Things You Need to Know Before Starting to Play Stocks

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Judging from its potential, stocks become one of the current investment alternatives that are profitable for you if done properly and correctly.

By buying shares, it means that you are also one of the owners of the issuer company (share issuer).

With your ownership portion there, it means that you are entitled to a certain percentage of the company’s value.

If the issuer’s performance is good, big profits can go into your pocket!

Surely many of you have started to consider investing in stocks.

Moreover, now, buying shares can be done easily through various application-based platforms and the internet, so that your share purchase can be completed with just a few clicks.

Therefore, this time we will learn to recognize the basics about stocks before you decide to start investing in stocks.

By knowing it, you can choose which type is right to generate returns that match your expectations and investment goals.

Theoretically, there are several classifications of types of stocks based on certain indicators.

However, I think we should know the main types of shares prevailing in your country so as not to confuse understanding.

Based on ownership rights/claims/claims

1. Common Stock/Common Stock

This is the type of majority in the stock market. If you choose this type of stock, you have the right to participate in voting at the GMS and dividends (company profit sharing) are not absolute.

This means that you will get a new dividend if the decision of the GMS (General Meeting of Shareholders) is willing to distribute the dividend (with an uncertain amount).

In this type of stock, you also have a claim on the company’s assets in the event of liquidation.

However, claim rights are limited to the last remaining company assets after taxes, employee wages, creditors, and preferred stockholders.

2. Preferred Stock

We can call it a priority stock.

Preferred stock is quite rare in your country, if any, it is usually held by large companies.

If you buy this type of stock, you are entitled to a fixed dividend.

Fixed dividends are usually quite safe because they are paid regularly and dividend payments are prioritized before the payment of common stock.

When a company is liquidated, preferred stockholders are entitled to a first claim on assets from common stockholders.

Another advantage of this stock, you can convert it to common stock and can take shares at any time.

By market capitalization

Market capitalization is intended as the total value of the issuer’s outstanding shares at the prevailing price.

Now, based on the market share value, the shares are divided into the following 3 types:

1. Top stocks (blue chips)

The issuer is worth more than IDR 40 trillion, has good fundamentals, has high credibility, has wide market coverage, is well established, and is needed by many people.

This stock is stable and suitable for long-term investment.

2. Second layer stock

Issuers worth IDR 1-40 trillion, more volatile, are in the developing stage but their stability is close to blue chip.

3. Third layer stock

Issuers are worth under IDR 1 trillion.

Of the three types of stocks above, blue chips are the only stocks worth looking for in the stock investment market.

This is because non-blue chip stocks have a very high risk with uncertain valuations.

Based on the Mode of Transfer

1. Bearer Stocks

Physically, Bearer Stocks or Shares on Show are not written in the name of the owner.

The reason for this is to make it easy to transfer from one investor to another.

This stock is chosen by many investors for their resale.

By law, whoever holds the shares will be recognized as the owner and has the right to attend the General Meeting of Shareholders (GMS), so investors don’t have to worry about the law.

2. Registered Stocks

This instrument is also known as Shares in the Name and is the opposite of shares on display, where the name of the shareholder is clearly written on the paper only.

In addition, to transfer ownership must also go through certain procedures.

By Trade

1. Blue Chip Stocks

The next types of stocks are stocks that are much sought after by investors, namely Blue Chip stocks.

Blue Chip shares can be interpreted as superior or top-tier stocks that are included in stocks with large capitalization figures, which are above IDR 40 trillion.

Of course, the value of shares of that size is not owned by just any company.

Therefore, these shares usually come from companies that have a high reputation, as a leader in their industry and have a stable income in paying dividends.

2. Income Stocks

This stock has great appeal to many investors.

This is because of its ability to pay dividends that are higher than the average paid annually, and can also create higher incomes and are more regular in distributing cash dividends.

3. Speculative Stocks

If you are an investor who has a high risk risk profile, these types of stocks can be an option.

This stock has attractive potential that can generate high profits in the future.

But before you choose this stock, you must understand that speculative stocks cannot earn a stable income every year.

4. Counter Cylical Stocks

If you want a type of stock that is stable even though economic conditions are turbulent, Counter Cyclical Stocks can be an option.

These shares will not be affected by macroeconomic conditions or the general business situation.

So it can be interpreted, when there is a recession or economic downturn, stock prices will remain high.

This is because issuers or companies issuing shares can provide high dividends.

This is the result of the issuer’s ability to earn high incomes even during a recession.

Rate of Return (Return) and Risk (Risk)

The next thing you need to know is the form of stock return and risk.

This point is important so that you understand what you will get and what you might sacrifice when investing in stocks, and how to optimize it.

I’ve said before that stocks promise big profits.

For that, you also have to remember that big profits will only be obtained with big risks.

Return In Stock

The rate of return in stocks comes from 2 things, namely:

Capital Gain: profit on the sale of shares. You get capital gains if you sell shares when the price is above the price when you bought them first.

Dividend: the issuer’s profits are distributed to shareholders according to the resolution of the GMS. As I have explained in the section – types of shares, the distribution of dividends can be fixed and can also be according to the condition of the company.

Risk In Stock

Stocks are a very risky type of investment.

Basically, the stock game is full of intrigue.

There are many unforeseen conditions, so often people who already have high flying hours investing in stocks even record investment returns that are not too much (many of them are not spared from losses).

In stocks, you must be prepared with the main risks, which are as follows:

Capital Loss: the negative difference between the selling value of the stock and the purchase value. Simply put, you sell the stock at a lower price than the previous purchase price.

Liquidation: the issuer goes bankrupt. If the issuer goes bankrupt, you actually have rights to the company’s assets according to your share ownership.

However, if the issuer turns out to have no remaining assets (after paying off debt, taxes, and employees), then you have to give up your shares forfeited without getting any returns.

If we refer to the theory, there are 2 types of risk in stocks; namely systematic and unsystematic risk.

Systematic risk comes from macro external market influences, for example: changes in foreign exchange rates, interest rates, and government policies.

Meanwhile, unsystematic risk comes from within the industry (capital structure, asset structure, and liquidity). You can still suppress this risk by diversifying stock posts.

How to outsmart the risk?

Now you know the types of stocks and their potential benefits/risks.

However, there is still important information that you should know before investing in stocks.

This information can even be said to be the most important because it relates to how you can successfully invest in stocks.

To be successful in playing stocks, you must be good at outsmarting the risks.

By outsmarting the risk, you can reduce the level of loss and increase the level of profit.

From a lot of available information, it turns out that there are 4 main ways that stock experts use to outsmart stock risk.

1. Diversification

The first way is portfolio diversification.

This method has become one of the ultimate weapons of investment experts.

Diversification means that you buy shares of several issuers from different industries, types of shares, and company sizes.

Diversification makes you avoid total losses.

Because you invest in different companies.

When one share of a company is losing money, you still have a share of another company that is not losing money, maybe even making a profit.

This is because it is unlikely that all companies of different types will experience the same conditions at the same time.

2. Stocks are Long-Term Investment

Second, instill in your mindset that stocks are long-term investments.

In the long term, stocks have the potential to strengthen.

When a stock declines, it’s better to wait and watch rather than immediately decide to sell your stock at a loss (in the long run, the market usually gets better).

Do not equate stocks with ordinary buying and selling, where you immediately buy when the price drops, and sell out when the price rises to get big profits.

The key, think long term when making decisions.

Although people often call it “playing stocks”, don’t think of stocks as a game of fun.

3. Have Knowledge, Intuition, and Skills

In this investment, you must have good knowledge, intuition and skills when managing stocks.

It’s not true that talent and sensitivity alone can make you great success playing stocks.

All still have predictions based on calculations and analysis of conditions.

Therefore, you must swiftly monitor stocks and everything related to them.

The topic of economics and business should be daily food.

If necessary, you can deepen the magic of investing in stocks by attending the Capital Markets School.

4. Company Fundamental Analysis

Next, make sure you do a fundamental analysis of the company when you want to choose an issuer.

Investigate the ins and outs of your prospective issuer.

What is the business profile, financial reports, credibility, prospects, and performance in the capital market.

You can access the main sources of this information on the IDX and from various mass media.

Stocks can be the most profitable investment for you.

But do not forget that there are several things that must be considered in undergoing this investment.

Before starting any investment, make sure you have studied the potential risks and benefits that you can achieve, so that it matches your investment goals.

Don’t forget to learn from the experiences of those who have done it, too.

Another way you can learn to invest fundamentally is by funding through KoinP2P from KoinWorks because the concept is similar.

In addition, you can fund only starting from IDR 100,000, and analyze which loans you should fund and can provide benefits.

You can also generate effective returns of up to 18% per year, you know.

Terms In Stock

Acquisition: The takeover of a company by another company by buying shares of that company.

Annual report: A financial report that is made annually and has been approved by the shareholders at the general meeting.

Auto rejection: Limitation of stock price movements such as when positions go up and down.

Bearish: The price of a stock that shows a downward state.

Bid: The offer requested by the purchaser of shares

Blue chip: A collection of featured stock from a professional company with a good reputation and easy to trade.

Broker: A company or person who works as an intermediary between investors and companies in the world of buying and selling shares.

Bullish: The stock price is showing an uptrend.

Stock exchange: A party or market that provides or provides a system to bring together buyers and sellers of shares.

Buyback: Repurchase of outstanding bonds or shares by issuers for various reasons and purposes.

Capital gain: The price when buying the stock is less than the price when selling.

Capital loss: The price when buying shares is greater than the price when selling.

Capital market: Trading of securities.

Closing price: The total closing price of securities on the stock exchange.

Cut loss: Selling shares when they are in a loss position with the aim of minimizing losses that are predicted to be larger.

Issuer: A company that has listed its number of shares on the stock exchange.

JCI (Joint Stock Price Index): A composite indicator of all stock price movements.

Investors: Companies or people who invest money or funds in issuers.

IPO (Initial Public Offering): Initial market offering in the world of stock exchanges.

Custodian: The party (company or individual) who keeps all securities.

Lot: The minimum number of units in the sale or purchase of shares, such as 1 lot equals 100 shares.

Margin Trading: Stock trading where part of the capital is a loan from a broker or company by providing a guarantee for the shares purchased.

Offer: An offer requested by the investor (investor) who sells its shares.

Open price: The amount of the opening price of securities on the exchange.

Stock split: Splitting of stock units where each unit is split into more than one unit with the aim of increasing the number of existing shares.

Stock Playing Strategy for Beginners

1. Start Small

Stock investing has big risks, so beginners should start with small amounts first, for example around 10 to 30 million Rupiah.

Remember that you can lose money in stock investments, because the risks are quite high.

Start small as you slowly explore the stock investing environment, so that even if there are losses, they won’t be too big

2. Observe the Economic and Political Situation

If you don’t like news, now is the time to diligently follow business, economic, and even political news.

Stock investing is best done when the economic situation is stable or improving.

You must be very good at reading the country’s economic situation to make an assessment (at least a rough assessment) of economic growth.

3. Choose Stocks from Preferred Industries

The best stock investments should involve an understanding of the product, so ideally, novice investors should choose a preferred product.

You can choose stocks from companies whose products you use frequently, or companies whose products are familiar to you.

However, don’t forget to look at the reputation and performance of the company, including the opinions and observations of economists on its potential.

4. Huge capitalization for stocks

The ideal stock should have a large market cap.

This is so that the stock value is not easily manipulated by individuals for their own interests (the term “stock fryer”).

Individuals with sufficient capital are usually able to manipulate the price of stocks with small market capitalization values, but they cannot do that with large-value stocks.

5. Choose stocks with low PE ratio

PE is the term for the ratio of price per share divided by net income per share only.

There is no stipulation on how big or small the PE value limit you should choose, because this has to be compared with PE of similar products.

This is why it is important to have insight into other products that are similar to the stock you choose to invest in.

6. Observe market sentiment

Market sentiment determines the value of your stock.

Even though the PE value of your stock is low and the market capitalization price is quite high, the stock will decrease in value if market sentiment is not at all supportive.

Market sentiments include commodity prices, interest rates, unemployment rates, inflation rates, and so on.

You will still have to adapt these general strategies to your personal investment style, but in general, all of these methods are good strategies to ensure lower risk of loss.

How to Do Fundamental Analysis

Fundamental analysis is an analysis based on basic or fundamental factors that will affect the stock value of a company by looking at the condition of the stock prospect, the industry and the condition of the economy itself.

Now the way to do this is to find out about anything related to the company and the shares it publishes as well as information that does have a relationship with the stock analysis.

There are two methods to do if an investor:

The first method: Top Down or from top to bottom where investors will first look at macroeconomic conditions with the aim of knowing which business sector was good at that time.

The second method: Bottom up which means from the bottom to the top where this method is the opposite of top down. In this method, investors are very sure to choose stocks that are indeed their target.

One way that is often done is to read the stock table.

But that’s still only a small part because there is still a lot of information that experienced and professional investors can use to analyze the fundamentals of the selected stock.

Whether it’s information that is open or hidden, surely investors will quickly find out.

The information actually needed by investors is the expense ratio, the value of the equity book, the incoming income per share and the value of the stock book which is used as an indicator of the company’s position as well as knowing whether the stock is a good form of investment instrument or not.

The book value of shares has an understanding that is the difference between the assets owned by the company and also passive.

Book value can be affected by debt for example the profit of the company becomes limited even though it is able to carry out many business activities.

Sometimes if the book value is low, it means that the asset to be estimated is too low and economists will consider this a good thing.

Earnings Per Share

Meanwhile, the income for each share will be calculated by dividing the nominal number of shares towards profits.

If stock earnings continue to increase every year, the company will be considered healthy and growing.

Another analysis carried out is the book value of equity where the acquisition is obtained from the percentage of the company’s income sharing for each share with the book value of the shares owned.

Don’t forget the expense ratio as this is also very important.

The meaning of the expense ratio is the percentage of net income or net income from the company that will later be allocated to pay dividends.

For normal amounts the expense ratio is about 25% or 50% for net income.

If the ratio is higher, it means that a company is struggling to meet obligations.

These figures will be recorded regularly in a financial medium that can be provided by the broker.

The existence of the analysis starts from research on the four elements earlier.

The company will also continue to have relationships with people or parties who own its shares and it is the company’s duty to always inform periodically from time to time to shareholders about the course of business or any activities carried out by the related company.

Of course this information is very important so that someone is able to open an account regularly to invest more and more funds.

Thus, investors will continue to receive promising long-term investment benefits without worrying about the risk of going out of business.

Benefits of Investing in Stocks Apart fromThings You Need to Know Before Starting to Play Stocks

playing stocks – stock investment for civil servants – types of mutual funds