How to Buy Shares in Pakistan

How to Buy Shares in Pakistan: A Beginner-Friendly Guide

When you are new to investments, your first question about buying shares in Pakistan will be that how you can invest shares without any mistake. Here, there comes the good part that it becomes easy compared to before. Earlier, you had to go to different places to make an investment. But now, many brokers provide online services to make it convenient for students, salaried individuals, businessmen, freelancers, and overseas Pakistanis.

Simply put, when you are buying shares, you are buying ownership in a firm. These firms deal at the Pakistan Stock Exchange and the shares of these companies fluctuate according to their performance, sentiments of the market, economical conditions, interest rates, and investor demand etc. Therefore, many people follow the Pakistan stock exchange live today and Pakistan stock exchange today.

To make an initial investment, you must have a trading account with a registered broker and a CDC account in Pakistan for your holdings in electronic form. The broker assists you in making purchases and sales while CDC system maintains your securities in digitized format. According to SECP, the security broker’s services are licensed activities and SECP licenses the brokers who provide brokerage services to the general public.

This will help you understand the entire process in detail so that before you invest your hard-earned money, you know everything about opening an account, picking brokers, basic trading, risks, and good practices.

Understanding PSX and Shares Trading

Pakistan Stock Exchange or PSX is the most popular exchange in Pakistan and the only one where shares of the listed companies are bought and sold. Whenever people talk about the performance of the stock market, especially when it is on the rise or downfall, they actually mean performance indices like the KSE-100 Index. These indices indicate general market performance.

Share prices may go up if investors believe that the company will have excellent performance and profits. Otherwise, the share price might decline if the company makes losses or experiences economic downturns, loss of demand, or any other trouble. This means that trading stocks and bonds is different from holding cash because of volatility.

• You may make capital gains if prices go up.
• Companies sometimes pay dividends.
• Prices may go down. It is necessary to manage risks.
• Investing for a long time is preferable to emotional trade.
• Before large investments, newbies should first get educated.

Steps Involved in Purchasing Shares in Pakistan

The procedure involves selecting a stock broker who is trustworthy in Pakistan. The broker will act as a liaison between you and the Pakistan Stock Exchange. You cannot trade with Pakistan Stock Exchange directly as you need a brokerage firm in this regard. In addition, the investor education section on Pakistan Stock Exchange explains the same.

Once you find your broker and decide to open your trading account online, you have to follow a set procedure. This procedure depends upon the account you select and the documentations required by the broker. Generally, you will need your CNIC, bank details, phone number, email id, income source, and some KYC related details as well. Sometimes a broker may also require a picture, sign, income proof, and more documentation based on the account you are opening.

On the approval of your account, you will get a login ID with which you can start your trading via the online portal provided by the broker. Using the online portal, you can do things like looking for stocks, their prices, market depth, placing your order, watching out your trading portfolio, etc. Before purchasing any share, always try to know about the company.

Steps involved in simple purchase process:

• Choosing licensed and reputable stockbroker.
• Creating PSX account using online method or broker office.
• Submitting your CNIC, bank details and KYC documentations.
• Depositing money in your broker account.
• Sending a search command for a stock using trading application software and placing the order.

CDC Account Pakistan?

CDC account Pakistan plays a significant role since it does not rely on shares issued in physical form anymore. The shares bought by individuals or companies are kept electronically within the central depository system. When an individual buys shares through his broker account, the stocks get transferred in his CDC sub-account or investor account based upon account type.

The terminology used by CDC regulations includes terms such as sub-accounts, investor account, KYC form, and online portal-based account opening under depository system. For beginners, the easiest way to trade the stock can be considered as a broker-associated sub-account. It is the most convenient for both trading and account management processes since the same broker manages everything.

Choosing the Right Stock Broker in Pakistan Stock Exchange

There are many people who search for best stock broker in Pakistan but what you have to understand is that there is no such thing as best broker. The reason is simple and that is because every individual requires something different from the other. While someone would need rapid trade execution, charts, and low commission, another would require solid research reports, support, and account management.

When choosing the right broker in Pakistani stock exchange, the foremost thing that should be done is determining whether or not the broker is well-licensed and has connections with the PSX as well as other related bodies. According to the Securities and Exchange Commission of Pakistan, securities brokers licensing entails conditions of eligibility, procedure of licensing, obligations, and renewal among other things.

It would be better if you try out the trading application of the broker before investing into it. What you should ideally find in an application is transparency in charges, stability, user-friendliness, etc. In addition, the broker’s system must provide information regarding orders, portfolio value, account statement, and current rates.

Some investors even evaluate the top brokers in Pakistan’s stock market based on research quality. Research quality can assist you to determine the earning ability, dividend record, performance of industries, and market behavior of any company. Even then, research is just supposed to provide guidance; it cannot make your decisions for you.

Do not select by low commission only

A low commission will definitely assist you, but that should not be the only deciding factor. An excessively low-priced broker offering you poor customer services, bad application functionality, or poor reporting system can become problematic. It would be better to select a broker who offers a balanced equation.

The way to read Pakistan stock exchange today before buying

Most beginners start looking at Pakistan stock exchange today for checking whether it is up or down to decide whether to buy or sell stocks. It is a wise move, however, the movement of the market everyday should not be your sole criteria for buying and selling stocks.

If you want to analyze Pakistan stock exchange live today, then besides the index numbers, you need to pay attention to what is going up or down. Look out for sectors, companies whose volumes are high and if there is any important information causing fluctuations in the market. Banking, cement, fertilizer, oil, technology and power stocks may react differently to different economic situations.

It would also be important for you to know the difference between investing and trading. In trading, decision-making ability is important as well as management of risks and trading experience. While in investing, it is important to think about dividends and future prospects.

Trading seems harder to many beginners compared to investing. As a beginner investor, start small, learn how to place orders, understand risks and don’t invest all your money in one single stock.

Conclusion

Buying stocks in Pakistan is not complicated; what matters is that investing is a process which demands some amount of patience. There are certain requirements such as a brokerage, opening an account, an appropriate structure of accounts like the CDC account, knowledge of the stock market, and most importantly, the right attitude.

Stock market may become the tool of making you rich provided you invest in a disciplined manner. Carefully choose your stock broker Pakistan, get yourself registered online on the PSX platform, make sure you analyze the companies you are going to buy, and always be ready to learn more.

For beginners, there is just one simple piece of advice – be patient, do not follow rumors, monitor your investments and think about quality companies rather than market fluctuations.