By following some rules and regulations, you can start investing in stocks in Bangladesh. Investing in stocks in Bangladesh Stock Market is not a difficult task. But you need to expertise on stock market mechanism in order to make money from stocks investment. Bangladesh stock market is highly volatile. You have to master both on fundamental and technical analysis.
As a beginner in share investing, you should learn stock market basic knowledge. On the contrary, you should try to control your greed and emotion to make money from share market. In this article, you are going to learn complete procedures- how to invest in stocks in Bangladesh. So, read the whole article.
1. Determination to invest in stocks in Bangladesh
Make up your mind to invest in stocks in Bangladesh before further reading. As you have already started reading this post, I think you have intention to start stock investing. You should take stock investing as a serious business. Your strict determination will help you to achieve skill and experience. So, are you ready to start investing in stocks in Bangladesh?
If your answer is negative, just skip this article! Did you hear the name of Warrant Buffet yet? He is one of the best stock investors around the world. Moreover, he is one of the richest men in the earth. You should read successful investors’ story to motivate yourself. Hence, you should surely make up your mind to invest in stock market.
In stock investing, you can remain active or passive. That means you may become a day trader or a passive investor. This is one of the most significant reasons to invest in share market. At the outset, you should decide whether you want to be a trader or an investor.
2. Open a bank account
Opening a bank account is the prerequisite to create a BO (Beneficiary Ownership) account. You can open a bank account by deposit a specific amount from any Bangladeshi banks whether it is public or private bank. Your bank account will be used to deposit or withdraw money from BO Account.
You need National ID’s Photocopy, Passport size Photos, Nominee’s NID Card’s Photocopy, Passport size photos and some other information to open a bank account for investing in stocks in Bangladesh.
3. Select a broker house
Now time to search a best broker house. You can visit Dhaka Stock Exchange and Chittagong Stock Exchange website to get broker houses list. Some of the broker houses have accessed to more than one exchange. It will be a good decision if you can choose cost effective broker house.
Moreover, try to select the best broker house, which has permission to trade more than one exchange. Your broker can legally demand a specific commission rate for each transaction. In Bangladesh, on average commission rate is 0.25% to 1% per transaction. This commission rate is applicable both on buying and selling shares.
Let’s see an example how commission rate works
Suppose, a broker house’s commission rate is 0.4%. That means you need to pay buying commission @0.4% and selling commission is also @0.4%. Total commission rate is at least 0.85%. Commission amount to your broker will vary depending on selling price.
As commission rate and service are the main expected ingredients from broker house, you need to find out the best broker house to lessen cost and expand service.
4. Open a Beneficiary Ownership (BO) Account
To open a BO account, you need to talk with a broker agent. He will provide a form like opening a bank account form. Documents and procedures are same like bank account opening. Better service and less commission are the major concerns. When you fill up the BO Opening Form and submit required documents, your broker house will provide you a Client Code. By using this Client Code, you can perform all transactions.
5. Study the listed Companies from DSE or CSE
Now time to start the real game. Some may say, before opening BO account, you should start studying the listed companies from DSE or CSE. This is a good idea. But, opening BO account before studying market indicates that you are ready to start the game.
Whether you research market before BO account opening or after BO account opening, that doesn’t matter. You are requested to read my analysis on Dhaka Stock Exchange Broad Index for one year index study.
If you want to be a good investor, you need- how to buy stock for long term investment. You should Learn technical and fundamental analysis to study the companies. Firstly, learn about RSI indicator to know buying and selling signal. Secondly learn about candlestick chart in order to know price movement. Thirdly, for risk analysis, learn Value at risk (VaR).
On the contrary, learn top 3 fundamental indicators to take investing decision. Now take time to understand the economy, market condition and sectors wise performance. Economic factors, Market Volume, Index Trend, Monetary situation, Country’s financial condition are the common factors you need to analysis.
6. Make a deposit in BO to start investment
At the beginning, you should deposit small amount of money in your BO account. You can transfer money to your BO Account through offline and online mode from your bank account by selecting other bank transfer or deposit cheque. You can start with below 10 tk by buying a share less than 10 tk. Initially, I recommend you to start with 20000 tk to 40000 tk.
I suggest to use online transfer method. Initially, you should start with small amount. Gradually, increase your deposit after understanding the market properly. If you have much money, don’t need to deposit in a single day. Wait for final moment.
7. Start to invest with IPO
At the beginning, you can start invest in stocks in Bangladesh by initial public offering (IPO). According to last Security Exchange Commission (SEC) Law, you need minimum 20000 tk market value investment in secondary market to qualify for IPO application.
Maximum IPO application is 10000 tk. Hence, you need at least 30000 tk to apply for IPO. IPO shares are profitable and risk free. So, you can start with 30000 to 35000 tk to start investing in Bangladesh stock market.
8. Select stocks for secondary market
On your research step, you need to study at least 30 to 50 company’s stocks for investing in secondary market. Gradually, short the list and finally select 3 to 5 companies for investment. As your initial invest amount is 30000 tk, just buy 50 to 100 shares from each company and wait for 15 to 30 days to realize market movement. During trading hour, watch the market movement.
9. Holding stocks
How much time should you hold stocks? This answer depends on your investment nature. You can hold shares until you can obtain capital gain occurs or can hold till get dividend. Most active traders wait to gain 10% to 20% capital gain. But investors want both capital gain and dividend.
Many like to sell when holding increases 10% to 15%. When you see that your holding is increasing, hold shares for some more time. Your ultimate target is profit making. Fix your target and develop your own strategy to figure out holding techniques. But, follow stop loss rule when you make any mistake.
10. Selling or Buying decision
When will you sell your holding? You should try to buy shares when price is near 52 weeks’ lowest. Try to sell when price reaches to 52 Weeks’ highest. You should take selling decision by considering the market condition. Moreover, you should have knowledge about how to trade trend reversal if you start trading.
Traders have more experience about trading in downtrend market. If you want to be an investor, read the article- how to buy stock for long term investment. Temporarily, share price may below your buying price. Don’t worry if your confidence is enough to future prospects. So, buy shares when a good share price fall more. Try to average and minimize your buying risk.
11. Capital gain or dividend
Shares have both capital gain and dividend gain. Suppose you buy 200 shares from Company Bata Shoes on 1 July 2021. Buying price at 1000 Tk per share is 200*1000=200000 Tk. You can hold the shares until dividend will be received. Bata shoes has declared 50% dividend on the 1st December, 2021.
Current market price of Bata Shoes per share is 1200 Tk. Your capital gain is 40000 dollars (200*200), and 1000 dollars (200*5) at 50% dividend. Dividend is given on face value and 10 Tk is the face value of Bata Shoes. Hence, your total earning is41000 Tk (40000+1000), which is 20.50% gain (41000/200000) on your 200000 dollars investment.
Final Speech investing in stocks in Bangladesh
To earn money from Bangladesh stock market is very difficult task. To become successful in your share investing career, try to buy shares at discounted price and wait until achieve your target. Good shares may give you loss and this loss has no ability to grasp all of your capital.
But bad shares may eat your whole capital. Just imagine, you buy 500 shares at 400 tk per shares. For you trading mistakes, shares price may fall to 350 tk per share. Your loss is 25000 tk (500*50). That is for a single company’s share! Spend your time to understand the stock market.