A good example of understanding the above can be in the case of Hershey’s. Just because the chocolate tastes good does not mean that the position of the company is strong. A point should be made that the product of a company does not provide merit to its strength in the index.
Studies have shown that over a twenty-year span, investment in shares has provided greater returns than most other forms of savings. Shares can provide you with a regular stream of income through dividends as well as the potential for your investments to grow in value. If the prices of shares go up, you can sell them for more than you paid. This is called capital gain.
Dividends are returns paid to shareholders out of the profits of the company. Returns can be in the form of cash or additional shares of the company called bonus shares. Dividends are usually paid once or twice a year depending upon the company’s profit distribution policy.
This is one of the ways in which shares differ from deposit accounts. The principal amount of money you put in a bank or any fixed income savings scheme always stays the same e.g. if you start with Rs.100,000 you will always have Rs.100,000 (other than any interest earned).changes in value according to the performance of the company. With good management, the value of your investment in shares of a company can grow over time so that your shares are worth more than you paid for them. This is capital growth.
Buying shares can offer advantages over saving in deposit accounts: your investment may increase in value besides paying you dividends. You share the rewards when the company does well and the price of the shares goes up. But if the company performs badly, the share price may go down and the value of your investment will be reduced. Other factors, such as the performance of the stock market as a whole and the general economic climate, may also affect the price of your shares. Investment in shares is therefore investment in ‘risk capital’. The shareholders can be rewarded for taking this risk and the potential return on your money can be higher than that on other investments. You can reduce your risks with careful planning.
Equities are mainly growth investments, and can include things like real estate, art, and gold. However the most popular equity investments that people rely on for growth are stocks. But stocks can also serve purposes other than growth.
In addition to potential capital gains, stocks also have the potential to pay dividends. If you have equity in a business you are an owner, and if your company makes money, you are rewarded with dividend.
Financial experts have many opinions on many things, but there is one fact on which they will all agree. You need to have stocks in your portfolio to provide the growth you need to stay ahead and have a secure future over the long-term
They also agree on the best way to invest in stocks is with a long-term view in mind. Over the long run, equities do go up and have proven to be the most profitable investment by far. But the key phrase here, the vital strategy for success is “over the long run”.
When you hold stocks for the long run you get good days and bad days. If you are a short-term trader, unless you have a crystal ball working for you, you are going to miss most of those good days. The simple secret to success is to stay invested.
There are two general ways of determining a stock’s potential as an investment. You can look at the “fundamentals” or you can look at “technical analysis” and of course you can look at both.
Fundamental analysis looks at factors such as earnings, cash flow, debt, strength in its industry, outlook for the industry, general economic factors, interest rates, and so on. If these factors are good, then even if there are short-term setbacks, over the long run, the stock should do well.
Technical analysis looks at factors like volume of trading, cyclical behavior, trends, moving averages and many others.
Some investors use both approaches. They use fundamentals to determine the long-term potential of a company and technical analysis to decide when to buy. For example, you may believe that a certain company has great potential over the long-term and will be worth much more in years to come.
However, it could be that the current market for this company’s product is temporarily weak and that as a result, the stock price could fall. Technical analysis could be helpful in determining how far the price might fall and could provide help in indicating a good time to buy.
Shares of a particular company are offered by the following methods.
An initial public offering (IPO) is the sale of equity in a company, generally in the form of shares of common stock. These shares trade on a recognized stock market. A company goes public; to raise capital for project funding, business planning and implementation; for marketing purposes.
A rights issue gives the existing shareholders the right to subscribe for new ordinary shares at an issue price lower than the prevailing market price and at a ratio equivalent to their existing shareholding. Companies carry out a rights issue when they want to raise additional funds to finance their capital requirements.
The Stock Market
Stocks in publicly traded companies are bought and sold at a stock market also known as a stock exchange. This is the most common way of buying and selling shares.
Stocks and shares are the most volatile asset class in terms of price movements and thus, the most risky. Hence, do not invest directly in the stock market unless you can bear a fall in price without it having any impact on your day-to-day living standard. Remember the saying: “the greater the reward, the higher the risk”.
The aim of investing in stocks and shares is to buy at a low and sell at a high, but knowing when, is the problem. Many investors attempt to time the market: they try to figure out when the market is going up and buy into it before it does, and then figure out when it is going to crash and sell everything just before it does. Unfortunately such spot on accuracy is usually impossible to achieve, so what you can do is try to catch a portion of each big swing. You buy when the upswing has begun, and sell as the downswing starts. But for this to work, you must be able to control your greed, as you do not know exactly when the top or bottom is reached.
The stock market can be said to be driven by two emotions: greed and fear. People get caught up in the boom fever and pay silly prices for unworthy shares – this is greed driving bull markets. In bear markets, people get carried away with the ruling negativity and are overeager to believe the worst rumors – this is fear dominating bear markets. You must step away from the crowd and not let them take over your rational reasoning and action.
Minimize the risk of losing your savings to scams by recognizing the different types of illegal investment schemes that are plaguing our society. Here are some typical characteristics and promises made by scams:
Central Depository Company of Pakistan Limited (CDC) started in 1993 to manage and operate the Central Depository System. CDS is an electronic book entry system to record and transfer securities. Electronic book entry means that the securities do not physically change hands and the transfer from one client account to another takes place electronically. CDC is to operate as a central securities depository on behalf of the financial services industry to support an effective capital market system that will attract institutional and retail level investors from Pakistan and abroad. Its basic purpose is to operate and maintain an electronic book entry settlement system for equity, debt and other financial instruments.
The capital markets of Pakistan have witnessed a rapid growth resulting in increased trading volume. This in turn has led to difficulty in handling the share certificates. The custody and safe keeping of physical certificates required maintenance of huge vaults by the individuals and institutions and the physical settlement of certificates were no longer feasible. Moreover, the manual system was also plagued by long delays, risks of damage and considerable time delays. Following are some highlighted problems faced before CDS was in place,
Following are some of the benefits of electronic settlement of securities through CDS:
To track how your stocks are doing, you have to look at stock listings. Stock listings are published in most of the newspaper (e.g. Dawn). The listings look confusing at first, since they look like a mixture of numbers, but can be a very useful tool when tracking your stock’s progress. The listings are organized into many columns, including the following information:
In addition to the stock listings, other useful information about companies is available in the Annual Reports that reflects the balance sheet, income statement and cash flows and states the reasons for changes in these financial statements during the year.
Understanding why you are investing is the first step in structuring a portfolio. There are few questions investors need to ask themselves and review with their broker before starting to invest.
Specifically, What are my investment objectives? What is this money for? What kind of risk am I willing to take? What is my time horizon? It is important that you work closely with your advisor so you both have a clear understanding of your specific needs and goals.
Understanding risk is an integral factor that is required to be evaluated before making any investment. You can view risk as portfolio volatility, as the risk of not achieving your goals, or as the risk of permanent capital loss. When you are assessing risk, questions to ask yourself include:
Risk and returns are generally related. Over the long term, increasing your risk typically leads to higher expected returns, while lowering your risk leads to lower expected returns. However, this is not always so. For some occasions, which may occur for an extended period of time, higher levels of risk may lead to lower returns, and vice versa.
Goals and risk tolerance should be the basis for establishing investment guidelines for your portfolio. These guidelines will enable you to structure your portfolio and provide you with a framework that allows you to review and understand your investment performance.
• Investment Climate
Whenever you hire a broker to invest in the stocks it’s not necessary that your results would be same as the market movements. In some cases brokers advise to invest in stocks that are not highly correlated with stock index due to the small capitalization of that particular scrip in the market.
• Maximization of Returns
The goal of the investor, in most cases, is to maximize return. Higher returns are often related with higher degree of risk. Investor should not take unnecessary risk to earn higher profits because it posts a great deal of threat to its basic equity and investments. Investors could avoid risk by diversifying its portfolio in different sectors, which usually pays off in terms of better returns.
• Company profile
Information regarding companies invested in and their economic profile should be exposed to the investor. Investor should be well aware of the financial background, management style and the nature of business of the company to make an adequate investment. Investing in the stock market requires looking ahead to anticipate future events in the company’s life and changes in its business environment, to minimize risk and maximize return on investment.
• How much Money Can You Afford to Invest?
Investors should be aware of the fact that investments in the stock usually do not result in immediate profits. A sound investment strategy avoids speculative moves. An investor should have excess reserves with its broker to protect himself against frequent fluctuations in stock.
• Investment Avenues
Investors can invest in their money in stock in following ways:
Shares: It is the direct mode of investment in which investor directly sell and purchase stocks of various companies through the brokers or dealers.
• Own Investment Strategy vs. Professional’s Advice
Sound strategy for investment in stock market requires either professional’s advice or own stock dealing decisions, which are often, time consuming. Despite the time consideration it is advisable to pursue own investment strategy because it is more rewarding than seeking broker’s opinion.
Costs that are associated with stock dealing usually fall under the following heads:
It is highly recommended that the investors should have a proper understanding of the commission structure of the brokerage service. The structure varies from broker to broker in most cases. It is advisable that the investor should ask his broker about all the cost associated with stock dealings to arrive at his net profit position
• Information Tools Make All the Difference
While you sense the promise and enjoy the excitement of modern technology, like so many others, you probably feel overwhelmed, frustrated, even lost at the prospect of putting your savings online and on the line. Certainly none of the skills crucial to sizing up the market are intuitive; therefore, in order to see what is really going on, and to become a successful investor, you are going to have to learn about the market’s state-of-the-art trading techniques and strategies.
Different people trade in different styles. There are long-term investors who buy stocks and hold for a year or two. Mid-term investors may buy and hold stocks from thirty days to six months. Short-term traders trade frequently, on a weekly basis. And finally, day traders buy and sell every day. Now, assuming you make good decisions, the more frequently you trade, the more profit you gain. But what style is right for you? Which stocks should you choose and how long should you hold them? Some investors like companies with strongest earnings. Other players examine company financial statements and balance sheets, picking only those with low debt ratio, high cash flow, and high profit margin.
Your investing style comes from a variety of things: your age, personality, personal experience, and financial circumstances to name a few. For instance, if you are approaching retirement, have financial responsibilities, chances are you may be more risk-averse, or a conservative investor.
On the other hand, if you’re young, earning a high income, have few financial responsibilities, and have seen little in the way of economic hardship, you might be inclined to take more risk.
While there are as many investing styles as there are investors, most people fall more or less into one of three broad categories: conservative, moderate, and aggressive.
Transfer of securities from your CDC Investor’s Account to PCSL Trade Account
In order to transfer your shares from your CDC Investor’s account to your PCSL Trade account, you may provide us the Transfer Order (TO) or you can do the same by submitting it directly to the CDC and intimate us by emailing at firstname.lastname@example.org
Transfer of securities from another Broker / Member Account to PCSL Trade Account
In order to transfer your shares from another brokerage house to your PCSL Trade account, you may provide the Participant Name and Participant ID of PCSL Trade to the particular broker and ask him to transfer your shares and also intimate us by emailing at email@example.com
Note: Only those shares are accepted at PCSL Trade which are received in the name of PCSL Trade account holder.
Transfer of Physical Shares to PCSL Trade Account
In order to transfer your physical shares to your PCSL Trade account you can submit your physical shares at any of our branch offices. Please make sure that your physical shares are in your name and the transfer deeds are duly verified. Please attach a copy of your CNIC and a covering letter mentioning your User ID and 6 digit customer number, and clearly stating that you wish to convert your physical shares into CDC format and credit to your PCSL Trade account.
CDC Participant Details of PCSL
Don’t feel like talking or unable to make a call. You can also send us an email regarding your queries or suggestions. It sounds sophisticated, because it is.
Info is our Customer Care point which let you feel being part of the family. Get in touch with us through email; you can email us for all your stock related queries and suggestions to make us serve you in a much better way possible. Our info team is more than helpful; they will not only resolve your issues but also guide you into understanding various technicalities according to your own needs.
To stamp us you can always use: firstname.lastname@example.org All your queries and suggestions will be answered with in next 48-72 hours.
Put your feet on the paddle, We assure you a smooth ride.
The stock market makes an appearance in the news every day. You hear about it when it reaches a new high, in headlines like “The Pakistan Stock Exchange Average rose 100 index points today”, when a certain stock plummets, or when the political scenario changes.
Obviously, stocks and the stock market are important, but you may find that you know very little about them. What is a stock? What is a stock market? Why do we need a stock market? Where does the stock come from to begin with, and why do people want to buy and sell it? If you have questions like these, you’ve come to the right place.
Welcome to a whole new World.
Stocks in publicly traded companies are bought and sold at a stock market (also known as a stock exchange).
The Pakistan Stock Exchange (PSX) is an example of such a market.
In your neighborhood, you probably have a supermarket that sells groceries. The reason you go the supermarket is because everything you need to run your home is available under one roof. It’s far more convenient than having to make 10 stops at different stores.
The PSX is a supermarket for stocks. The PSX is like a big room where everyone who wants to buy and sell shares can go to conduct their transactions.
The Exchange makes buying and selling easy. You do not have to actually travel to the Stock Exchange; rather, you can call a stock broker who does business with the Exchange, and he or she will go there on your behalf to buy or sell your stock. With an Exchange in place, you can buy and sell shares instantly.
The Stock Exchange has an interesting side effect. Because all the buying and selling is concentrated in one place, it allows the price of a stock to be known every second of the day. Therefore, investors can watch as a stock’s price fluctuates based on news from the company, media reports, economic news and a range of other factors. Smart buyers and sellers take all of these factors into account before making decisions.
If you start a business using your own money, you have formed a sole proprietorship. You own the entire business yourself. If three people pool their money together and start a business as a team, they have formed a partnership. The three people own the business, sharing the profit and decision-making.
Any business that wants to sell shares of stock to a number of different people does so by turning itself into a corporation. The process of turning a business into a corporation is called incorporation.
A corporation is different, and it is an interesting concept. A corporation is a “virtual person.” That is, a corporation is registered with the government, it has a tax number, it can own property, it can go to court, and it can enter into contracts. By definition, a corporation has stock that can be bought and sold, and all of the owners of the corporation hold shares of stock in the corporation to represent their ownership. One incredibly interesting characteristic of this “virtual person” is that it has an indefinite and potentially infinite life span.
There is a whole body of law that controls corporations. These laws are in place to protect shareholders and the public. These laws control a number of things about how a corporation operates and is organized. For example, every corporation has a board of directors. The shareholders in the company meet every year to vote on the people for the board. The board of directors makes the decisions for the company. The board of directors can be thought of as the brain of the virtual person.
The owners of a corporation gain ownership by buying shares of stock in the corporation. The board of directors decide how many total shares there will be. For example, a company may have one million shares of stock. The company can either be privately held or publicly held. In a privately held company, the shares of stock are owned by a small number of people who probably all know one another. They buy and sell their shares amongst themselves. A publicly held company is owned by thousands of people who trade their shares on a public Stock Exchange.
A corporation is an easy way to gather large quantities of investment capital. When a corporation first sells stock to the public, it does so in an IPO (Initial Public Offering). The company might sell one million shares of stock at Rs. 20 a share to raise Rs. 20 million very quickly. The company then invests the 20 million rupees in equipment and employees. The investors who bought the stock hope that with the equipment and employees, the company will make a profit and pay a dividend.
Out of all the three Exchanges, the Pakistan Stock Exchange is the premiere Stock Exchange of the country, with over 644 listed companies. It was established soon after the creation of Pakistan.
When people talk about investing, they think of putting money into a company stock and holding it for a long time until they realize a significant gain. From this view, put simply, investing is to “buy and hold.” In reality, people also use the term “invest” to describe mid-term and long-term stock acquisition. Mid and long-term investors will study stock fundamentals such as a company’s quarterly earnings report, a company’s relative strength in its industry sector, new product lines, technological innovation, or new management teams or strategies. They also look at stock charts and use basic technical analysis combined with overall market conditions to determine an entry point. Then, having done all this, they may sit back without worrying too much about short-term market fluctuation.In another form of trading, short-term traders attempt to buy low and sell high, not focusing as much on company fundamentals as long-term investors tend to do. Short-term traders may seem to care very little about conventional indicators. What they do care about is market volatility, the rising and falling of stock values, for the more ups and downs a stock has, the more money they believe they can make, getting in and out fast to take a quick profit.
An investment portfolio is an investor’s collection of investments. A portfolio is a list of the total number of investments an individual investor holds. A diversified portfolio contains assets from a number of different sectors.
Every investor should know that there is a tradeoff between risk and reward: To obtain greater expected returns on investments, one must be willing to take on greater risk
Portfolio management is all about the art and science of making decisions about an investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk vs. performance.
The main difference between an amateur and an experienced trader is that the latter always tries to understand and control portfolio risks. Before entering into any trade, good traders first think about how much risk to take and how much risk exposure comes with a particular trade selection. Only then do they allow themselves to think about how much profit they stand to make. Smart investors always cut down their position and exposure if they determine that a portfolio carries too much risk. They calculate this all-important estimation by employing Risk Management defined as that set of methods and procedures taken to estimate, and control risk for the purpose of achieving optimal investment results.
One successful investor who made a lot of money defined stock trading as a challenging game of strategy and discipline. The stock market is vastly complex and dynamic, so you need to exercise strict discipline, clear judgment, do your homework, and set firm goals and limits. Sometimes the most important work you can do is exercising patience, confidence, and discipline. You need to stay calm, keeping your mind clear and focused. You can’t blindly bet that the stock price will go up or go down. You need to be well informed and make buy or sell decisions based on facts and logic.
In investing, intuition also plays an important role. Good intuition comes from experience and sound judgment. When you start making money, you cannot think of yourself as a winner yet because if you lose focus and become greedy, you can lose your money in an instant. More importantly, if you happen to lose money, you cannot let yourself conclude that a single loss makes you a loser. Losing money can be very upsetting, but you need to be consistent and not quit the game easily. Learn to use a loss as a lesson, just as professional traders do, and determine why you lost. In this way, you maximize your chances of becoming a better investor. Talk with your friends and listen closely to trading tips, but in the end, you have to make your own judgments. Believe in yourself. If your next pick ends up being wrong, that may mean you have not yet done sufficient homework on that stock.
Conducting research is the most important thing to do before any trade. By doing your own research, you complete a definite set of steps that will guide you towards a successful outcome. First of all, set your goals: Do you want to trade long-term, mid-term or short-term? Once you have set your targets, stay with your plan.
After you have identified your goal, you will need to concentrate on specific industry sectors. By diversifying in a couple of different sectors you avoid putting all your eggs into a single basket. Within each sector, choose stocks you want to invest in. Ask yourself questions such as, why do I want to buy this particular stock. Does it have leading-edge products or technologies that I believe are going to fly? Or does the stock follow technical patterns well? In other words, does the stock chart follow a model? Positive responses to these questions can help you feel comfortable in investing in that stock.
Diversification means creating an investment portfolio that contains different types of investments within each of the major classes. A diversified portfolio might include stock in several different companies or a number of stock mutual funds, government and corporate bonds. You might diversify a larger portfolio even further by including a range of investments from other asset classes, such as real estate.
There are two important reasons to diversify your investment portfolio:
Each of the traditional asset classes tends to produce its strongest returns under different market conditions than the other asset classes do. For example, stocks often shine when corporate earnings are strong and financial markets are expanding.
If your investments are narrowly focused, for example, if you own stock in just one company or stock in three companies in the same industry or area of the economy, the value of your portfolio can drop sharply if that company or industry produces disappointing returns. But if you own stocks of different-sized companies in different parts of the economy, even if some investments go down in value, others may remain stable or go up. In any case, different types of stocks are not as likely to lose value at the same rate or at the same time.
Diversification is not just about increasing the sheer number of your investments. It is about striking a balance among various investments in your portfolio to reduce your exposure to risk and take advantage of the full range of opportunities in the market. First, you need to analyze what you already own before you make another investment. Then you can identify the categories that you need to build up.
For example, if all of your stock investments are in large company stocks, it may be time to investigate some smaller company stocks, since they tend to perform differently and rise and fall in value at different times than larger company stocks. In this way, you can offset some of the risks that each investment carries on its own, while enjoying many of the advantages and benefits of each category of investment.
|Share Price||Commission||Roll Over|
|Upto 4.99||Re. 0.03||0.01|
|5.00 – 99.99||Re. 0.05||0.01|
|100.00 – 199.99||Re. 0.10||0.02|
|200.00 and Above||0.05% of Share Value||0.02|
For Filler :
For Non-Fillers :
|Tax Year 2015||Tax Year 2016||Tax Year 2017||Tax Year 2018|
|Securities acquired before 01.07.2016||Securities acquired after 01.07.2016|
|1.||Where holding period of a security is less than 12 months.||12.5%||15%||15%||18%||15%||18%||15%||20%|
|2.||Where holding period of a security is 12 months or more but less 24 months.||10%||12.5%||12.5%||16%||12.5%||16%|
|3.||Where holding period of a security is 24 months or more but the security was acquired on or after 1st July, 2013||0%||7.5%||7.5%||11%||7.5%||11%|
|4.||Where the security was acquired before 1st July, 2013*||0%||0%||0%||0%||0%||0%||0%||0%|
|5.||Future Commodity Contracts entered into by membrs of Pakistan Mercantile Exchange||0%||0%||5%||5%||5%||5%||5%||5%|
[Provider that the rate of tax on cash settled dervatives traded on the Stock Exchange shall be 5% for the tax years 2018 to 2020.]
* As per Sindh High Court Order C.P.No 4199/2015 dated August 10,2016, this date shall be 1st July 2013 instead of 1st july 2012.
Statement Courier Charges:
Minimum Account Balance Requirement:
You may open an account with PCSL Trade without even physically appearing at our office with a minimum initial balance of Rs 100,000/-, which can be in the form of cash, shares or combination of both, provided that you have the following;
You will only be required to submit the following documents:
|Duly filled and signed PCSL Trade Account Opening Form.|
|Duly filled and signed CDC Sub-Account Opening Form(SAOF).|
|Duly signed PCSL Trade Commission Structure.|
You may download the forms and the commission structure from the above links.
You may also visit any of our Branch Offices as per your convenience. For any further queries regarding account opening procedures, please feel free to contact us at our Call Centre 0423-6311051-58.
Please Note: A minimum balance of Rs 5,000/- has to be maintained in all PCSL Trade accounts at all times. However, any PCSL Trade account holder wishing to close his/her PCSL Trade account or withdraw his/her full account balance, will be required to produce a Tax Clearance Certificate as per the CGT Rules and Regulations.
Please make sure that all the fields of the New Standardized CDC Sub Account Opening Form (SAOF) are properly filled as per the following instructions:
Section A: REGISTRATION (AND OTHER DETAILS OF MAIN APPLICANT (Page # 1)
Section B: REGISTRATION (AND OTHER DETAILS OF JOINT APPLICANT (Page # 2)
Section C: OTHER INFORMATION (Page # 3)
Section D: CDC SMS / IVR / WEB SERVICES (“CDC access”) (Page # 3)
Section E: SUB-ACCOUNT OPERATING INSTRUCTIONS (Page # 4)
Section F: BANK VERIFICATION (Page # 4)
DISCLAIMER FOR CDC ACCESS (Page # 6)