From A to Z: What Beginners Need to Know About Stock Market Investment

The stock market has become an attractive option for investors in recent years. As production and trade difficulties increase, seeking profitable opportunities through stock investments has attracted millions of participants. To succeed in this field, new investors must equip themselves with solid stock investment knowledge, understand the operating mechanisms, and appropriate strategies. This article will help you grasp the most fundamental and core knowledge about the stock market.

What is stock? Definition and types of stocks

According to the Securities Law No. 70/2006/QH1, securities are documents, certificates confirming the lawful rights and interests of the owner regarding assets or the capital of the issuing organization. Stock investment knowledge begins with understanding the different types of securities, including:

• Shares, bonds, fund certificates
• Derivative securities
• Warrants, rights to purchase shares, deposit certificates
• Other types of securities regulated by the state

Shares - The most common type of security

Shares are the most widely known investment product. They confirm ownership of a part of the capital of the issuing company or enterprise. There are two main types of shares:

• Common shares: linked to the company’s business results, without fixed dividends
• Preferred shares: including priority dividends and voting rights

Shares can be issued in paper form with company information, face value, issuance year, or electronically with complete information stored in computer systems.

Bonds - Debt instruments

Bonds are securities confirming the rights of the owner and the debt repayment obligation of the issuer (company, organization, or government). The essence of bonds is a borrowing method where the issuer commits to repay both principal and interest within a certain period. Bond buyers will receive fixed interest regardless of the capital utilization results and do not have management rights over the capital recipient.

Fund certificates - Shares of investment funds

Fund certificates are securities confirming the ownership rights of investors when they contribute capital to a public fund. A public fund is an investment fund where many investors pool capital together to invest in securities or other assets to earn profits. When investing in a public fund, investors must purchase fund certificates to confirm their capital contribution.

Derivative securities - Contracts based on underlying assets

According to the 2019 Securities Law, derivative securities are contracts that define the rights and obligations of the participating parties. Their value depends on one or more underlying assets such as securities, indices, or commodities. Types of contracts include options, futures, and forward contracts. Derivative securities differ from underlying securities in the following characteristics:

• Traded on specialized derivative markets
• No limit on issuance volume
• Settlement occurs at a specific future time
• Profits are calculated daily

Warrants - Rights to purchase underlying securities

Guaranteed warrants are securities issued by securities companies with collateral assets. Each warrant usually comes with a code of the underlying security. The warrant holder has the right to buy the underlying security at a predetermined price on the maturity date.

Share purchase rights - Priority to buy additional shares

Share purchase rights are securities issued by companies to give existing shareholders priority to buy additional shares at a lower price than the market listing price. Each existing share will come with a purchase right, and the number of rights per share varies with each issuance.

Deposit certificates - Representing securities

Deposit certificates are created when a company’s or foreign enterprise’s shares are deposited into a depository bank. The depository bank then issues deposit certificates with quantities and values depending on the exchange ratio between the issued certificates and the underlying shares.

Stock market - The trading venue

Concept and classification of the stock market

The (stock exchange) is a place where investors conduct buying and selling transactions of securities at trading floors or through brokerage firms. The stock market is divided into two types:

• Primary market: where organizations or investment funds raise capital by issuing securities for the first time
• Secondary market: after issuance in the primary market, investors buy and sell securities. This transaction does not generate cash but only changes ownership rights between buyers and sellers

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, business valuation, securities distribution, and attracting investor capital (mobilizing effective capital)
• Provides investors with criteria to evaluate business development activities
• Highly liquid, allowing easy buying and selling
• Helps the government and enterprises raise foreign capital through bond and stock issuance

Essential concepts and terms for investors

To succeed in stock investment knowledge, new investors need to master some core concepts below.

Terms related to the market

• Listed company: a company that offers shares to the market, listed on the stock exchange
• IPO (Initial Public Offering): the first public issuance of securities
• Market capitalization: the total value of a company based on current share prices
• Offering price: the listed price of securities during the initial offering
• Securities portfolio: the collection of security codes in an investor’s account
• Yield: the total value of dividends or profits received by investors
• Annual report: the financial report of the issuing company published annually
• Alpha coefficient: return rate adjusted for risk
• Beta coefficient: a measure of risk for a stock or investment portfolio
• Price to Book Ratio: compares market price to book value
• Bankruptcy risk ratio: helps investors assess the financial risk of a business
• Dividend yield: the relationship between received dividends and the purchase price of shares

Trading order terms

• Limit order (LO): buy/sell order at a specified or better price
• Market order (MP): buy at the lowest selling price or sell at the highest current price
• ATO order (on Ho Chi Minh Stock Exchange): order to determine the opening price, before 9:15 AM
• ATC order (on Hanoi and Ho Chi Minh Stock Exchanges): order to determine the closing price at 2:45 PM
• PLO order (only on Hanoi Stock Exchange): buy/sell order at the closing price after the ATC session ends
• Break: indicates a strong increase in stock price surpassing a certain price range
• Matching price: the price at which an investor places an order
• Long (buying up), Short (selling down): trading up/down in derivatives
• Stock filtering: using criteria such as upward momentum, accumulation, market capitalization to find qualifying stocks
• Safety margin: the difference between market price and intrinsic value

Terms related to stock prices

• Par value: the amount written on the security at issuance
• Market price: the current buying/selling price in the trading market
• Listing price: the stock price at the first trading session
• Matching price: the price at which an order is matched
• Opening price: the closing price of the previous trading day
• Floor price: the lowest price during a trading session
• Ceiling price: the highest price during a trading session
• Settlement date: T+3, three days after order matching (excluding holidays)
• Price trend: the market has three types of trends: up (Uptrend), down (Downtrend), sideways (Sideway)

Basic trading concepts

• Index (index): a statistic based on a list of stocks according to a certain ratio. For example, Vnindex represents all stocks on HOSE, Vn30 is the index of the 30 largest-cap stocks
• Margin (margin): a trading method where investors borrow money from securities companies to buy securities
• Trading volume: the number of securities traded within a period (e.g., one day)
• Short selling: a method of selling securities not owned by borrowing from others and returning after sale
• Price fluctuation: the range of price movement on HOSE is +/- 7%, on HNX is +/- 10% compared to the reference price (the previous day’s closing price)

Market participants

The stock market system includes the following entities:

• Issuers: organizations issuing securities to raise capital
• Investors: individuals executing buy/sell transactions. Including retail investors (those with capital participating to earn income) and institutional investors (investment companies, insurance, finance, commercial banks operating with large capital)
• Securities companies: units supporting management, consulting, brokerage, and underwriting
• Related organizations: State Securities Commission, stock exchanges, credit rating agencies, securities IT service companies

Principles of stock market operation

To understand stock investment knowledge, investors need to grasp 5 basic operating principles:

• Competition principle: issuers compete to sell securities, investors compete to buy at good prices and high profits
• Fairness principle: all participants must comply with common regulations
• Transparency principle: issuers are required to regularly, openly, and fully provide information about securities
• Intermediary principle: transactions between investors and issuers must go through securities companies
• Centralization principle: transactions only occur at stock exchanges and are strictly managed by government agencies

Trading hours and methods

Trading hours

Trading floors in Ho Chi Minh City, Hanoi, and UPCOM operate from 9:00 to 11:30 in the morning and from 13:00 to 15:00 in the afternoon, Monday to Friday (excluding weekends and holidays).

How to read stock price tables

The price table is very important for new investors to understand:

• Green color: price increase compared to reference price
• Red color: price decrease compared to reference price
• Yellow color: price equal to reference price

Methods of buying and selling securities

Investors can conduct transactions in two ways:

• Manually placing orders on trading software
• Placing orders through brokerage firms

Opening a securities account - Important steps

Before opening a trading account, investors should research thoroughly and choose a suitable securities company. Special attention should be paid to transaction fees, margin ratios, and interest rates applied by the company.

Investors can open accounts directly at securities companies, banks, or brokerage firms. Required information includes residence address, email, phone number, and bank account.

After opening an account, the company will provide an account number and instructions for depositing funds to start trading. With a balance over 500,000 VND, investors can begin buying and selling securities.

Important notes when trading

When participating in the stock market, investors should pay attention to:

• Vietnam has 3 main trading floors: HOSE (HOSE), HNX (HNX), and UPCOM (for public companies not listed). Besides, many international trading platforms operate in Vietnam, each with different advantages and disadvantages. Regardless of the platform chosen, investors must select reputable, long-standing exchanges managed by domestic securities authorities or international regulators such as ASIC, FCA, SEC, CySEC

• New investors should master 3 basic orders: ATO, ATC, LO before learning advanced orders like MP, MTL, MOK, MAK

Conclusion

The above stock investment knowledge is an essential foundation that F0 investors need to equip themselves with when entering the market. To generate sustainable profits from securities, investors should continue learning deeper knowledge, accumulating practical experience to be sensitive to market fluctuations. Success in investing not only depends on knowledge but also on discipline and careful risk management.