01. What do I have to do to trade stocks?

You need to have a trading account with any of the 250 brokers of the Dhaka Stock Exchange. The process is very easy, just call one of 250 stock brokers and collect the account opening form. Fill the form and submit with a photocopy of the national identity card or a valid passport and two passport sized photographs of the account holder. The stock broker will open an account in the Central Depository Bangladesh Limited (CDBL) in your name.

You may place an order over the telephone but the written order must be placed within 24 hours. When an order is placed you should receive an order confirmation slip and a trade confirmation slip when the trade is executed.

02. I’m not rich! How much money is needed to start investing?

In case of investing in IPOs, there is no minimum fund requirement. One just needs to check the market lot and offer price of the stock and invest the required amount. In case of investing in secondary market, brokers generally specify the minimum fund requirement (if there is any). It can vary broker to broker; BDT 50,000-BDT 100,000 is a rough approximation. You also need to consider the brokerage commission of 0.4% (BDT 0.40 commission per BDT 100 transaction).

03. What sorts of information will be needed to fill up the trading account opening forms?

In order to open a trading account, you must submit the following documents. In addition to these, your broker may request you to fill in more information depending on different services that they offer. Most information requested in these forms is very straightforward.

  • Account Opening Form and Signature Card duly filled up
  • Photocopy of valid passport or national ID card
  • Two copies passport size photograph of account holder
  • One copy passport size photograph of authorized person (if any)
For more information go through the Corporate Profile of LBSL

04. How do I know which stock to buy?

SEC is working on the advisory services rules and research analysts’ roles & responsibilities. Upon successful implementation of these initiatives, advisors will be legally permitted to recommend on the clients’ investment policy. In any way, you can contact your broker who has multiple stock market experts for any stock recommendation.

You may be a school teacher, Chef or an architect. Just as you are experts in your fields, advisors are the experts in stock market domain. Get the best from them.

Nevertheless, it is always advised that you too learn as much as you could about the market. More knowledge about stock markets can only make you wiser and richer!

05. How fast can I earn money in stock market? What's the minimum guaranteed return?

The return (profit) you make from a stock is as simple as buying the stock at a lower price and selling at higher price*. After deducting buying commission (approximately 0.4%) and the selling commission (approximately 0.4%) you will get your net profit. Therefore, your returns depend entirely on the price movement of the stocks you bought. Price can move in either direction for various reasons.

So simply there is no guaranteed return in stock market investments nor can we say how fast you can make money. In fact, you could well lose your money if you do not select your stocks wisely.

Your returns entirely depend on how wisely you select your stocks. Your advisors can suggest you good stocks but even they cannot assure you full return.

*There are other forms of returns from stocks such as dividends.

06. Is my money safe in stock market?

First of all, you are only buying shares of a company or companies. Stock exchange and the brokerages are only the parties that facilitate these transactions. Having shares of a company is almost like you own a small % of that company.

Performance of the stock depends on how successful or unsuccessful the company is. If the company performance or the information about the company is favorable, most probably the share prices may go up. If the information is unfavorable, stock prices may affect adversely. Therefore, the safety of your money depends almost entirely on how well the company performs and information circulates about the company.

07. How fast can I take my money back?

A stock (‘A’, ‘B’, ‘G’ and ‘N’ category) generally matures in T+2 days. If you buy stocks on Sunday, your stock will get matured on Tuesday. That means you can sell shares on Tuesday. If you request for cash withdrawal on Tuesday through submitting duly filled cash withdrawal form to your broker, the broker will issue a check in favor of you in the next working day (in this case Wednesday). Then you will have to deposit the check to your bank account and you will avail the cash. Z’ category shares mature in T+9 days and you can follow the same process. It is also to be noted that you need to exclude all the holidays when considering the whole process of your money back.

08. How can I lose money in stock markets?

Risks are common to any investment. One of the main risks of share trading would be the possible decline in value of shares you've bought. But if you buy shares after careful consideration of the performance of the company then it is unlikely that you will lose. However, economic, political, social, technology and various other conditions could also affect the share prices.

One way that you could possibly minimize your risk is by investing in different companies in different sectors which referred to as diversification. As it is commonly said "Don't put all your eggs in one basket".

But always remember "Never invest more than you can afford to lose".

09. I want to start trading stocks, what advice would you like to give me?

If the stock trading is new to you, it's very important that you gather as much knowledge about this domain as possible. We would recommend for you to observe the market, more specifically few selected stocks for few days. Consider that you have bought them with paper money (not real money). Now keep an eye on to see how your money is progressing. This will give you a good feel of how prices fluctuate without you having to invest your actual money. Practice makes it perfect!

Further, read as much as you can! The more you read about the information related to stock markets and Dhaka stock exchange, the better you are geared up for the real thing. Especially with the power of the internet, no information is far away from any person. Knowledge is power!

Talk to an expert, who you can trust and who can give you honest opinion about the state of the market and suggest good stocks that you can invest in.

When you feel you are equipped listen to your instincts!

10. Can anyone open a trading account?

Yes, anyone above the age of 18 can open a trading account.

11. Why should I invest in the share market and not in a savings account or a fixed deposit? What are the additional benefits?

If you invest your savings in a bank deposit you are sure to get an interest at the end of each month, (unless otherwise the bank goes bankrupt!!!) However, the return you get is fixed. If you invest in the share market with the correct knowledge and a bit of caution your returns could best be explained as unlimited. But you should also keep in mind that the share prices always fluctuate and there is a risk that you will make a loss. You should only invest in the stock market if you can take that risk.

Every investment has its pluses and minuses. It is up to you to decide which investment best suits you based on your expectations and the amount of risk you are willing to take. As the finance theories say, higher the risk higher the return!

12. What if I am unable to pay during this period?

Since you can buy share on margin unless you exceed the 50% value of your portfolio your broker will not sell your shares to recover monies. However, if the transaction exceeds the 50% limit your broker will make a margin call and if you fail to respond to that they will dispose shares so as to restore the 50% margin.

13. My English is not that good. Is it a problem?

Not at all! Learning how to read stocks is very easy. Further most brokerages provide native language including Bengali. In fact even if you are very good in English, once you build a good relationship with your brokers, most likely you will end up talking to them in your native language as this is the case in many business relationships in Bangladesh.

So again, by all means you don't need to speak good English to trade stocks.

14. Is it true that Stock Market is controlled by a handful of individuals and all others are playing to their tune?

Well, we really don't know the answer to this. As you may be aware Bangladesh exchange is still a smaller exchange compared to some of the exchanges in developed countries. What is important to note is that, this very myth or fact is there against most of the very big and developed markets as well. So frankly speaking, you should really not worry too much about these when nobody has a direct answer, just focus on whether there are opportunities for you to benefit. And what is more important to understand is that economic and market conditions in most circumstances are more powerful than the power of few individuals. Therefore if the country's political, economic, social and technology trend is looking good, those are even better reasons why you should not be concerned about such matters when investing in the market.

Nevertheless, if you are convinced that this is indeed a fact and your money is at risk due to this, we suggest you to consider alternative investment vehicles.

01. Can I quote any price I want?

Yes, you can quote any price but in multiples of 10, 25 or 50 paisa. The tick size or the multiples of prices that can be quoted will be displayed in the DSE website. The quoted price also has to be within the circuit breaker range specified by DSE.

02. Why do share prices fluctuate?

Share market is similar to any other market. The prices depend on the demand and supply of the shares. For example, if there are more people wanting to buy a stock than to sell it, the price will be driven up because those shares are rarer and people will pay a higher price for them. On the other hand, if there are a lot of shares for sale and no one is interested in buying them, the price will quickly fall.

Apart from this economic and political conditions will also have an effect on the share prices.

03. What are DSI, DGEN and DSE 20? How do I know whether the market is ‘UP’ or ‘down’?

DSI is the index that measures price movements of all shares and if this index is higher on a particular day as at end of trading than the previous day the market is said to have improved and vice versa.

DGEN measures the price movements of A, B, G and N categories of shares and DSE20 measures the price movements of a selected group of 20 stocks.

04. What's the difference between limit orders and market orders?

Limit orders are placed with a price limit which will ensure that the order is executed at that price. Whereas market orders are orders to buy or sell shares at the best price prevailing in the market at that point in time.

05. What are dividends?

Dividends are a share of a company's profit given out to shareholders of the company in different ways. It could either be in cash or in shares of the company. If it is paid to shareholders in cash it's called a cash dividend, which is the most common way to pay a dividend. If dividends are paid in shares it's called a stock dividend.

06. Once I place an order is it final? Can I amend the price or the quantity of my order?

You can amend the price and quantity of the order before it is executed and you can cancel any order that is entered to the system before it is executed.

07. How do I know whether the Company I've invested in is performing well?

You will be entitled to get an Annual Report once a year which sets out the financial position and performance of the company. It is very important that you go through these data to see whether the Company is performing well. Company also publishes quarterly reports which reflect performance of the company. But unfortunately past performance only will not guarantee a good return in future.

08. If a company does not pay dividends does it mean that the company is not performing well?

By all means NO! You should always look at the income statement of the Company. The Company could be making profits but does not want to pay dividends because it has attractive ventures to invest in, which could be more advantageous in the long run. But if you expect a short term return then you should think twice before investing in such a company.

09. Why do I always hear about Bulls and Bears in stock markets? What did these animals do?

Although America is not the country where the concept of stock markets originated, arguably it is by far the best country that made stock markets popular and also America has the biggest stocks markets in the world in terms of turnover and market capitalization. Therefore most wording that you hear related to stock markets are coming from U.S.

Like we find tigers and elephants in the forests of Bangladesh, some of the common wild animals found in U.S. are Bulls and Bears.

Bull signifies market going up. Bear signifies market going down. So if you happen to hear "…today market had a bull run…" or "… banking sector reacted bullish to new tax reforms.. " this means to say it went up. Similarly any reference to bear meaning it went down.

What made going up related to Bull and going down related to bear is the 'Attacking styles of these Animals'. As you know Bull always put its opponent up into the air with their horns when attacking while bear push the opposing party down when attacking.

This is the reason you get to hear a lot about Bulls and Bears in stock markets.

10. What is a portfolio?

Portfolio as the word suggests is a collection. In the share market context it is a diverse collection of stocks. If you are keen to minimize your risk then you should ideally maintain a collection of stocks in a variety of industries that has opposing earning characteristics. As such the prices of all your stocks would not move in the same direction and if the price of one falls another will rise and net off your position. This is called diversification.

11. What is a Circuit Breaker?

This is an automated system by which the prices of the stocks are controlled not to exceed or decrease more than a certain percentage of the previous day's closing price. This percentage for each stock will be given by the DSE for each day and the system will not allow the price of any stock to rise or fall more that given percentage of the previous day's close. This is done in order to control unusual volatility in the market.

12. I bought stocks, but every day I see all other stocks going up except mine. Why am I so unlucky?

You are 'probably' not unlucky. This is a common dilemma that most investors go through. Each day at least one stock starts a rally and makes a significant gain in its price. By nature we get attracted that stock and tend to think that 'why did not I buy that' or 'if I had bought that stock' like thoughts.

But in reality stock rallies lasts for only few days, all the other times stock remains dull and stagnant. Unfortunately for the investor, when they continue to see different stocks rallying each day for about couple of weeks, they get the feeling that everything else moves except the stocks in the investor's portfolio.

May be you have made the wrong selection, But if you think that you have made the right selection, then your time will come. And the stock that you selected too will start its rally. But nobody knows when! Just be patient and hold.

13. What does 'overvalued' and 'undervalued' means?

You can calculate a value (intrinsic value) for the shares of a company based on a number of factors such as earnings, dividends and free cash flows. This value could differ from the market price of a share because market price is determined from demand and supply factors which may not reflect the above factors. Therefore, there could be a difference between the market price of a share and the intrinsic value of a share.

If the market price is less than the intrinsic value then the share is undervalued. The market has not identified the true worth of the share. If the market price is higher than the intrinsic value then the share is overvalued. It is advisable to buy shares that are undervalued because its price may reach its true value in the long run.

01. What is an IPO? How does it differ from a Direct Listing?

Initial Public Offering (IPO) is the method by which a company raises fund through issuing shares of stock for the first time in stock market. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. It is also referred to as a "public offering." The company invites the general public to invest in the shares of the company using a document called a Prospectus.

On the other hand, direct listing is where already listed shares of a company being listed on the stock exchange. The general public cannot buy shares before the listing but they will be able to buy shares in the secondary market after it is listed. A Direct Listing document (which is similar to a Prospectus in an IPO) is issued by the company going for a direct listing.

02. What is a Prospectus? From where can I get a Prospectus?

Prospectus gives out the details of the company, details about the shares to be issued, industry information, financials, future strategies, utilization of IPO proceeds, and procedure in applying for shares and so on. The Prospectus will most likely be available with the issuing company, stock exchange, managers to the issue and underwriters. As an investor, you can access it from the Dhaka Stock Exchange.

03. What is an IPO Lottery?

If the company gets applications for more than the number of shares they are issuing, the issue gets oversubscribed. As a result, the company going for an IPO will have an IPO lottery. The manner in which the company intends to allot the shares will be given in the Prospectus.

04. What is the procedure for IPO application?

First of all, you need to have a BO (Beneficiary Owners) account. Then just collect the IPO form of respective company from your broker and fill all necessary information. Then submit the form and required money (one market lot of shares multiplied by the offer price per share) in the designated banks.

01. What is a 'rights issue'?

A company issuing shares in a specific proportion to the existing shareholders of the Company. If you hold shares on the record date you will be entitled to buy a certain number of shares depending on your existing shareholding.

02. I don't have money to exercise my rights. What are my options?

If you do not intend to exercise your rights in to ordinary shares of the company you have the option of renouncing all or part of your rights entitlement to any person of your choice except for an infant or a person of unsound mind. You have to fill in the Form B attached to the Rights Issue Offer Document and hand it to the person in whose favor the shares are renounced. The person in whose favor the shares are renounced will then fill Form C attached to the Rights Issue Offer Document and hand it over with the required payment.

03. What is a bonus share issue?

This is a situation in which you are given shares free of charge in a specific proportion to your current holding. The required funds are taken from the reserves of the Company.

04. What should I do to get shares in a bonus issue?

You have to get registered in the share register of the company on or before the record date if you are to be entitled for the bonus share issue. When a bonus issue is announced the company will also announce the record date in advance. When the record date is known if you hold shares then you should get yourself registered as a shareholder of the company to be entitled for the bonus issue.

05. What is the record date in relation to a rights issue?

You have to get registered in the share register of the company on or before the record date if you are to be entitled for the bonus share issue. When a bonus issue is announced the company will also announce the record date in advance. When the record date is known if you hold shares then you should get yourself registered as a shareholder of the company to be entitled for the bonus issue.

06. What does an ex-date mean?

The first date after the record date is called the ex-date. If you buy shares which have a rights or bonus issue on or after the ex-date you will not be entitled for the same.

07. What is the difference between right share and bonus share issue?

When a company offers right share or bonus share paid up capital in both cases. When a company offers right share, company gets additional capital from existing shareholders. When a company offers bonus share the paid up capital rises and retained earnings is deducted by the same amount; company gets no additional cash.

01. Is the Bangladeshi market open for foreigners to invest?

Yes, foreign citizens as well as non-resident Bangladeshis (NRBs) can invest in the Dhaka Stock Exchange. The following are the requirements that the foreigners and non-resident Bangladeshis (NRBs) should satisfy:

  • A Foreign Currency (FC) account for inward and outward remittances
  • A Non-Resident Investors’ Taka Account (NITA) with an authorized commercial bank or any bank branch for converting foreign currency into Taka.
  • Stock Broking account should be opened with any stock broker of the respective Stock Exchange
  • If you need to trade shares listed with the Stock Exchanges, investors must have a Beneficiary Owners (BO) Account with Central Depository Bangladesh Limited.

02. What do I have to do to get a Broking Account?

03. Are there any minimum requirements that foreigners have to fulfill prior to investing?

In terms of funding, there are no minimum requirements to be fulfilled. If you have opened a trading account, you can start trading at any moment.

04. How easy it is to take money in and out of Bangladesh?

100% repatriation of dividend income and capital gains is allowed in Bangladesh through NITA accounts.

05. What International Banks Operate in Bangladesh?

  • Standard Chartered Bank
  • The Hongkong and Shanghai Banking Corporation Limited
  • Commercial Bank of Ceylon Limited
  • Woori Bank
  • Citi Bank Bangladesh
  • Habib Bank Limited
  • National Bank of Pakistan
  • State Bank of India

06. Tell me about Bangladesh, briefly.

Bangladesh is a country located in South Asia which is bordered by India on all sides except for a small border with Burma and by the Bay of Bengal to the south. Bangladesh has an area of 147,570 square km, including around 13,830 square km of inland waters. The population of Bangladesh is around 160 million, with over 12 million people living in the capital city of Dhaka. Bangladesh's main ethnic group is Bengali, with around 2% of tribal groups and non-Bengali Muslims. The country's official language is Bengali although English is commonly used in business. The major religions in Bangladesh are Muslim (89 percent) and Hindu (9 per cent). The currency in Bangladesh is Taka.

Bangladesh is considered by some as God's own handed painting. It is an important highlight in the world tourist maps. The country offers unparalleled diversity of tourist attractions including hundreds of serpentine rivers, crystal clear water lakes surrounded by ever green hills, luxuriant tropical rain forests, world's longest beach, beautiful cascades of green tea gardens, world's largest mangrove forest, home of the Royal Bengal Tiger and the wild lives, warbling of birds in green trees and many more.