Financial Adviser | Stock trading lessons for US resident
Published:Friday | November 11, 2016 | 12:00 AMOran Hall
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. Client agreement 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 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 which 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 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.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.