PM »
Hi Risktaker,

Here is my answers for your questions...

1. The minimum is 1 lot, which is equal to 100 shares unit.
2. The minimum would be 1 lot.If the price is RM5/share, it would total about RM513.20 (including brokergae fee, you could actually find a cheaper brokergae fee).
3. If you only have RM5000 (no additional few bucks), then you would only able to buy about 9 lots=900 share units, for RM4,538.30. (RM4,500 + RM 38.30 for brokergae fee). But if you had additional about RM42, then you actually could buy 10 lots.
4. Margin call is actually more towards Futures and Option. In stock market, I think it is only applicable if you sell short(not implemented yet) or you take Margin Loan(Where you borrow money to buy shares).

Regarding long term investment, I'm not expert in it. I believe you should buy stocks with a very good fundamental and high dividen yielding stock, if you are planning for long term.
Perhaps, the other experts can answer this question better.
« Last Edit: November 21, 2006, 07:31:17 PM by uvirra »

Offline julez.lim

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Re: Basic stock market
« Reply #2 on: November 22, 2006, 03:26:32 PM »
Get reply uvirra :)

Risktaker, a lot of books on stock have been recommended in the Books Recommendations section in this forum. I suggest you go and take a look there...

1 thing to add on to uvirra's answers is that:
Reason y i don't buy 100 share units is because the brokerage fee as a percentage of investment is rather high. If not mistaken, if you buy stocks lesser than RM2000 in amount the fee is RM20, which is 1%. Hence, if you buy 100 lots that cost RM5 per share (like the example below), brokerage fee is set at RM20.
uvirra, after writing, I notice some discrepancy between your data and mine... I might have misunderstood between brokerage fee and transaction fee :P Normally, I just pay them since to me, the amount is negligible... Please correct me, if I am wrong

Offline uvirra

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Re: Basic stock market
« Reply #3 on: November 22, 2006, 06:38:01 PM »
Hi Julez,

Usually when people say brokerage fee, they means the transaction fee. The more you buy, the total brokerage fee does increase, but percentage wise, it will drop. I used the following rate to calculate the total brokerage fee, which I got it from 1 of the brokerage firm's website:
1.     Brokerage Rate           
     0.70% - For transaction value at or below RM100,000
   0.60% - For transaction value exceeding RM100,000 and at or below RM500,000
   0.50% - For transaction value exceeding RM500,000
     A minimum fee of RM2 for bonds/loan stocks and RM12 for normal stocks/warrants.
2.    Clearing fee    0.04% of transaction value with a maximum of RM200.00 per contract
3.    Stamp duty    RM1.00 for RM1,000 or fractional part of transaction value.

Do note that there are many brokergae firms offer a lower brokerage rate. The rate above is for explaination purpose, and in fact the firm actually offers lower rate than published.

Offline julez.lim

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Re: Basic stock market
« Reply #4 on: December 15, 2006, 05:18:05 PM »
Thanks uvirra