Introduction to Shares
The Malaysian capital market offers various investment products in the form of shares, unit trusts, bonds, warrants and derivatives. However, as an investor the type of investment product you choose to invest in is usually determined by several common factors such as investment goals, risk appetite and risk tolerance, investment time frame, and available cash to name a few.
In this leaflet, we will discuss the investment product known as shares. After reading this leaflet, you will be able to:
Identify the characteristics of shares and make an informed investment decision when selecting a share investment.
It is important for you to obtain as much information as possible on the product from the authorised person or organisation you wish to invest in. By having the relevant information on the investment products, you will be able to make an informed investment decision and exercise your rights and responsibilities as an investor. However, seek professional advice if you are unsure or check with the regulator.
What are shares: A share represents part ownership of a company. You must understand the principal business activity of the company as a shareholder, monitor your investment and attend shareholder’s meetings and exercise your voting rights. Each share you own represents a small stake in the company and you can buy a small or large number of units (shares are traded in lots, and one lot is equivalent to 100 units), depending on how much capital you have. As a shareholder, you can benefit from the profits earned by the company (usually paid in the form of dividends) and capital gains in the value of the company.
Risks and returns: Remember, investing in shares is not without its risks. For example, the shares of a company may fall in value if the company’s underlying fundamentals are weak. Other factors that may affect share prices include the general economic outlook, its industry segment and others.
General guide for investing in shares:
Conduct a “financial self-examination”
Analyse your financial objectives, constraints and risk tolerance. Ask whether you are financially ready to invest in the stock market? Generally, do not borrow to invest in the stock market. In a volatile market, you could lose the borrowed money and still have to pay for it.
Deal only with licensed persons
Your investment bank or institution and its representatives must be licensed by the Securities Commission (SC). For a quick check, log on to http://www.sc.com.my/ or call 03-6204 8000 (Licensing Department).
Open CDS and trading accounts
Open a CDS (Central Depository System) account and a trading account at your stockbroking company. These accounts are for your exclusive use. Never let anyone, including your stockbroking company’s representative use them for their own trading.
Know the products traded on the exchange
Do your homework. Be familiar with the products traded on Bursa Malaysia. Get sufficient information on the products from your stockbroking company’s representative or alternatively, visit Bursa Malaysia’s website and the website of the company that you invested in.
Learn the trading procedures
Failure to fully understand trading conditions and procedures could lead to losses due to lack of knowledge. Ask your stockbroking company’s representative to explain the correct trading procedures.
Know the companies
Before you invest, do some homework on the companies whose shares you plan to buy. Get to know them by reading the prospectus, annual reports and articles in the dailies. Seek professional advise if necessary. Your investment decision must be an informed one. Avoid rumours and tips.
Monitor your investments
Never leave your investments unmonitored. This should include not just keeping tabs on the share price but also keeping abreast of developments in the media, research reports and announcements on the exchange.
The Malaysian Capital Market has an extensive range of investment products, all with varying degrees of risks and returns to cater different types of investors. As a potential investor, always be mindful of your own risk appetite and investment goals and never invest in an investment product that you do not understand. Lastly, make only informed investment decisions by first learning and understanding the products carefully.