How To Invest In Pakistan Stock Exchange

Pakistan stock exchange is a market that allows all types of business. It provides the facility to small and large investors. Business people sell and buy their shares on the Pakistan stock exchange. Before anyone starts trading his/her shares at PSX, he/she must know how to invest in Pakistan Stock Exchange.

There were three stock exchange markets in Pakistan. These are as follows:

• Pakistan stock exchange
• Lahore stock exchange
• Islamabad stock exchange

However, on January 11, 2016, all of them merged to form a single stock exchange known as Pakistan Stock Exchange or PSX.

Types of companies in Pakistan Stock Exchange

There are two types of companies on the Pakistan Stock Exchange.

• The private limited Companies
• The Public Limited Companies

Working of Pakistan Stock Exchange

The stock exchange markets in the entire world work with the same principle. The working principle of stock markets is to buy a stock and wait for its price increase; when the price increases, sell it.

The stock markets provide a good profit.

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Suppose you buy a stock with 20 rupees after 5-6 hours, the price becomes 21 rupees. Sell the stock and get the profit. The stock market always does not give a profit. Sometimes there comes a loss in the business too.

Types of investment in Pakistan Stock Exchange

There are two types of investment in the Pakistan stock exchange.

Short term Investment

The short term investment is also known as daily traders. They buy the stock and sell that on the same day when the price goes high. The short term investor gets his profit or loss on the same day. These investors have to keep a close eye on the stock market every moment. They spend their whole day analyzing the stock market's ups and downs.

Long Term Investment

Long-term investment means an investor keeps his stocks for a long duration and sells at a profitable price. The long term investment is very beneficial and can give good profit. The long term investment is beneficial for the investors that have less time to monitor the Pakistan stock exchange. Most of the investors make long term investment as a part-time investment.

Steps To Invest in Pakistan Stock Exchange

Follow the following steps to invest in the Pakistan stock exchange.

Investment method selection

There are several ways through which one can invest in the Pakistan stock exchange. Choose one method of investment that suits you the most. The investment method should be comfortable and easily approachable for you. Before selecting the method, you should learn about that and should have a command in that too. 

Investment account selection

For the investment in the Pakistan stock exchange, one needs an investment account. The buying and selling occur through this account. There are two types of accounts.

A Brokerage Account

The brokerage account is online. It provides online access to the stock exchange market. The brokerage account saves them time and money. It is easy to handle and operate. The brokerage account can be opened as retirement or a taxable account in the stock market. It is less expensive in buying, dealing, and selling the stocks.

The brokerage account is opened in the investor's name. Read the terms and conditions of the account and make sure that they match the stock exchange market's terms and conditions. After opening the account, an investor's identification number and the account number are generated.

• CDC sub-account: After opening the primary account, open a secondary account that is a CDC sub-account. CDC is the account that deals in the stock exchange market. It is directly involved in the selling and buying process. CDC investors' accounts can be opened for better dealing in the business. By this, you get the unique identity number (UIN) that will be mentioned on each transaction and money transfer.

A Robo-Advisor Account

A Robo-advisor account is beneficial. It is a little bit expensive because the companies provide the complete package of the account. The company handles the management of the account. In return, the company charges 0.25% of the account amount deposit as their interest. The company develops the portfolio and manages the account completely. So the investor remains worry-free all the time.

Documents for account opening

Following documents are required for the account opening:

• Attested copy of national identity card
• Attested copy of the joint account holder
• A copy of the letter of authorization from the holder to the applicant
• Attested copy of the passport of both applicant and joint account holder
• A complete list of transactions and fee details with voucher

Select the brokerage firm

The brokerage firm is significant in the stock exchange business. One needs to select the brokerage firm after research. Select the firm that suits you the best. Before choosing the brokerage firm, one should visit a few different brokerage firms and satisfy himself.

Never select any brokerage firm in a hurry. While visiting the brokerage firm, must check these points in that firm and then make the final decision.

• Brokerage firm matches your aims and objectives.
• Communication of the firm satisfies you or not.
• Check the research material of the brokerage firm.
• The online trading facility of the brokerage firm.
• Availability of Trade confirmation options.
• The interest rate of the brokerage firm.

Order placement

The second step is to decide the stock that you buy and select the company from which you buy that stock. After the company selection, place your order with the company. Follow the instructions of the company for placing the order. When the company receives the order, they forward a confirmation message to you.

For the selection of the company, one must need to check the following points about the company.

• The finance department of the company
• Aims and objectives of the company
• The activity of the company in the stock market
• The share price of the company
• Earning ratio of the company
• The annual profit of the company
• Annual progress of the company

Settlement of transactions

In buying or selling the stocks, the transactions should be settled. The National Clearing Company of Pakistan Limited (NCCPL) settles the transactions. The Central Depositary Company Limited (CDCL) is also involved in the exchange of shares. 

Taxes and charges 

There are few taxes and charges that apply to the investors in dealing with the Pakistan stock exchange. The taxes and charges are given below:

• Capital gain tax (CGT)
• Brokerage commission
• IPF
• SECP fee etc.

Budget for the investment

Select the budget for investment in the stock exchange market. The budget should be according to the demands. Invest a small amount in the stock market if you are a new investor. It will help you to learn the rules and tricks of the business. Never invest a big amount in the market unless you become an expert in trading.

Term of the investment

Select the duration or term of the investment. The investment is of two types. A small term investment gives daily results, either profit or loss. The long term investment is good because it provides 3-6 months to the investor. The investor sells his stock when he gets a good profit. The long term investment is also beneficial because the investor does not need to be stuck with the stock exchange market.

Portfolio management

Manage your portfolio in a good manner. Visit your portfolio once a month. Verify that your portfolio matches your aims and goals. Portfolio management is an art that improves with time and gives you more success.

How to be a successful investor

One can only be successful through practice and experience because practice makes the man perfect. Always choose a small investment, and when you are secure, you can do it, then go to the next level of investment.

Stock market business is a complex business. Make a business plan and move along with that plan. Keep an eye on the stock market's ups and downs. The price of the stock changes within a minute, so this business needs the investor's full-time attention.

There come ups and downs in the business. If you lose the investment in the business, make yourself calm and cool. Do not get upset or panic. It could ruin your entire business and confidence. Feel confident and move to the next level of the investment. Do not feel yourself a winner at the start of the business. Go forward and struggle your best to gain the win.

Investment of overseas Pakistanis in the stock market

The overseas Pakistani can also invest in the Pakistan stock exchange market. The investment is quite easy for them. Also, investment from overseas is well benefited and attractive. Pakistan stock exchange facilitates them as their investment is the backbone of the country's economy.

Advantages of investment in the stock market

The stock exchange is an open room for investors. It provides the opportunity to the investors for making and developing the business. A few advantages of the Pakistan stock exchange are as follows:

• A stock exchange provides you the opportunity to get the maximum profit. Whenever you want to sell, you can sell your stock and get the profit of your will.
• It is a time free investment and does not bound the investor. It provides two opportunities short term and long term. The investor selects one term according to his requirement.
• It has a low risk of money stolen. The investment of a person is safe. It provides the account to account money transfer facility that is a safe way of transactions. 
• Some of the shareholders have an investment in various fields like entertainment, hotels, restaurants, and many other fields. They provide a special discount to the investor.
• The investor has the advantage of the market's ups and downs. An investor can sell his stock at the time of maximum profit. The stock market did not bound the investor to retain the shares. An investor can drive the business in his way in the market according to his requirement.
• Experience is the key to successful investment in the stock exchange market.  

Tips for investing in the stock exchange market

Keep the following tips in mind before investing in the Pakistan stock exchange. These tips will help in dealing with the stocks and ensure the maximum profit.

• Before investing in the stock exchange market, verify the broker and the brokerage firm.
• Always issue a cheque in the name of the brokerage firm owner.
• Ensure the legality of all the documents issued to you.
• Never sign a blank cheque.
• Always read the document brief before signing it.
• Keep a record of each transaction.

Now you know everything related to investment in Pakistan Stock Exchange (PSX). So think wisely and invest your money; hopefully, you will get high returns soon.