Stock trad­ing lessons for US res­i­dent

Jamaica Gleaner - - BUSINESS - Oran Hall Oran A. Hall, prin­ci­pal au­thor of ‘The Hand­book of Per­sonal Fi­nan­cial Plan­ning’, of­fers per­sonal fi­nan­cial plan­ning ad­vice and coun­sel. fin­viser.jm@gmail.com

QUES­TION: I would love to get in­for­ma­tion on stock and trades. I live in the United States. — Ni­cola

FI­NAN­CIAL AD­VISER: A res­i­dent of a for­eign coun­try who is in­vest­ing in Ja­maican stocks must first open an ac­count with a lo­cal stock­bro­ker­age firm. Clien­ta­gree­ment forms are avail­able on­line. They cap­ture im­por­tant in­for­ma­tion on the in­vestor, so it is im­por­tant to give all the in­for­ma­tion that it asks for.

The form must be printed and sent to the bro­ker­age house with an orig­i­nal sig­na­ture. The fol­low­ing are also re­quired: a no­tarised copy of the in­vestor’s iden­ti­fi­ca­tion, two ref­er­ences, proof of ad­dress, and a copy of the so­cial se­cu­rity card for US res­i­dents.

Trad­ing takes place on the JSE Mon­days to Fri­days be­tween 9:30 a.m. and 1:00 p.m. on a com­put­erised plat­form. Trans­ac­tions are set­tled three days af­ter the ex­e­cu­tion of the or­der by your bro­ker, who will sup­ply you with a con­tract note giv­ing de­tails of the trade.

The Ja­maica Stock Ex­change pub­lishes re­ports of each day’s trades. They also give im­por­tant in­for­ma­tion on pre­vi­ous ac­tiv­ity. This is help­ful in de­ter­min­ing trends, but you should ex­er­cise care in the con­clu­sions you draw.

If you are to make good de­ci­sions, you should do the

nec­es­sary re­search. In­for­ma­tion on the listed com­pa­nies is on­line. You can find cur­rent and his­tor­i­cal in­for­ma­tion. The stock­bro­kers also pro­vide some in­for­ma­tion, anal­y­sis, and rec­om­men­da­tions. I do not sug­gest that you take them as gospel.

It would be use­ful to re­late to more than one stock­bro­ker to get more than one per­spec­tive on the mar­ket and the var­i­ous stocks that trade on the Ja­maica Stock Ex­change.

When you place your or­der, be sure to in­di­cate a price. If you state a spe­cific price, the stock­bro­ker will not ex­ceed it if your or­der is a buy­ing and will not sell for less if it is a selling or­der. If you place a mar­ket or­der, the stock­bro­ker will try to fill your or­der at the go­ing price of the stock. It is not al­ways pos­si­ble to fill your or­der com­pletely: only a per­cent­age of the or­der may be filled. Much depends on de­mand and sup­ply.

Bear in mind that you will in­cur ex­penses such as bro­ker’s com­mis­sion and the JSE cess when you trade.

In ad­di­tion to the Main Mar­ket, there is also a Ju­nior Mar­ket. Al­though it fa­cil­i­tates trad­ing in smaller com­pa­nies, it is a means of mak­ing good re­turns as its per­for­mance has shown so far.

Al­though you may re­quest a phys­i­cal cer­tifi­cate, to­day’s norm is for hold­ing se­cu­ri­ties in elec­tronic form, which is fa­cil­i­tated by the Ja­maica Cen­tral Se­cu­ri­ties De­pos­i­tory. This en­ables trans­ac­tions to be pro­cessed by book en­try.

It is a con­ve­nient way of chang­ing the own­er­ship of se­cu­ri­ties be­tween seller and buyer. The de­pos­i­tory is able and will­ing to con­firm what it is hold­ing for each client and is­sues reg­u­lar state­ments of the hold­ings of its clients

A word of cau­tion: the Ja­maican dol­lar is still los­ing its value against the US dol­lar. US cur­rency that you send to Ja­maica to in­vest will buy more Ja­maican dol­lars as long as this hap­pens. At the same time, pro­ceeds from the sale of your stock will de­cline. Al­though you may make a good profit in Ja­maican dol­lars, your re­turns will be less in US dol­lars.

PER­SONAL FI­NAN­CIAL AD­VI­SOR

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