PSX Stock Investment Basic Concepts

Stock Investment Basic Concepts | PSX Announcement

KSE 100 Index Market Summary Live 2019 - Karachi Stock Exchange is regarded as Pakistan’s largest and one of the oldest stock exchanges in South Asia in terms of market capitalization. It is situated at the Stock Exchange Building (SEB) on Stock Exchange Road, in Karachi's business district, I. I. Chundrigar Road, Karachi. It is integrated with Pakistan Stock Exchange along with LSE and ISE. KSE Market has special recognition worldwide. Bloomberg regarded it as third best performer since 2009 in the world. Even Khaleej Times reported in 2015, that Pakistani equities delivered 26% per year for USD investors, making Karachi best performing stock exchange in the world.

Following are some of the important considerations before investing in the stock market: DIVIDEND & DIVIDEND YIELD: An investor may invest in stocks of a company for its Dividends. Dividend is the return paid to shareholders out of the profits of the company. Dividend can be cash dividend or bonus dividend/ shares. Dividends may be paid out by a company more than once a year. Cash dividend provides for a measure called Dividend Yield. Yield is the measure of cash flow that an investor gets on the amount invested in a security. Dividend Yield is a financial ratio that indicates how much cash dividend a company pays in terms of its share price. Dividend yield is calculated by dividing the cash value of the dividend by the share price. It is defined in percentage. EARNING PER SHARE (EPS): This is a ratio calculated by dividing a company’s net profit after tax by the number of shares outstanding. It’s a measure of the strength of the company in terms of its earning capability for each share issued. PRICE EARNING RATIO (P/E): This is a ratio calculated by dividing the current share price by its EPS. It’s a measure of valuation and indicates whether the price of a share is realistic and is in-line with its earning. If the share is over-priced, then the ratio will be high and if the share-price is low, the ratio will be low. BOOK VALUE OR BREAK-UP VALUE: Book Value per share is calculated by dividing the total equity of a company by its number of shares outstanding. This ratio indicates the asset coverage that each equity share represents in the company. CAPITAL GAIN: Capital gain is the selling of shares at a higher price than the purchase price. Multiple such trades can result in multiple capital gain accruing to the investor. COMPOUNDING: Compounding is the process in which an asset’s earnings, from either capital gains or profit, are reinvested to generate additional earnings over time. This Investment will generate earnings from initial principal and accumulated earnings from preceding periods. DIVIDEND REINVESTMENT: This is the process whereby cash dividends earned from a company are reinvested for stock investment.

Courtesy: PSX - Pakistan Stock Exchange

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