Equity or its ownership through shares is one of the key investment choices for paper assets. While you face loss of capital in investing, you may also enjoy price appreciation and dividends with stocks you own. Learn all about the basics of shares investing.
- Highest returns among asset classes in the last 50 years (12.35% in the US market)
- Warren Buffett arguably the greatest shares investor average is 21.6% in the last 50 years (or a total of 1,826,163%)
- Compounding returns
Profiting from Shares Investing
Profiting from Shares Investing
Gains from shares investing primarily comes from dividends (realised profits) and share price appreciation (unrealised profits until sold).
- Dividend payments (note: not all companies pay out dividends)
- Share price appreciation (realized when you sell the share)
Shares Investing Categories
Investing into shares itself can be broadly divided into 3 categories of investing with rather different goals & methods.
1. Day trading
Buying & selling shares in the same day (intraday) to make quick profits based on small price fluctuations & involves arguably a high degree of risk. Many day traders advise others to stay away unless you are willing to pay the price to learn. A key feature as well is being able to step away & cut losses. Typically not holding any shares at the end of each trading day.
2. Swing trading
Short term trading typically lasting from 2 days up to 1-2 weeks. Traders are interested in short term price trends & momentum.
3. Long term value investing
A long term trading strategy (above 1 year & often longer) looking for companies with strong fundamentals & that the market has undervalued. Or as Warren Buffett puts it buying stocks at less than their intrinsic value.
Common Shares Categorization
Exchange Traded Funds (ETFs)
Exchange traded funds are index funds that are listed on a stock exchange. ETFs allow investors to buy a portfolio of stocks under a single share listing. Buffett has famously outlined his investment strategy upon his demise for 10% into short-term government bonds & 90% into one single ETF – the S&P500.
- Immediate diversification with a single share that outperforms most managed funds in the world
- Lower expense ratios (especially compared with UTs in Malaysia)
- Shares trading benefits (continuous pricing, short selling, buying on margin, stop & limit orders)
Real Estate Investment Trusts (REITs)
REIT is a security that invests in real estate through property often on a stock exchange market.
Options gives the buyer the right (but no an obligation) to buy / sell shares at a certain price within a certain period of time.
- Call Option: right to buy
- Put Option: right to sell
Warrants are like options giving the warrant holder a right to buy/sell shares at a certain price within a specified period of time. Warrants differ from options that warrants are issued by the company and may have a longer period of time up to years. Warrants have potentially higher gains and is cheaper at lower cost. However, warrants do not receive dividends and can become worthless if they expire.
Contracts for Differences (CFDs)
A futures financial instrument which works as a leveraged derivative to an asset like shares typically used for short term trading.
Learn more on CFDs (members)
Other Shares Info
- Main Market consists of established companies with strong track records.
- ACE Market facilitates the listing of emerging companies and more industry specific.
- NYSE: New York Stock Exchange founded in 1817 in New York
- NASDAQ: National Association of Securities Dealers Automated Quotation System (Nasdaq) which is an electronic only market
- AMEX: American Stock Exchange focused on exchange-traded funds (ETFs)
US Stocks Main Indices
- Dow Jones Industrials Average (DJIA): 30 largest companies in USA
- S&P 500 Index: 500 largest companies in USA
- Nasdaq 100 Index: 100 largest companies in the Nasdaq exchange focused on the technology sector
Minimum Shares Investment
- In USA, the minimum share to purchase is just 1 unit.
- In Malaysia, the minimum shares to purchase is 100 units.
There are brokerage fees which are discounted if you trade on your own over the internet. Some brokers charge flat fees (especially internet-based brokers) while others charge by % (more common in Malaysia) % charges range typically from 0.4-0.6%.
US brokers are increasingly adopting 0% brokerage fees for equities, options and/or ETFs. Pioneered by broker Robinhood, a number of other major brokers are now commission free including Interactive Brokers, Charles Schwab, TD Ameritrade, E-Trade, Ally Invest and Fidelity .
Shares offer the most potential for growth. Especially if you are younger (having 20 or more years of income coming in), you are able to be more aggressive in pursuing higher risk investments such as shares as you will be able to hold & weather out stock market dips & crashes. (And load up even more shares).
At MyPF, we focus more towards mid-long term value investing where we work with our clients to grow wealth going in when the time is right in a bear or bull market. And not worrying what Mr Market’s pricing is on a day to day basis allowing you to sleep well at night. All this to you owning a successful diversified profitable stock portfolio.
- A Beginner’s Guide to Shares Investing
- How to Open Shares Trading Account in Malaysia
- How to Diversify Shares and Your Portfolio
- Stock Terminology and Charting Terms
- Global Stock Market Indices
- US Dow Jones Industrial Average 30 Component Shares
- US Nasdaq 100 Component Shares
- How to Respond to a Shares Corporate Action
- Malaysia Retained on FTSE Russell Fixed Income Watchlist
- Semiconductor Cycle Ready for an Upswing
- Bursa Malaysia’s ETFs Continue to Innovate
- Green Shoots Sprout for Financial Markets
- Bursa Excellence Awards 2018
- Warren Buffett’s Annual Letter 2018
- You Can’t Time the Market
- Bursa Malaysia Top Stock Picks 2019
- Interview with Rakuten Trade Malaysia’s MD
- How to Build a Diversified Portfolio
- How to Pick Your Investments: the Warren Buffett Way
- How to StashAway
- Introducing Malaysia’s First Robo Advisory, StashAway
- What to Do in a Bear Market
- Investing Ain’t Hard, Here’re 10 Simple Tips
- 2018 October Market Outlook
- A Beginner’s Guide to Shares Investing
- How Self Driving Cars will Change the World
- Facts About Exchange Traded Funds
- Rakuten Trade Contra Trading Account
- Beware the Value Trap
- 2018 June Market Outlook
- 2018 May Market Outlook
- 2018 Q1 Market Review
- How to Read a Company Earnings Report
- When to Sell Your Shares
- Warren Buffett’s Shareholders Letter 2017 Highlights
- Bursa and US Market Sector Performace
- Bursa Fundamentals Screen 2018 Jan
- 2018 Malaysia and Global Outlook
- My Personal Finances 2017 in Review
- Rakuten Trade Expresso Workshop Review
- Investment Returns and Expectations
- Investment Portfolio Rebalancing
- Peter Lynch’s Approach to Stock Selection
- Calculating Beta and Intrinsic Value
- Should You Reinvest Your Dividends?
- 5W & 1H in Shares Investing
- Investment Performance 2017 1H
- Rakuten Trade: New Low Cost Online Brokerage
- Conrad Alvin Lim’s Candlestick & Breakout Patterns Workshop Review
- In Pursuit of Financial Independence
- Lessons from Datuk Seri Cheah Cheng Hye
- Shares Trading with CFDs
- What ETF or Index Fund to Invest in the US?
- Warren Buffett’s Investment Advice
- Opportunities and Caution for the New Year
- How to Open a Shares Trading Account in Malaysia
- 10 Reasons to Not Buy IPOs
- IPO Review: HLT Global Berhad
- My Personal Finances Year 2016 in Review
- MyPF 1st Christmas Gathering on 22 December 2016
- Recommended Sites for Malaysia & US Shares Investing
- 5 Lessons on Shares Investing
- Time to Buy or Sell? And the US Presidential Elections
- What’s a Gap Up, Fill or Kill & Other Stock Terms
- US Presidential Debates
- Financial Roundup: Sep 9, 2016
- Adam Khoo / Summit Capital Free Talk Contents
- Top 100 Malaysian Shares by MarketCap 2016
- Berkshire Hathaway Annual Shareholder’s Meeting
- Investment Styles
- Financial Roundup: Mar 6, 2015
- Financial Roundup: Feb 27, 2015
- Financial Roundup: Feb 11, 2015
- KLCI 5 & 10 Year Historical Returns
- 2015 High Dividend Yield Shares, REIT & P/E Ratio
- How to Factor in Shares Rights Issue