A stock is a unit of ownership for a company. If you own one share, then you’re considered one of the millions of owners of this public company. The share price fluctuates up and down as investors buy and sell it either through their broker.
For those considering investing in stocks, Hong Kong offers a wealth of options. To make the most of one’s investments, an investor needs to learn as much as possible about their options. When stocks are first introduced into a portfolio, it is often hard to distinguish whether they will be worth more or less than what was paid for them.
With experience, investors can begin to predict how well a stock will do. However, before beginning the process of purchasing a stock, several concepts should be understood by beginners and more experienced alike.
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Understanding how the market works
The main index against which all Hong Kong stocks can be measured is referred to as The Hang Seng Index (HSI). This index considers all of the most significant shares being traded in Hong Kong at a particular time.
It is calculated every 30 seconds by Hang Seng Indexes Company Limited. The HSI is made up of several sub-indices called “Composite indices.” These indices include (but are not limited to) companies from different sectors such as financial, transportation, utilities and others.
All companies included in these indices are selected based on market capitalization. A company’s market cap represents the total worth of all outstanding shares. To calculate the market cap, one must consider how many outstanding shares there are and then multiply that number by the current share price.
How to go about buying stocks
The first step in buying stocks is opening an account with a brokerage firm. This can be done quickly by finding one through the Hong Kong Securities and Futures Commission list of registered brokers. Once the account has been opened, an investor will need to decide which companies they are most interested in based on their research. Then, they may indicate how much of each company they would like to buy using margin financing or other means such as cash.
When placing an order for stocks, there are three different ways investors can do so:
- Limit order – An order placed wherein your desired price must be met before you purchase any shares
- Market order – If no specific price is set, then a market order will buy/sell at whatever price is available
- Stop order – A buy stop or sell stop orders are contingent orders that become active only after a specific price has been reached
How to track the market and individual stocks?
One of the most important things to keep in mind as a stock investor is to keep informed. By getting a better understanding of how the market works, you will make wiser decisions. This can be done by staying up-to-date with all announcements relating to traded companies.
Investors can also stay on top of news about what they invest in by checking out financial articles from various sources such as Bloomberg or Yahoo Finance. In addition, Hong Kong Stock Exchange offers an online system that allows investors to track their holdings and place orders.
Summary
Remember that there is no guarantee that you will make money on your investments. You can do everything right and still see prices drop, so never invest more than you can afford to lose. If you don’t have much experience investing in the market, I would recommend beginning with a simple strategy such as “dollar-cost averaging” or other systematic methods that take out the guesswork when deciding when to purchase stocks.
New investors should use a reliable and reputable online broker from saxo Bank before investing in stocks. Trade on a demo account and practise different trading strategies before investing real money. For more information, navigate to this website.
