Money & Banking Project

Topic:
Stock Market

Submitted to:
Sir Mubashir Ahmed

Submitted By:
Ume-Aima LCM-3934

Syed Afaq Haider LCM-3932

Where to Buy Stocks:
Most of the time, stocks are listed and traded on exchanges, licensed venues where
buyers and sellers meet often with the assistance of a broker or other intermediary.
These intermediaries will be members of the exchange and use their access to buy
and sell shares on your behalf. Major exchanges in the United States include
the New York Stock Exchange (NYSE) and the NASDAQ market.

Smaller companies with less liquid shares and minimal market caps (sometimes
called penny stocks) may alternatively trade over-the-counter (OTC) on more
loosely regulated platforms such as the OTC Pink Sheets. Shares of these
companies are often more volatile and risky, so investors choosing to trade on the
OTC market should engage in extra due diligence and understand the risks
involved.

Buying Stocks with a Full-Service Broker:

Full-service brokers are what some people visualize when they think about
investing well-dressed businesspeople sitting in an office and chatting with clients.
These are the traditional stockbrokers who will take the time to get to know you
personally and financially.

They will look at factors such as marital status, lifestyle, personality, risk

tolerance, age (time horizon), income, assets, debts, and more.1 By getting to know
as much about you as they can, these full-service brokers can then help you
develop a long-term financial plan.

These brokers can not only help you with your investment needs but also provide
assistance with estate planning, tax advice, retirement planning, budgeting, and any
other type of financial advice hence the term “full service.” They can help you
manage all of your financial needs now and long into the future and are for
investors who want everything in one package.

In terms of fees, full-service brokers are more expensive than discount brokers, but
the value of having a professional human investment advisor by your side can be
well worth the additional costs. Accounts today can be set up with as little as
$1,000. Most people, especially beginners, would fall into this category in terms of
the type of broker whom they require.
Buying Stocks Online:
Online/discount brokers, on the other hand, do not provide any investment advice
and are basically just order takers. They are much less expensive than full-service
brokers, since there is typically no office to visit and no certified investment
advisors to help you. Cost is usually based on a per-transaction basis, and you can
typically open an account over the Internet with little or no money. Once you have
an account with an online broker, you can usually just log on to its website and into
your account and be able to buy and sell stocks instantly.

Remember that since these types of brokers provide absolutely no investment

advice, stock tips, or investment help of any kind, you’re on your own to manage
your investments. The only assistance that you will usually receive is technical
support. Online (discount) brokers do offer investment-related links, research, and
resources that can be useful. If you feel that you are knowledgeable enough to take
on the responsibilities of managing your own investments, or if you don’t know
anything about investing but want to teach yourself, then this is the way to go.

The bottom line is that your choice of broker should be based on your individual
needs. Full-service brokers are great for those who are willing to pay
a premium for someone else to look after their finances. Online/discount brokers,
on the other hand, are great for people with little start-up money and who would
like to take on the risks and rewards of investing upon themselves, without any
professional assistance.

Buying Stocks via a Direct Stock Purchase Plan:

Sometimes, companies (often blue-chip firms) will sponsor a special type of
program called a direct stock purchase plan (DSPP).2 DSPPs were originally
conceived generations ago as a way for businesses to let smaller investors buy
ownership directly from the company. Participating in a DSPP requires an investor
to engage with a company directly instead of with a broker, but every company’s
system for administering a DSPP is unique.

Participating companies will offer their DSPP through transfer agents or another

third-party administrator. To learn more about how to participate in a company’s
DSPP, an investor should contact the company’s investor relations department.
How to Trade Once You Have a Broker
Once you’ve chosen your brokerage platform, you will need to establish and fund
an account before you can begin trading. Today, it’s easier than ever to link a bank
account online and transfer funds, or to electronically roll over an existing
brokerage account to another firm. You can also choose to make recurring deposits
into your brokerage account to increase your portfolio on a regular basis.

Once funded, you simply need to go online or call your broker to place a trade.
Stocks are designated by a unique ticker symbol, a one- to four-letter mnemonic
assigned to a particular company. MSFT, for instance, is the ticker for Microsoft
Inc., and AAPL is the ticker for Apple Inc. If you don’t know the ticker of your
stock, it is easy to look it up online or via your broker.

When you select the stock ticker that you would like to trade, you’ll be met with
a price quote, a set of information about the stock’s price and activity. This will
show you the last price at which the shares traded, as well as a bid and an offer.
The bid is the lowest price at which somebody in the market will buy a share (and
thus is the best price at which you can sell to them). The offer, or ask, is the lowest
price at which somebody in the market is willing to sell (and thus is the best price
at which you can buy from them). The difference between the bid and offer prices
is known as the spread. A narrower spread typically indicates that the market for
the stock is quite active and liquid. A wider spread indicates the opposite. After
considering the price quote, you may place your order.

Market orders are the most basic type of order and will give you immediate
execution at the prevailing market price. A limit order, on the other hand, allows
you to set a specific price at which to buy or sell. If the price never reaches that
limit level, then the trade will remain active until it is canceled. Many such trades
are day orders that will remain good until the end of the trading day. If you want
the order to be active only briefly, you can instead specify with your broker that it
is immediate or cancel (IOC). Alternatively, if you want the order to remain in
force for longer than a day, then you can designate it good ’til canceled (GTC).
Other conditions can also be placed on an order, such as a stop-loss.

Once your trade is executed (in whole or in part), you will receive a fill a summary
of your order’s details.
Stock Sales:
Having a “long” position in a security means that you own the security. Investors
maintain “long” security positions in the expectation that the stock will rise in
value in the future. The opposite of a “long” position is a “short” position.

A "short" position is generally the sale of a stock you do not own. Investors who
sell short believe the price of the stock will decrease in value. If the price drops,
you can buy the stock at the lower price and make a profit. If the price of the stock
rises and you buy it back later at the higher price, you will incur a loss. Short
selling is for the experienced investor.

A short sale is the sale of a stock that an investor does not own or a sale which is
consummated by the delivery of a stock borrowed by, or for the account of, the
investor. Short sales are normally settled by the delivery of a security borrowed by
or on behalf of the investor. The investor later closes out the position by returning
the borrowed security to the stock lender, typically by purchasing securities on the
open market.

Investors who sell stock short typically believe the price of the stock will fall and
hope to buy the stock at the lower price and make a profit. Short selling is also
used by market makers and others to provide liquidity in response to unanticipated
demand, or to hedge the risk of an economic long position in the same security or
in a related security. If the price of the stock rises, short sellers who buy it at the
higher price will incur a loss.

Brokerage firms typically lend stock to customers who engage in short sales, using
the firm’s own inventory, the margin account of another of the firm’s customers, or
another lender. As with buying stock on margin, short sellers are subject to the
margin rules and other fees and charges may apply (including interest on the stock
loan). If the borrowed stock pays a dividend, the short seller is responsible for
paying the dividend to the person or firm making the loan.
Economic effects of the stock market
1. Wealth effect
The first impact is that people with shares will see a fall in their wealth. If the fall
is significant, it will affect their financial outlook. If they are losing money on
shares they will be more hesitant to spend money; this can contribute to a fall in
consumer spending. However, this effect should not be given too much
importance. Often people who buy shares are wealthy and prepared to lose money;
their spending patterns are usually independent of share prices, especially for
short-term losses. Also, only around 10% of households own shares for the
majority of consumers they will not be directly affected by a fall in share prices.

2. Effect on pensions
Anybody with a private pension or investment trust will be affected by the stock
market, at least indirectly. Pension funds invest a significant part of their funds in
the stock market. If there is a serious and prolonged fall in share prices it reduces
the value of pension funds. This means that future pension payouts will be lower.
If share prices fall too much, pension funds can struggle to meet their promises.
The important thing is the long-term movements in the share prices. If share prices
fall for a long time then it will definitely affect pension funds and future payouts.
This may cause households to have lower pension income and they may feel the
need to save more in other terms.

3. Confidence:
Often share price movements are reflections of what is happening in the economy.
E.g. a fear of a recession and global slowdown could cause share prices to fall. The
stock market itself can affect consumer confidence. Bad headlines of falling share
prices are another factor which discourages people from spending. For example the
stock market falls of 2008/09 reflected the fall in confidence. On its own, it may
not have much effect, but combined with falling house prices, share prices can be a
discouraging factor. There are times when the stock market can appear out of step
with the rest of the economy. In the depth of a recession share prices may rise as
investors look forward to a recovery two years in the future.
4. Investment
Falling share prices can hamper firm’s ability to raise finance on the stock market.
Firms who are expanding and wish to borrow often do so by issuing more share it
provides a low cost way of borrowing more money. With falling share prices it
becomes much more difficult.

5. Bond market

A fall in the stock market makes other investments more attractive. People may
move out of shares and into government bonds or gold. These investments offer a
better return in times of uncertainty. Though sometimes the stock market could be
falling over concerns in government bond markets

PAKISTAN STOCK MARKET REACTION TO

COVID-19
The COVID-19 outbreak could go down as a significant illustration of an
overlooked danger in

History. Much of the concern of corporate decision-makers and policymakers has

centered on

Mainstream market risk outlets and the urgent climate change problem. Major
personal life

Disturbances are happening, for example curfew-like situations in Pakistan and in

other countries.

Besides the acute disasters of death and illness, there is pervasive apprehension the
potential economic influence of COVID-19 remains somewhat unpredictable as it
is not clear regarding the propagation of the epidemic, its extent and mortality rate,
the policy responses and human behavior. Economists anticipate the COVID-19 to
reduce global economic development by about 0.15 percentage points in 2020
translated into about $135 billion in postponed or unproduced products and
services. This year's effects would be guided by three things: first, how quickly the
virus travels and how long it lasts secondly, how much concern affects travel,
consumer buying, production, and trade; and finally what steps policymakers take
to avoid the spread of the virus and improve productivity. In Pakistan, the first case
of COVID‐19 is reported on February 26, 2020 which has crossed the figure of
13,000, till conducting the study. The recovery rate is better as compared to the
developed countries, like Italy, France, and United States. The impact of this
pandemic situation on Pakistan's economy depends on the time taken in taking
preventive measures and the intensity of spreading the disease. According to the
Asian Development Bank (ADB), this pandemic situation can cost the Pakistan
economy approximately $16.38 million to $4.95 billion, nearly 1.57% of the
overall GDP. The report also mentioned that this pandemic cost more than 946,000
job losses. In this way, a country that is at the recovery stage, in the last 2 years, is
affecting badly.

REFRENCES:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7435569/

https://businessreview.iba.edu.pk/covid19/articles/hamid.pdf