6 Effective Online Stock Trading Strategies in Vietnam

Stocks are one of the leading investment tools, but many people still do not fully understand what stocks are and how to participate effectively in the stock market. This article will help you grasp basic concepts, the most common types of stocks in Vietnam, along with the advantages and disadvantages of each type.

What is a stock?

Stock is a financial product with value that the owner can buy and sell on the market. It can exist in paper form, electronically, or in book-entry form, confirming the legal rights of the owner with the issuer.

Stocks traded on a separate market are called the stock market. Additionally, stocks are also the foundation for other derivative financial products such as indices, futures contracts, exchange-traded funds, etc.

Because stock prices constantly fluctuate according to the market, stocks become an important investment channel with the potential for higher returns compared to traditional investment forms.

6 Effective Ways to Participate in Online Stock Trading

The Vietnamese stock market currently offers all types of stocks and derivative products similar to international markets. Below are the most popular products when participating in stocks:

1. Initial Public Offering (IPO) (Stock IPO)

IPO (Initial Public Offering) is a stock issued by a company for the first time to the public to raise capital. This is a common common stock issued in the form of certificates. IPO shareholders enjoy the usual rights of the company.

When a company issues additional shares to raise capital, that stock is called a Follow-on Stock (SPO).

Advantages:

• High growth potential in the long term
• Buy at low prices, profits can be high
• Transparent, publicly available stock prices

Disadvantages:

• Very difficult to buy stocks at the IPO moment
• Large fluctuations, higher risks than regular stocks

2. Single Stocks

Single stocks allow shareholders to confirm ownership of a part of the company. There are two main types: common stocks and preferred stocks.

Common Stocks: Owners have the right to participate in shareholder meetings, vote on decisions, and run for the board of directors. However, they do not have the right to withdraw capital, only transfer their shares.

Preferred Stocks: Enjoy benefits such as lower purchase price, paid before common shareholders. However, they do not have voting rights or the right to run for the board.

Advantages:

• Cost reduction - only pay when buying or selling stocks
• High profits when investing long-term compared to gold, silver
• Full control over the type of stock, timing of buying and selling
• High liquidity, easy to trade on the exchange

Disadvantages:

• Difficult to diversify the portfolio with limited capital
• High risk due to concentration on few stocks
• Time-consuming research and management
• Influenced by personal emotions when making decisions

3. Stock Index (Index)

A stock index is a collection of stocks or bonds representing a specific market segment.

Examples:

• VN30: Includes the 30 strongest stocks in Vietnam, accounting for about 80% of the domestic stock market capitalization
• S&P 500: Includes the 500 strongest stocks in the United States, accounting for 75-80% of the US market capitalization
• DJIA (Dow Jones Industrial Average): Comprises 30 top stocks, calculated as a weighted average

Advantages:

• Diversified investment - a sum of money can buy a basket of diverse stocks
• Reduce market risk through diversification
• Save transaction costs due to fewer trades
• Save time and effort in research

Disadvantages:

• Cannot achieve “super huge” profits because the basket may contain weak companies
• Returns are dragged down by poor-performing companies in the index

4. Exchange-Traded Funds (ETF) (ETF)

Exchange-Traded Fund (Exchange-Traded Fund) is an investment fund into multiple underlying assets. You can buy and sell ETF shares just like trading company stocks on the exchange.

Some stock indices are also ETFs, such as S&P 500, DJIA.

In Vietnam, FTSE Vietnam ETF was the first fund established in 2008. Currently, there are 7 ETFs operating, with the three largest being VNM ETF, FTSE, and VFMVN30 ETF, accounting for over 90% of the total fund size.

Advantages:

• Diversify investments into many asset types
• Easy to trade, low costs, dividend payments
• Some ETFs can be traded with Options like foreign exchange

Disadvantages:

• High commissions (depending on the trading platform)
• Small trading volume leading to high bid-ask spreads
• Some funds are heavily taxed

( 5. Stock Index Futures )Stock Futures###

Stock index futures are derivative financial contracts based on a stock index at a future date. The buyer and seller agree on the index value at a future point in time. At maturity, the seller must sell at the predetermined price regardless of the actual market price.

In Vietnam, there are futures contracts based on the VN30 index with maturities such as 1 month (VN30F1M), 2 months (VN30F2M), and other months.

Advantages:

• Can short sell without owning actual stocks
• Use leverage to increase profits
• Similar trading to forex, applying various investment strategies

Disadvantages:

• Large lot sizes, difficult for small capital
• Continuous monitoring of the portfolio required
• Complex trading methods for beginners

( 6. Stock CFD )Stock CFD###

Stock Contract for Difference (CFD) is a type of trading where the buyer does not own the underlying asset but enters into a contract with the provider. Unlike actual stock trading, when buying Stock CFD, you can use high leverage to generate high profits.

With margin funds, you can use leverage, open Long-Short positions similar to forex trading.

Advantages:

• High leverage - access the market with less capital
• 24-hour trading, global tools
• Continuous, real-time trading within the day
• Low margin requirements, flexible

Disadvantages:

• Can lose more money than the initial capital if leverage is used improperly
• CFD holders have fewer rights than actual stocks (no voting rights, no candidacy)

Stock trading platforms in Vietnam

According to HOSE statistics, the top 10 largest brokerage firms in Vietnam include:

• SSI (Ho Chi Minh City Securities Corporation)
• HSC (Ho Chi Minh City Securities Corporation)
• VCSC (Bản Việt Securities)
• VNDS (VNDirect Securities)
• MAS (Mirae Asset Securities)
• VPS (VPS Securities)
• MBS (MB Securities)
• FPTS (FPT Securities)
• MBKE (Maybank KimEng Securities)
• BSC (Bank for Investment and Development of Vietnam Securities)

Vietnamese securities brokers mainly offer products including stocks, fund certificates, warrants, bonds, and the VN30 index, operating on both HOSE and HNX exchanges.

Important terms when participating in stocks

Bonus Shares: A method of issuing additional shares to raise more capital. For example, owning 1 share with a face value of 100,000 VND will become 2 shares with a face value of 50,000 VND.

Treasury Shares: When a company repurchases its own shares from the market to reduce the circulating shares, thereby decreasing dividend payouts.

ESOP Shares: Preferred shares issued to employees at a lower price to retain talent.

OTC Shares: Unlisted shares on the exchange, with potentially inflated prices compared to actual value.

Bluechip Stocks: Shares of leading, stable companies with large market share. Examples include stocks in the VN30, HNX30 baskets.

Penny Stocks (Penny Stock): Very low-priced stocks with high volatility issued by small companies. They have high profit potential but also high risk of loss.

Defensive Stocks (Defensive Stock): Stocks of stable companies with low risk. Sectors like electricity, water, pharmaceuticals are considered defensive stocks.

Derivative Financial Instruments: Besides stocks, you can invest in Stock CFDs, futures contracts, indices. These tools are usually more flexible, diverse markets, can use leverage, trade 24/7, and apply various strategies.

Learning path and how to participate in stocks

To make money by participating in stocks, you need to spend time learning about stock trading, technical analysis, keeping up with market trends, and accumulating trading experience.

Necessary steps:

• Master basic concepts
• Learn technical and fundamental analysis
• Regularly update market news
• Practice through demo accounts
• Start trading with small capital

The journey of learning and participating in stocks requires patience and accumulation. Begin with fundamental knowledge, practice skills, and gradually develop your own trading strategies.