From Basic to Advanced: Secrets to Success When Exploring Fundamental Stocks

The stock market has become an ideal destination for millions of investors in recent years. When business and production activities face difficulties, stocks open up attractive profit opportunities. To enter this field successfully, new investors need to learn about basic stocks and master fundamental rules. The following article will help you understand how the market operates, the different types of products, and how to trade on the stock market.

What Are Stocks? Essential Definitions to Know

According to the Securities Law No. 70/2006/QH1, stocks are documents or certificates confirming the ownership rights and legitimate interests of individuals or organizations in assets or the capital of the issuer. In other words, stocks are tools that help companies and organizations raise capital from investors.

Stocks include various forms such as common shares, bonds, fund certificates, derivatives securities, warrants, rights to purchase shares, and deposit certificates.

Shares - The Most Common Type of Security

Shares are the most widely chosen securities by investors. They confirm ownership of a portion of the company’s capital issued. There are two main types of shares: common shares (linked to the company’s business results, with no fixed dividends) and preferred shares (with priority dividend rights or voting rights).

Shares can be issued in paper form (stating the company’s name, face value, issuance year) or electronically (with all information stored on digital systems).

Bonds - Traditional Borrowing Instruments

Bonds (debt securities) are securities that confirm the rights of the holder and the debt repayment obligations of the issuer (company, organization, government). The essence of bonds is a loan contract, in which the issuer commits to repay both principal and interest within a specified period. Unlike stocks, bond buyers do not participate in company management but only receive fixed interest.

Fund Certificates - Indirect Investment Method

Fund certificates confirm the ownership rights of investors when contributing capital to a public investment fund. This fund pools capital from many investors to invest in securities or other assets. When participating in a fund, you must purchase fund certificates to verify your participation.

Derivative Securities - Complex Products

Derivative securities are contracts that define the rights and obligations of the parties involved. Their value depends on one or more underlying assets such as securities or market indices. Types include options, futures contracts, and forward contracts. Derivatives differ by trading on separate markets, unlimited issuance volume, settlement at future dates, and daily profit calculation.

Warrants - Purchase Rights at a Fixed Price

Warrants with collateral are securities issued by securities companies with collateral assets. Each warrant usually comes with a specific underlying security code. Warrant holders have the right to buy the underlying security at a predetermined price on the maturity date.

Share Purchase Rights - Preferential for Shareholders

Share purchase rights are securities issued by companies to give current shareholders priority to buy additional shares at a lower price than the listed price. Each existing share will come with a purchase right, with the quantity varying depending on the issuance round.

Depository Receipts - Foreign Shares Representation

Depository receipts are created when shares of foreign companies are deposited at a custodian bank. This bank issues depository receipts corresponding to the ratio between the issued certificates and the underlying shares.

Stock Market - The Playground for Investors

Basic Concept of Trading Floors

The stock market (also called stock exchange) is where investors gather to buy and sell securities at trading centers or through brokerage firms.

The stock market is divided into two types:

Primary Market: Where organizations and investment funds initially issue securities to raise capital. This is where securities are “born.”

Secondary Market: After issuance in the primary market, securities are traded among investors. Transactions here do not generate new money but only transfer ownership rights between parties.

The Important Role of the Stock Market

The stock market plays a crucial role in the economy:

• Promotes the development of joint-stock companies through information dissemination, company valuation, securities distribution, and attracting capital from investors.
• Provides investors with tools to evaluate company performance.
• Highly liquid, allowing quick buying and selling.
• Helps the government and businesses access foreign capital through bond and stock issuance.

Basic Terms Every F0 Investor Must Know

Market Vocabulary

• Listed Company: A company that offers shares publicly, listed on a stock exchange.
• IPO (Initial Public Offering): The first time a company issues securities to the public.
• Market Capitalization: The total market value of a company (stock price × number of outstanding shares).
• Offering Price: The initial listed price of shares when first issued on the market.
• Portfolio: The collection of stock codes in an investor’s account.
• Yield: The total dividend value received by an investor from holding shares.
• Annual Report: The company’s business result report published annually.
• Alpha Coefficient: The return rate adjusted for risk.
• Beta Coefficient: A measure of the volatility risk of a stock or portfolio.
• Price to Book Ratio: Compares the market price with the book value of a stock.
• Bankruptcy Risk Coefficient: Helps assess the risk and likelihood of a company’s bankruptcy.
• Dividend Yield: The relationship between dividends received and the purchase price of shares.

Trading Order Terms

• Limit Order (LO): Buy or sell at a specified price or better.
• Market Order (MP): Buy at the lowest selling price or sell at the highest current bid.
• ATO Order: Order executed at the opening price, applied before 9:15 (only on HOSE).
• ATC Order: Order executed at the closing price at 14:45 (applies to both HOSE and HNX).
• PLO Order: Buy or sell at the closing price after ATC (only on Hanoi).
• Break: A phenomenon where stock prices surge past a specific price range.
• Matching Price: The price set by investors when trading on the exchange.
• Long (buying up) / Short (selling down): Derivatives trading strategies.
• Stock Screening: Using criteria like upward momentum, accumulation, market cap, or liquidity to select stocks.
• Safety Margin: The difference between the market price and the intrinsic value of a stock.

Types of Stock Prices

• Par Value: The face value printed on the security at issuance.
• Market Price: The actual buying/selling price on the exchange.
• Listing Price: The initial price of the stock when it first appears on the market.
• Opening Price: The closing price of the previous trading session.
• Floor Price: The lowest price in a trading session.
• Ceiling Price: The highest price in a trading session.
• Settlement Date (T+3): Three working days after matching, when buying you receive shares, when selling you receive money.
• Price Trend: The market can have three types of trends - uptrend (Uptrend), downtrend (Downtrend), or sideways (Sideway).

Essential Concepts About Trading

• Index (Index): A statistical measure based on a list of stocks with a certain weighting. For example, Vnindex represents all stocks on HOSE, Vn30 is an index of the top 30 stocks by market cap and liquidity.
• Margin (Margin Trading): Investors borrow money from securities companies to buy stocks.
• Trading Volume: The number of shares traded within a certain period.
• Short Selling: Selling securities not owned by the seller by borrowing from others and repurchasing later.
• Price Fluctuation: The permissible fluctuation on HOSE is ±7%, and on HNX is ±10% compared to the reference price (previous day’s closing price).

Market Participants

Issuer: An organization that issues securities to raise capital from investors.

Investor: The person executing buy/sell transactions of securities. There are two types:

• Individual investors: People with personal capital seeking additional income.
• Institutional investors: Large capital entities like investment firms, insurance companies, financial institutions, banks.

Securities Company: An intermediary agency supporting management, consulting, brokerage, and underwriting.

Related Organizations: State Securities Commission, stock exchanges, credit rating agencies, technology service companies.

Five Basic Principles of the Stock Market

Investors must understand these five principles to comprehensively learn about basic stocks:

Competition Principle: Issuers compete to sell securities under the best conditions. Investors compete to buy at the highest price and achieve the best profit.

Fairness Principle: All market participants must comply with common regulations without exceptions.

Transparency Principle: Issuers are responsible for regularly, fully, and publicly providing information about their securities.

Intermediary Principle: Transactions between investors and issuers must go through securities companies as intermediaries.

Centralized Principle: Securities transactions only occur at trading centers managed and closely supervised by state agencies.

Trading Hours on the Exchanges

The Ho Chi Minh (HOSE), Hanoi (HNX), and UPCOM exchanges operate according to the following schedule:

• Morning: 9:00 to 11:30
• Afternoon: 13:00 to 15:00
• Trading days: Monday to Friday (excluding weekends and holidays)

How to Read Stock Price Tables

The price table is the most important tool that F0 investors need to master:

• Green: Price increased compared to the reference price.
• Red: Price decreased compared to the reference price.
• Yellow: Price unchanged compared to the reference price.

How to Buy and Sell Stocks

Investors can execute transactions in two ways:

1. Placing orders directly via the trading software of the securities company.
2. Contacting a brokerage firm to place orders on your behalf.

Account Opening Procedure

Before starting trading, new investors should follow these steps:

Step 1: Research and choose a securities company with suitable transaction fees. Pay attention to margin ratio and interest rates.

Step 2: Open an account at a securities company, bank, or brokerage firm. Provide necessary information: residence address, email, phone number, and bank account.

Step 3: Receive your securities account number from the company and deposit funds into the account to prepare for trading.

Step 4: With a minimum balance of 500,000 VND, investors can start buying and selling stocks.

Important Notes When Trading

The Three Main Stock Exchanges in Vietnam

Currently, there are three main exchanges:

• HOSE (Ho Chi Minh City): The largest exchange with many listed stocks.
• HNX (Hanoi): A smaller trading platform.
• Upcom: A trading point for public companies not yet officially listed.

Additionally, many international stock exchanges operate in Vietnam, but each has different advantages and disadvantages. Regardless of the chosen exchange, ensure it is reputable, has a long operational history, and is managed by domestic or reputable international securities authorities (ASIC, FCA, SEC, CySEC).

The Three Basic Orders for New Investors

When starting out, understanding basic securities involves mastering three main orders: ATO, ATC, and LO. Later, you can enhance your knowledge by learning more complex orders like MP, MTL, MOK, MAK.

Conclusion

To succeed in the stock market, F0 investors need to learn about basic stocks and master the foundational knowledge outlined above. However, this is only the beginning. To achieve sustainable profits, you must continue learning, accumulating experience, and constantly update market information to react quickly to fluctuations.

Start with a clear plan, manage risks carefully, and never stop learning about the market. Wishing you success on your investment journey!