Investment Basic2
Investment Relate Basic Information
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COSTS

Stock brokerage costs vary according to the extent of services you avail. You should select the service that meets your needs and requirements. Before you start dealing in shares, determine how much you to pay stockbrokers for their services. You need to shop around for the right service at the right price. Charges will differ depending on whether you wish to invest directly or indirectly. Ask if there are any ongoing costs of stockbrokers, other than the dealing commission each time you buy or sell.

WHAT YOU ARE A SHAREHOLDER HAPPENS ONCE

There are several types of shareholders: some are long term investors who simply tuck away their investments for years while others trade frequently and keep a close eye on how their shares are performing. You can check your shares’ performance in various ways. A daily indicator of share price movements is available in many newspapers and also on website of the relevant stock exchange. You may access this information directly or through your stock broker/advisor. Informative articles about many companies are regularly published in newspapers and investment magazines. Your stockbroker may also provide valuable information. Some publish newsletters for their clients, reflecting their views on the performance of selected companies. Annual reports of companies also contain useful information. Some companies have shareholder relations departments, which can help with factual information.

INVESTOR PROTECTION:

You should always ensure that the stockbroker you choose is licensed by the Securities and Exchange Commission of Pakistan (SEC) to trade. Prefer stock brokerage firms with good track record. As a shrewd investor, you should know your rights and responsibilities and should beware of the rules that govern your investments as well as the legal recourse available, in case things go wrong. You can report abuse to the SEC, whose mission is to ensure the development of a fair, efficient, and transparent securities and futures market. Although its main function is regulatory in nature, the SEC has the ultimate responsibility to protect the investor through market supervision and ensuring that its laws and regulations are complied with. Stock exchanges are the frontline regulators; they must play a proactive role. Send all your complaints in writing to the respective stock exchange(s) with full details, including the complainant’s name, address and telephone number etc. In case you do not get a response to your complaint, please contact the “Complaint Cell” in the SEC.

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

NIC Building Jinnah Avenue Blue Area Islamabad

NIC Building Jinnah Avenue Blue Area Islamabad

Fax: (92 51) 920 4915 Website:www.secp.gov.pk

GLOSSARY OF STOCK MARKET TERMS

an investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price.

an investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price.

Blue ChipA largewell-established company with a history of profitable operation.

Bonds Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principal at maturity.

An investor who anticipates a rising market and, therefore, buys the security in the hope of selling it later at a higher price.

Carry-over Trades Equity repurchase transactions, better known, as “Badla”; these are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.

Dividend That part of a company’s profits which is distributed among shareholders, usually expressed in rupee per share or percentage to paid up capital.

Earnings per share(EPS) A profitability indicator calculated by dividing the earnings available to common stockholders during a period by the average number of shares actually outstanding at the end of that period.

EquityThe owners’ interest in a company’s capital, usually referred to by ordinary shares.

Floatation The occasion when a company’s shares are offered on the stock market for the first time.

Fund managers A company, which invests and manages investors’ money, with the aim of maximizing capital growth.

Initial Public Offering(IPO)The offering of equity shares of a company to the general public for the first time.

I Insider trading The purchase or sale of shares by someone who possesses ‘inside’ information on a company’s performance which information has not been made available to the market and which might affect the share price. In Pakistan, such deals are a criminal offence.

Investment companies A company, which issues shares and uses its capital to buy securities and shares in other companies.

Listed company A company whose securities are admitted for listing on a stock exchange.

Long position When an individual purchases securities of a company he is said to have a long position in the company’s shares. For example an owner of shares in PTCL is said to be "long PTCL" or "has a long position in PTCL." If you are long, you would like the share price to go up.

Market capitalization The total value of a company’s equity capital at the current market price.

Nominee A person or company holding securities on behalf of others, but who is not the owner of such securities.

Option The right (but not the obligation) to buy or sell securities at a fixed price within a specified period

Ordinary shares The most common form of shares, which entitle the owners to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.

Portfolio A collection of investments

Price/earning ratio (P/E ratio) The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors has in a company. It is calculated by dividing the current share price by the last published earnings per share.

Primary market Where a company issues new shares, either for the first time, or at the time of issuing additional securities.

Privatization Conversion of a state-owned company to a public limited company (plc) status.

Private company A company that is not a public company and which is not allowed to offer its shares to the general public.

Public limited company (plc)A company whose shares are offered to the general public and traded freely on the open market and whose share capital is not less than a statutory minimum.

Rights Issue The issue of additional shares to existing shareholders when companies want to raise more capital.

Securities A broad term for shares, corporate bonds or any other form of paper investment in capital market instruments.

Settlement Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.

Short Selling The act of borrowing stock to sell with the expectation of price reduction with the intention of buying it back at a cheaper price.

Stockbroker A member of the stock exchange who deals in shares for clients and advises on investment decisions.

Stock MarketThe market place where shares of publicly listed companies are bought and sold.

Unit trustAn open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.

Yield The aggregate return earned on an investment taking into account the dividend/interest income and its present capital value.

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