May 30, 2021
After reading my blogs - The book “Rich dad Poor dad” by Robert Kiyosaki - Book Summary and The book "Think and Grow Rich" by Napoleon Hill - Book Summary, you have planned to invest and get passive income.
To read my blog the book “Rich dad Poor dad” by Robert Kiyosaki - Book Summary, click here
To read my blog "Think and Grow Rich" by Napoleon Hill - Book Summary, click here
To buy the book “Rich dad Poor dad” by Robert Kiyosaki from Amazon, click here
To buy the book “Think and Grow Rich” by Robert Kiyosaki from Amazon, click here
There are lots of investment opportunities in Sri Lanka such as Share Investment, Mutual Fund, Bonds, cryptocurrency, and so on. In this blog, we are going through only share investment in Sri Lanka. It is purely related to Sri Lanka's perspective. If you are from other countries and you would like to invest in Sri Lanka, You can get an understanding of rules and regulations related to share investment.
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| Photo by Austin Distel on Unsplash |
Let’s dive into the topics; in this blog, I am going through the share investment. You can come up with the question of what you can be able to get from share investment. You can get dividend income and capital gain. Dividend income means the income, you can get from the company where you have invested. Companies share some proportion of profit to shareholders because they made the profit by using your investment. Capital gain means the profit, you can get by selling the shares at a higher price than the purchase price when the prices are increasing.
first thing first, you should understand the institutes related to share investment. Colombo stock exchange (CSE) and stockbrokers are the main institutes related to share investment. The Colombo stock exchange is the main stock exchange in Sri Lanka which monitors all stock brokers if they perform according to the rules and regulations of the Securities Exchange Commission (SEC). CSE operates two main systems; The Central Depository System (CDS) and Automated Trading System (ATS). CDS maintains all investors’ accounts (We need to open a CDS account to invest in the share market). ATS helps CDS to perform electronic clearing and statement systems for share transactions. Share broker help to open CDS account in CSE. This is all about the share market in Sri Lanka.
If you want more details, visit cse web site where you can check who are the members or share brokers registered under CSE. My stockbroker is Richard Pieris Securities (Pvt) Ltd. There are 15 licensed members in CSE. Now I am going through the steps to invest in Sri Lanka.
Step -01: Choose your share brokers
You can choose the stockbrokers based on the minimum investment requirement of stockbrokers and other facilities. For some stockbrokers, it is difficult to handle small investments so they have minimum investment requirements, but inverters (shareholders) can be able to buy even one share, as per company act no. 7 of 2007. Brokerage fee (0.640%), SEC charges (0.072%), CSE charges (0.084%), CDS charges (0.024%), and share transaction levy (0.300%) are the same for all stockbrokers but it is a small percentage (1.12%) of your share purchases or sales.
Step -02: Open a CDS account
If you have a valid National Identity Card (NIC), you can able to open a CDS account. All share transactions will be conducted based on the NIC number. After choosing your share broker, you can get account opening forms including Application for Opening CDS, Know Your Customer (KYC) profile, Declaration Form, Share broker’s agreement, and Application for internet trading, from your stock brokers. After summiting these applications with NIC photocopies, you will be able to get a CDS account number within few working days.
Step -03: Obtain online trading access
If you submit an application for internet Trading/ online trading, you can get the user name and password to buy and sell the shares. You can monitor the share price increase and decrease in your access and decide to buy or sell.
Step -04: Decide to invest
To decide which company you are going to invest in, you should analyze, up to which level share price has increased in company history and current price. If you are an accounting or finance professional, you can analyze the earning per share (EPS Ratio) and Price to Earnings Ratio (PE Ratio). But you can decide the investment by analyzing tends of share price and current economic condition without having accounting and finance knowledge. I am personally using investing.com to analyze the trends of the share price of the company you are going to invest in.
I hope you got the knowledge to invest in shares. Now you can start to invest. This is the best time to invest because the economic boom is coming up after COVID 19 pandemic. The best advice is better to invest before spending. Most of us have an idea to invest after paying our bill but we do not get any savingsat the end of the day. If you invest 5% or 10% of your salary before spending, based on your salary and expenses. This investment will be a regular saving and after some years you can gain passive income (passive income means you can get income without any effort, for example, you can get dividend income because of this share investment).
Best of luck with your investment and passive income!
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