Transcript Stock Edu

Valued investors
W e l c o m e !!
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Wealth creation Basics
Stocks & Bonds
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Wealth creation Basics
Stocks & Bonds
Fazle Rabbi Mohammed Ahsan
Research Officer
Dhaka WASA
98, Kazi Nazrul Islam Avenue
Dhaka-1215
March, 2011
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What do we mean by STOCK ?
 In plain n simple:
STOCK is the share in the ownership of a
company.
 Stock represents a claim on the company's assets
and earnings.
 Generally: Shares, Equity or Stock means the
same thing.
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Why does a company issue stock?
They issue stocks in order to:
 Extend market share ; or
 Be market leader ; or
 Get bigger asset.
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How does a company issue Stock?
 A company can either borrow money from
banks or from NBFIs; or
 Can raise it by selling part of the company;
i.e. : Stocks, Equity or by Debt financing
(loans/issuing bonds)
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What’s the advantage to issue stock?
The most common phenomena are:
 It does not require paying back the loan or
interest payments along the way;
 No chances to involve into debt financing;
 No chances to creating obstacle in expanding
market share.
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How do we trade Stocks?
 Most stocks are traded in capital market , i.e.
in Stock Exchanges.
Exchanges are places where buyers and
sellers meet and decide on a price.
Some exchange has physical locations where
transactions are carried out on a trading floor.
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Types of Market Places
 Primary market : The primary market is the
first phase of stock trade where investors keep
their IPOs before trading at the floor.
 Secondary market : The secondary market is
what where people trade IPOs and traded
securities. People trade it through a network of
computers electronically.
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The “Home Work” in trading :
Risk Measurement
 No company or institute can guarantee you
when the stock price stops in up-end or
low-end; and
 How long it takes to get the profits;
 No guarantee what percentage of capital gain
you can get.
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What causes prices to change?
 Prices change by market forces;
 Prices change because of demand and supply;
 Prices change by flow of information,
it may be positive or may be negative.
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What should we look for:
A Value Stock or a Growth Stock ?
 Growth Stocks are companies that will have positive
earnings and have above –average risk-adjusted
rates which are in undervalued.
 Value Stocks are those stocks that appear to be
undervalued for reasons other than earnings
growth.
 Earnings are the profit of a company what it makes, and in
long run no company can survive without them. If a
company never makes money, they aren't going to stay in
business.
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Types of Stock
 Growth Stock: are companies that will have positive
earnings and have above –average risk-adjusted rates which
are in undervalued;
 Defensive Stock: are those stocks whose future earnings are
likely to withstand and economic downturn; i.e. public
utilities or grocery chain-firms.
 Cyclic Stock: are those stocks whose sales and earnings will
be influenced by aggregate business; i.e. steel, auto or
heavy machinery industries.
 Speculative Stock: are those stocks whose assets involve
great risk but that also have a possibility to gain.
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Know your Market
 The Bulls: a bull market is that when economy
goes easy- rosy, GDP is growing, people find
jobs and stocks are rising. Things are just plain
to picking stocks during a bull market is easier
because everything is going up.
 The Bears: a bear market is opposite of the bull
market. Bear occurs when the economy is bad,
recession starts or continues, and stock prices
are falling.
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The Relative Strength Index-RSI
 RSI : The relative strength
index (RSI) is an oscillating
indicator. It operates within
a range-bound area between
0 and 100. As the RSI line
moves higher, the price is
enjoying increased strength.
As it moves lower, the price
is suffering from a lack of
strength.
 Using the RSI, have to
watch for those times when
the line rises above 70 or
below 30. Buying or selling
decision will come out of
one of those areas.
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Simple Moving Average-SMA
 Simple Moving Average
(SMA) is a trending indicator
that shows the volatility of
daily price movement; and
 It highlights the top of the
price movement of a security.
 If the SMA is pointing up, the
security is trending higher.
 If the SMA is pointing down,
the security is trending lower.
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Money Flow Index-MFI
 The Money Flow Index (MFI)
is an indicator with a single line
that moves back and forth
between 0 and 100.
 The MFI is a combined
indicator. It consider both price
action and volume data into its
calculation.
 The closer to 100 the indicator
moves, the stronger it is, while
the closer to 0 it moves, the
weaker it is.
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Bollinger Bands
 Bollinger bands are used to
judge the magnitude of a stock
movement and identify moments
when the trend of the simple
moving average may be coming
to an end.
 Bollinger bands show the
expansion
and
contraction
around a simple moving average.
The expansion of the bands is
based on the volatility of the
equity. If the equity becomes
more volatile, the bands expand.
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Fazle Rabbi Mohammed Ahsan
has been born in Dashmina Upazilla under
Patuakhali district in 1970.
He has passed H.S.C. from B.M. College, Barishal in
1988. Mr. Ahsan has got his MBA from the
Business Faculty of Dhaka Varsity in Strategic Int’l
Management in 2008.
Presently he is serving in Dhaka WASA in the
capacity of Research Officer.
He can be reached by [email protected],
or +88 0155 2324656/ 01711703613/ 01670286528
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