What New Investors Need to Know About Stocks - A Practical Guide from A to Z

Why Is It Important to Understand Basic Stocks?

The stock market has become one of the most attractive profit channels today. When production and trade activities face difficulties, many investors shift to this field to seek opportunities. However, to avoid “reckless gambling” in the market, mastering basic stocks for beginners is an essential first step.

If you are just entering the (F0 - investor zero) market, you need to understand fundamental concepts, rules, and suitable trading strategies. This article will help clarify everything for you.

What Are Stocks? Basic Definitions

According to the Securities Law No. 70/2006/QH1, stocks are documents or evidence confirming the legal rights of the owner regarding assets or capital of the issuing organization. In other words, stocks are tools to confirm and transfer financial value.

Stocks come in many forms, from simple to complex. You can hold stocks in paper form or entirely electronically, with all data stored securely on computer systems.

Types of Stocks You Need to Know

Common Stock - The Most Popular Tool

Stocks are the most well-known type of security. When you buy stocks, you are purchasing a share of ownership in a company. There are two main types of stocks:

• Common shares: dividend value depends on the company’s business results, with no predetermined amount.
• Preferred shares: include preferred dividends and voting rights, with certain priorities.

Bonds - For Those Who Prefer Safety

(Debt securities) differ from stocks in that they are a loan agreement. When you buy bonds, you lend money to the issuing organization and receive fixed interest payments at each period, regardless of their business performance. If you dislike high risks, bonds are a conservative choice.

Investment Funds - Group Investment

Fund certificates are a type of security where you contribute capital to a public fund. This fund is managed by experts to invest in various instruments, helping you diversify risk without managing individual stocks yourself.

Derivative Securities - For Professional Investors

Derivatives are contracts whose value depends on underlying assets such as stocks or indices. These contracts include:

• Options contracts
• Futures contracts
• Forward contracts

Derivatives are traded on specialized markets, with no limit on issuance volume, and profits are determined daily. This type requires more experience from investors.

Other Types of Securities

You will also encounter:

• Warrants: issued by securities companies, giving you the right to buy underlying securities at a specified price in the future.
• Subscription rights: priority to buy additional shares at a lower price than the market.
• Depository receipts: created when foreign stocks are deposited at a custodian bank.

How Does the Stock Market Operate?

Market Definition

The stock market (or stock exchange) is a place where investors buy and sell securities. It is a financial arena where prices are determined by supply and demand mechanisms.

Two Market Components

Primary Market: where securities are issued for the first time to raise capital. This is where money flows directly from investors to companies.

Secondary Market: where investors buy and sell securities among themselves after issuance. No new money flows into the company; only ownership rights change hands.

The Important Role of the Market

The stock market plays several vital roles:

• Helping companies raise capital for expansion
• Providing investment channels for individuals and organizations
• Valuing enterprises through trading mechanisms
• Supporting government and businesses in attracting foreign capital

Basic Stock Terms That F0 Must Know

About Indices and Valuation

• Index (Index): a statistical measure based on a list of stocks with a certain weighting. For example: VNIndex represents all stocks on HOSE, VN30 is an index of the top 30 stocks by market cap and liquidity.
• Market capitalization: total market value of a company = stock price × number of shares issued.
• IPO (Initial Public Offering): issuing securities for the first time, when a company “goes public.”
• Yield: total dividends received when holding stocks.
• P/B Ratio (Price to Book Ratio): compares market price to book value, helping assess whether a stock is over or undervalued.
• Alpha and Beta: Alpha is the return after risk adjustment, Beta measures the stock’s risk relative to the market.

About Trading Orders

When buying and selling, you will use different types of orders:

• LO (Limit Order): buy/sell at a specified price or better.
• MP (Market Order): buy at the lowest selling price or sell at the highest current price (immediate transaction).
• ATO: trade at the opening price, before 9:15 AM (applicable only on HCMC exchange).
• ATC: trade at the closing price at 2:45 PM (on Hanoi and HCMC exchanges).
• PLO: trade after official market close (only on Hanoi exchange).

About Stock Prices

• Par value: the amount printed on the stock at issuance.
• Market price: the buying/selling price in actual trading.
• Listed price: the initial announced stock price.
• Opening price/Lower limit/Upper limit: respectively, the previous day’s closing price, the lowest, and highest during the trading session.
• Settlement date: T+3 (3 days after transaction), when funds are credited or stocks are transferred.

Other Trading Concepts

• Margin: borrowing money from a securities company to buy stocks (giao dịch ký quỹ).
• Short selling: selling stocks you do not own by borrowing from others.
• Long (buying long) and Short (selling short): strategies that profit from derivatives markets.
• Stock screening: using criteria like growth trend, market cap, liquidity to find suitable stocks.
• Margin of safety: the difference between market price and intrinsic value.

Vietnam Stock Market System

The Three Main Exchanges

Vietnam has three stock exchanges:

• HOSE (Ho Chi Minh City): focuses on large companies, high liquidity.
• HNX (Hanoi): medium and small-sized companies.
• UPCOM: public companies not yet officially listed.

Each exchange has different price fluctuation limits (HOSE ±7%, HNX ±10% compared to reference price).

Trading Hours

All exchanges operate from 9:00 AM - 11:30 AM and 1:00 PM - 3:00 PM, Monday to Friday (excluding weekends and holidays).

Market Participants

• Issuers: companies issuing securities to raise capital.
• Individual investors: private individuals participating to earn additional income.
• Institutional investors: investment firms, insurance companies, banks… trading with large capital.
• Securities companies: brokers, advisors, and managers for investors.
• Regulatory agencies: State Securities Commission, stock exchanges, credit rating agencies.

Five Principles for Market Operation

For the market to operate normally, five key principles are essential:

1. Competition principle: issuers and investors compete to find the best prices.
2. Fairness principle: all participants must comply with common regulations, with no privileges.
3. Transparency principle: issuers must provide complete periodic information.
4. Intermediary principle: transactions between investors and issuers must go through securities companies.
5. Centralized trading principle: transactions only occur on official exchanges under strict supervision.

How to Read a Stock Price Table

When you are new to this field, the price table may look complicated. But actually, it’s very simple:

• Green color: price increase compared to the reference price (previous day’s closing price) = positive signal.
• Red color: price decrease compared to the reference price = negative signal.
• Yellow color: no change compared to the reference price.

Price trends fall into three types: uptrend (Uptrend), downtrend (Downtrend), or sideways (Sideway).

Practical Tips When Starting Trading

Choose a Reliable Trading Platform

Besides the three main exchanges in Vietnam, many international trading platforms operate here. However, you must choose a platform with a long operational history, managed by reputable securities authorities like ASIC, FCA, SEC, CySEC,… This is a condition to protect your assets.

The Three Basic Orders F0 Must Learn First

• LO (Limit Order): buy/sell at your specified price.
• MP (Market Order): buy/sell immediately at market price.
• ATO/ATC: orders at opening/closing prices of the session.

After mastering these three orders, you can learn other advanced orders.

Opening a Securities Account - The First Step

To start, you need:

1. Choose a securities company with reasonable fees, margin ratio, and interest rate.
2. Prepare personal information: address, email, phone number, bank account.
3. Open an account directly at the securities company, bank, or brokerage firm.
4. The company will provide a trading account and guide you on depositing funds.
5. With at least 500,000 VND, you can begin buying and selling stocks.

Practice Before Investing Real Money

If you are still worried, start with a demo account. Many trading platforms offer virtual accounts with virtual money (often from 50,000 USD or more) for practice. You can:

• Trade on real markets: US stocks, forex, gold, oil, Nasdaq index, etc.
• Learn to use technical analysis tools
• Test trading strategies without risking real money
• Get familiar with the platform interface

Just a few simple steps to register, and you will have a demo account to start learning from real experience.

Conclusion: Your Starting Journey

These are the fundamental knowledge that every new investor participating in basic stocks for beginners needs to know. However, to truly succeed, you should:

• Continuously learn from reputable sources
• Practice on demo accounts before using real money
• Master risk management strategies
• Monitor the market and develop analytical skills

Your investment journey will be long-term, so don’t rush. Take one step at a time, learn gradually, and success will come.