Tuesday, November 30, 2010

How to Make Money in Stocks

This is the first cheque I got for my stocks' earnings and I have to say that it was a great feeling to collect such a cheque! I have been in Amman Stock Exchange for over 2 years where I started all by myself and had to learn things the hard way. Today I am willing to share my experience.

First of all there are three major ways to make money in a stock exchange (what's a stock exchange? please visit my previous post)
  1. You sell the shares you bought after their value increases over time; over years or even over a day.
  2. In case the company generates earnings and decides to give dividends to shareholders. This happens once a year, usually in the first third of the year. I call the season when earnings are distributed The harvest time.
  3. Sometimes a company makes earnings but instead of distributing them to shareholders, it would use them to expand business, such earnings are called retained earnings (تدوير الأرباح). Of course, if the business expands this means your share has also expanded. Retained earnings usually imply your company will give you free shares.
I found out that options 2 and 3 are the best trouble-free methods to generate revenue. With all the mistakes I made I was able to generate a yearly return on investment of about 4% . Option 1 is also good for some strategic stocks (long term investment) but trust me it is not worth doing on the short term. If I had to pick some favorite stocks from my portfolio I can recommend the following ones:
  • Jordan Electric Power Company (stock symbol: JOEP)
  • Jordan Express Tourist Transport (JETT)
  • Salam International Transport and Trading (SITT)
  • Jordan Steel (JOST)
  • National Aluminum Industrial Company (NATA)
  • Arabian Steel Pipes Manufacturing Company (ASPM)
  • Arab Pesticides and Veterinary Drugs Manuf. Company (MBED)
Also, here are a couple of useful websites:
http://www.stocksexperts.net whenever I have a question this great forum has the answer
http://www.ufico.com search for stock prices and graphs using stock symbols
http://ase.com.jo go to Rules & Regulations (الأنظمة و التعليمات) → Trading Directives (دليل استخدام نظام تداول الأوراق المالية) also good for disclosures

Suppose JOST shareholders decide in the general assembly meeting to give 15% dividends on 22-April-2010. On this day JOST buy and sell orders are suspended and each holder of this stock on that particular day is eligible to receive dividends. The nominal value of all stocks in Amman Stock Exchange is JOD 1 , so a disclosure stating a distribution of dividends with a value of 15% is in relation to the nominal value and not to the stock's current price; this means you will get 15 piasters.

I recommend that you buy and sell your stocks on two stages so that you will not regret any hasty decision and please always bare in mind that trading stocks is risky. My other advice would be to retain your own earnings and buy more stocks with the dividends at least for the first couple of year. So what's the good thing about going into stocks at this time? It is simply because prices are cheap. Some stocks have a market value that is even cheaper than real value. Exactly, that's a bargain!

Fact of the day: The Amsterdam Stock Exchange is considered the oldest in the world. It was established in 1602.

4 comments:

Aman said...

Info-rish post ! Interesting experience with valuble advice all summerized in a post ,, that's really good :)
I was wondering how was your start in this stock issue and business stuff?
I mean as an engineer, what brought you to that business world ? That made me curious :D

Nart Pshegubj said...

Thanks dear, I am flattered by your comment. It took me a while to think of an answer to your question and the good news is I finally came up with one.

Many people around me were going for IPO's (Initial Public Offering), therefore I was curious about getting involved in stocks.

I consider stocks to fall within the basic knowledge that any regular person can do; it should be considered a default instrument, not an advanced one.

Finally, I have to admit that it might be a side effect of 'extensively' watching Sebah Odeh & Nadine Hani :)

мой русский блог said...

man you are smart
nice blog

Nart Pshegubj said...

Thanks dear (wopso - spasiba) I am flattered.

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