Basics of Buying Stocks No One Talks About

Hopefully after reading some of the books I recommended, you will have a better understanding of investments in stocks. While you may acquire some strategies to spot undervalued companies or sort out your investment objectives, you will realise that you still do not know how to buy/sell a stock. Most investment books do not provide "manuals" on how to buy/sell stocks and you will be overwhelmed when you actually open a trading account. Hence, I aim to bridge this knowledge gap. In addition, I will also touch on some confusing trading jargon I faced during initial stages of investing
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Stock Quote

In a typical stock quote, you will find the following components: Last Done, Change, Buy Vol, Buy, Sell, Sell Vol, Vol. 

Last Done: When you buy a stock, you are buying it from a seller. Hence when a buyer's price matches a seller's price or vice versa, there will be a transfer of ownership (from seller to buyer). Last Done is just the price at which the latest transfer of stock took place at.

Change: It refers to the current price change from the prior day's closing price

Buy: Price where buyers want to buy the stock at

Buy Vol (Volume): The amount (volume) of stock that is queueing at the Buy Price

Sell: Price where sellers want to sell the stock at

Sell Vol:  The volume of stock queueing at the Sell Price

Vol: Volume Done up till the current point

Lot/Share?

1 lot = 1000 shares. In Singapore, stocks are generally traded in lots

Stock/Shares/Equity?

These three terms are often used synonymously. They represent the ownership of the company in question.

  

Trading/Investing?

In certain context, they can be used interchangeably. In others, they are as different as day and night. For example, if you want to tell a friend that you've started to gain interest in buying stocks. You can either say "I'm interested in trading stocks/investing in stocks". 

However, in investment contexts, there is a clear line between trading and investing. Trading is regarded as short term buying and selling of stocks in hope for quick capital gains. The time horizon for trading typically range from seconds to weeks. Trading is mostly focused on capitalising market movement of stock prices. 

Investing, on the other hand, focuses on the fundamental of companies. Objective is to ride on the potential growth of companies, leading to higher share price (see how I'm using stock and share interchangeably). Time frame ranges from months to years.   

Relationship between Brokerage Houses & SGX

Brokerage houses are companies that provide the service to buy and sell stocks on the local exchange, Singapore Exchange (SGX). SGX is just like a marketplace where brokerage houses are stallowners that barter stocks instead of meat.   

When you open a trading account at any local brokerages, they will also open a Central Depository (CDP) account with SGX to deposit any stocks you buy. Therefore, SGX also acts like a stock bank.

You may open a trading account at any of these brokerages: DBS Vickers, CIMB, Phillip Securities, Lim & Tan, UOBKH, Standard Chartered, iOCBC

For the full list of brokerages, go to http://forums.hardwarezone.com.sg/stocks-shares-indices-92/list-brokage-firms-available-singapore-589227.html for more information.


Hopefully, I have answered some of the common beginners' question here. I understand that one may have too many questions when starting out in investing, hence you can always drop a comment. I'll update this post whenever there is a question asked (which I highly doubt so since it's so obscure!)
Peace out~!

Reading List for New Investors

I started my investing journey solely by reading a few select books recommended by people on the Internet. I would use to read them during rest time or the long waiting in the firing range. Army mates used to ridicule me for reading investment books instead of playing PSP or cards. Some gave snide remarks like, "You have the money to invest meh?". Looking back, those are time well spent!

Below is the list of books I've read and I will also TRY to recall some of the key concepts covered in each book and the usefulness of it. Please pardon if it is somewhat erroneous because these are books I read between 1 - 3 years ago! 

A Random Walk Down Wall Street: The Time Tested Strategy for Successful Investing by Burton G. Malkiel
This lengthy-titled book gives readers a general guide to navigating the financial market. For instance, he advises that investors use four basic determinants to help estimate proper values of companies.

1. Expected rate of growth. Larger growth rate of earnings and dividends, higher the price.
2. Expected dividend payout. Higher percentage of dividend payout, higher the price. However, other factors are not considered. Poor prospect company may pay good dividend while expanding company may hold back dividend like Apple. 
3. Degree of risk. Naturally, higher risk, lower price.
4. Level of market interest rate. Lower interest rates, increase in stock price expected. 

In addition, the author recognises that an average investor will find it hard to beat the market. Hence he has a few recommendations for us. These include saving to invest, buying your own house, understanding your own investment objectives before investing

The Intelligent Investor by Benjamin Graham
Benjamin Graham is one of the "founding fathers" of value investing. Warren Buffet, himself, was mentored by Graham. While the book does not impart techniques to specifically select stocks, it discusses a wide range of topics. Eg. Investment vs Speculation, Portfolio Allocation, Dividend Policy.
The book provides an excellent foundation for beginners to learn investing; the principles of investing. Personally the book had convinced me to go for investing compared to trading. Though many use these terms synonymously, there is a big difference between these two which I will discuss some other day.

The Warren Buffet Stock Portfolio: Warren Buffet Stock Picks: Why and When by Mary Buffet, David Clark
This was the latest book I had read during the free time in reservist. In this book, we are introduced to how Warren Buffet chooses companies to invest in. Basic concept is to have the company possess a reasonable economic moat and increasing EPS (earnings per share).
Using the increment EPS, the book further teaches us how to project the stock's future price and see whether it's "potential" gain might warrant a buy now.
Ever since reading this book, I had only exclusively used this method to value a stock. I would say the method was fairly accurate because the screening of economic moat and increasing EPS had already ensure that the company is very strong.


Winning the Loser's Game by Charles D. Ellis
Along the same line as the above-mentioned  books, Charles aims to tell readers how to behave rationally in the stock market. Also, how to balance their portfolio of companies. The mix is determined partly your purpose of investing purposes (for growth, passive income or inflation?). He also advises investor to diversify within each asset class and between asset class.
This book covers what in already in Benjamin Graham's and Burton's books. So if you are not keen in reading, you can skip this book for the other two.


Books are the first step towards the world of investing and it is imperative that one read at least one or two books. This ensures that the person knows what is his investment objectives and can work gradually towards them.

First Post

This is the official first post of this investment-related blog. Because I have not done blogging for a few years now, I'm not well-versed in the mechanics of blogging. So I'll introduce my profile here in first post instead and also state my intention of starting this blog.

Profile

I am a 23 years old student currently studying Chemical Engineering at National University of Singapore. I first picked up investment knowledge during the lull periods of my army days. My first purchased stock goes back to 8 November 2011. This translates to me heading into the third year of my investment journey!

My interest in stocks are primarily due to my relatives and parents who trade stocks for capital gains and also to stave off their gambling needs. My investment influences come from successful individuals like Benjamin Graham and Warren Buffet. As you can infer, I am more of a investor rather than a trader. Consequently, I will touch on fundamental aspects of companies. 

Purpose

-  To help my peers who are not well versed in investing.  
A number of my female friends have already started on their careers. However, when quizzed about their savings or thoughts on investing, I was surprised to learn that they have no such plans. While I promised to teach them, I have no much spare time to individually introduce them to the world of investments. Hence this blog

- To share and receive good investment ideas
Like many other investment blogs floating around in the internet, I strive to share ideas about undervalued stocks and also receive feedbacks. This will aid me in my journey to gaining more insights in the stock market. Furthermore, I am currently at a crossroad between pursuing a engineering career or an investment career. I hope to meet people from these two industries who can provide valuable advice!

- Archival purposes
Anything written by me here is as it is. Years down the road, this blog will serve as a record when I look back at my investment decisions.


So, this is the end of my first post and I hope that it gives some foreshadowing for what is to come later. The next post shall be about the types of books I've read as a beginner and recommend to newbie investors. In addition, I will give reviews of the brokerages I am using and let newcomers decide which one to use.