6 Effective Ways to Play Stocks Online - A Detailed Guide for Investors

Although stocks are considered the top investment channel, not everyone understands what stocks are and how to trade stocks online in Vietnam. This article will help you grasp basic concepts, the types of securities available for investment in the Vietnamese market, along with the advantages and disadvantages of each type.

What Are Stocks?

(Stocks) are financial products with value that owners can buy and sell on the market. Stocks exist in many forms: paper certificates, electronic formats, or book-entry records (book-entry), confirming the legal rights of the owner with respect to the issuer.

Stocks are traded on separate stock markets. Additionally, stocks serve as the foundation for other derivative financial products such as indices, futures contracts, exchange-traded funds (ETF)…

Since stock prices constantly fluctuate according to market conditions, stocks are regarded as an important investment channel with the potential for higher returns compared to traditional investment forms.

6 Ways to Trade Stocks Online in Vietnam

Similar to the global stock markets, Vietnam’s stock market currently offers most types of securities and derivative financial products such as indices, options, ETFs. However, each type has its own characteristics. Below are the popular products you can invest in:

1. Initial Public Offering (IPO)(

An IPO )Initial Public Offering( is a stock issued by a company/enterprise to the public for the first time to raise capital. This is common stock )Common Stock(, usually in certificate form. IPO owners enjoy standard rights from the company. When the company issues more shares later to raise additional capital, this is called a Follow-on Offering )Stock SPO(.

Advantages:

• High growth potential in the long term
• Low purchase price, high potential profit
• Transparent stock prices on the exchange

Disadvantages:

• Very difficult to buy stocks at IPO time
• High volatility, greater risk 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.

Holders of common stocks have the right to participate in shareholder meetings, vote, and run for the board of directors. However, they cannot withdraw capital, only transfer their shares.

Preferred stocks offer additional rights such as lower purchase price and priority payments. However, owners do not have voting rights or the right to run for the board.

Advantages:

• Cost reduction: pay only when buying or selling, no management fees
• Higher profits for long-term investments compared to other channels ###gold, silver(
• Full control over stock selection, timing of buy/sell, profit-taking or cutting losses
• High liquidity, easy to trade on exchanges

Disadvantages:

• Difficult to diversify portfolio, higher risk if investing in individual stocks
• Need sufficient capital to diversify; less capital increases risk
• Time-consuming research and record management
• Easily influenced by personal emotions, leading to poor decisions

) 3. Stock Index###

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

In Vietnam, VN30 includes the 30 strongest stocks, accounting for about 80% of market capitalization, listed on HoSE. Internationally, the S&P 500 comprises 500 top US stocks (accounting for 75-80% of market cap), listed on NYSE and NASDAQ. The DJIA includes 30 top stocks, calculated as a weighted average.

Advantages:

• Effective diversification: buying an index is like buying many stocks, reducing long-term market volatility risk
• Cost savings due to fewer buy/sell transactions
• Saves time compared to selecting individual stocks
• Reduces emotional decision risk, achieving better returns

Disadvantages:

• Cannot generate super high profits because the index basket may include weak companies, pulling the index down

( 4. Exchange-Traded Fund (ETF))

An ETF ###Exchange-Traded Fund( is an investment fund holding various underlying assets. You can buy and sell ETF shares similarly to trading company stocks. On the exchange, ETFs are often marked with a green check symbol.

Some stock indices are also ETFs, such as the S&P 500 and DJIA. In Vietnam, FTSE Vietnam ETF was the first established in 2008. Currently, there are 7 ETFs operating domestically, with the three largest accounting for over 90% of the total market size.

Advantages:

• Diversification: funds typically invest in many asset types
• Easy to trade, low costs, dividend payments
• Some ETFs can be traded with Options, Long/Short orders

Disadvantages:

• High commissions )depending on the trading platform(
• Usually low trading volume, leading to high bid-ask spreads
• Some ETFs are heavily taxed

) 5. Stock Index Futures(

Stock index futures are contracts that specify the price of a stock index at a future date. These are derivative financial instruments where the buyer and seller agree on a price in advance. At maturity, the seller must sell at the predetermined price, regardless of the market price at that time.

In Vietnam, futures contracts are based on the VN30 index with maturities such as 01 month )mã: VN30F1M(, 02 months )VN30F2M###, or specific months.

Advantages:

• Can short sell without owning the stocks
• Use leverage to increase profits
• Similar trading to Forex, applicable to many investment strategies

Disadvantages:

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

( 6. Stock Contracts for Difference (CFD))

Stock CFDs are trading instruments where the buyer does not purchase the underlying asset (stocks), but instead buys a contract with a provider. Unlike actual stock trading, Stock CFDs allow high leverage for higher profits.

With a certain margin, you can use leverage, open Long-Short positions similar to Forex trading. Due to their flexibility, Stock CFDs are excellent tools for professional traders.

Advantages:

• High leverage - access with less capital
• 24-hour trading, global tools
• Instant, continuous intra-day trading
• Trading based on low margin levels

Disadvantages:

• Can lose more than the initial investment if leverage is misused
• Limited rights compared to common stocks (no voting rights, no candidacy)

Stock Trading Platforms in Vietnam

According to HOSE, the top 10 largest domestic brokerage firms in 2020 include:

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

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 in Stock Investment

Bonus Shares - a method of issuing additional shares to raise capital. For example, owning 1 share with a face value of 100,000 VND, after split, you get 2 shares of 50,000 VND each, helping the company raise funds and boost stock price.

Treasury Shares - the company repurchases its own shares from the market to reduce outstanding shares, thereby decreasing dividend payouts and preventing takeover attempts.

ESOP Shares - preferential shares issued to employees at a lower price to retain talent, sometimes to avoid income tax.

OTC Shares - unlisted shares not traded on exchanges. Since they are not listed, their value can be inflated compared to actual worth.

Bluechip Stocks - stocks of leading, stable companies with growing finances and large market share. Examples include stocks in the VN30 and HNX30 baskets.

Penny Stocks - very low-priced stocks with high volatility issued by small companies. They can yield high profits but also pose significant risks of loss.

Defensive Stocks - stocks of stable, low-risk companies. Sectors like electricity, water, pharmaceuticals are considered defensive.

Derivative Financial Instruments - besides stocks, you can invest in tools like CFDs, futures, indices. Investing in derivatives offers more flexibility, larger markets, leverage, 24/7 trading, and various strategies.

How to Learn Stock Investment

To make money from stock investing, you need to spend time learning basic knowledge, technical analysis, market trend updates, and gaining practical trading experience. Starting with a demo account to practice skills without financial risk is a good choice for beginners.

The journey of learning and practicing will help you improve trading skills and develop your own strategies. Patience and discipline are key to success in online stock trading.