Investing in the stock market or share market is one of the most popular ways to increase wealth in the modern age. However, investing in the stock market can be difficult, especially if you are a new investor. So, if you are a beginner, the best way you can start is by gaining experience. The share market is a volatile and risky investment, so do your research before making any decisions. Here is what you need to know about investing in the stock market in Bangladesh.
Types of Stock Market
There are two types of markets in which you can invest - primary and secondary. Let’s take a look at the investment process in both these markets.
Primary Market
The primary stock market refers to the main market where companies sell their shares to the public. The main goals of the primary stock market are to provide a means for investors to buy public shares and to provide information about company performance. If you want to invest in the primary market, you have to invest in an IPO (Initial Public Offering).
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It is the process through which a private company offers its shares to the public for the first time and becomes a public company. Through the IPO, the company involved provides its name on the stock market as an Initial Public Offering. A company owned by shareholders lets you know the basics of ownership and sells you some part of the company.
Secondary Market
The secondary stock market refers to a market where stocks that have been sold by their original owners are traded between investors. The secondary market is important because it allows small investors to buy and sell shares of companies that they may not be able to get access to through the primary market. To invest in the secondary market, you will need a BO (Beneficiary Owner’s) account.
Opening a BO Account
To invest in the stock market in Bangladesh, you need to open a BO account in a broker house. A BO account is like a bank account, but you can open it at a broker’s house. You can deposit and withdraw money in your BO account just like a bank account.
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However, there is no need to keep the minimum deposit. You will then decide whether you want to invest in the primary market (IPO) or the secondary market (buy/sell shares). Nowadays, it is easy to open a BO account, deposit money, and buy and sell shares online using different broker’s websites.
To open a BO account, you will need to go through some steps.
A person can open two BO accounts in one name. One is an individual account; the other is a joint account. Bangladeshi applicants must have an account with any bank in Bangladesh. Nonresident applicants must have an FC or NRB account in Bangladesh.
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Upon choosing a brokerage house, you can open a BO account online using the broker’s website or the ways they provide to you. Fill out the form properly. Essential documents/information you will need are a photo of the applicant, a copy of the National Identity Card (NID) of the applicant, joint applicant and nominee (scan/photo), nominee’s picture, copy of the bank check (scan/photo) and picture of the second applicant in case of the joint account. Depending on the broker, you will need to pay Tk. 500- Tk. 2000 while opening a BO account.
According to the new rules, to apply for an IPO, an investor must have a minimum mature share of Tk. 20,000 in his BO account number. Shares will be allotted proportionally instead of the IPO lottery. In that case, an investor can deposit Tk. 10,000 for a share.
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How to Buy and Sell Stocks in Bangladesh?
You can buy and sell stocks by showing up in person at the brokerage office, calling the broker, or initiating a trade via the DSE mobile app. Brokerage houses typically charge a commission anywhere between .25% and .50 % for each transaction. So, if you buy Tk. 1000 stock, the brokerage will charge you Tk. 2.5 if the rate is .25%.
However, if you want to trade via DSE mobile app, you will have to register via the brokerage house. Despite being required monthly paid subscription the app has waved the fees due to the Covid 19 last year.
What Beginners Should Consider before Investing in Share Market
If you are interested in starting investing but don’t know where to start, these five tips can help.
Know Your Goals
Before you invest in the stock market, you will need to know your goals. What are you hoping to achieve by investing in the stock market? Do you want to make money? Are you looking to make some investments to fund your retirement? Or do you just want to learn about the stock market?
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Understand How the Stock Market Works
You will need to understand how the stock market works before you invest. You will need to understand what the stock market is, what it does, and what it isn’t. You will also need to understand how it affects the economy and what are the risk factors.
Learn How to Invest
Once you know how the stock market works, you can start learning how to invest. There are lots of different strategies to invest in the stock market, and it can be a bit confusing. You will want to learn about the different types of investments you can make and what they do.
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Start Small
You will want to start small when you invest in the stock market. Start with a small amount of money, and keep your investments low. You can always increase your investment later on.
Be Patient
You will need to be patient when you invest in the stock market. It can take a while for your investments to grow, and it can be frustrating if they don’t. You will need to stay patient and be willing to wait for your investments to grow.
Final Words
Investing in the stock market can be a lucrative venture, but it is important to do your research and have a plan in place. Before investing in stocks, you should know the associated risks. Moreover, you should think ahead and stay prepared for potential stock market crashes. In this article, we have discussed a guideline for beginners to invest in the share market of Bangladesh. Hope it helps!