How-to: How to buy shares of technology companies using the example of Yandex
In the comments on one of the previous topics of our blog, readers asked to reveal the topic of how to buy shares of Russian Internet companies. Therefore, today we will talk about how to do this for a Russian citizen, and what steps for this will need to be completed. It was decided to take Yandex as an example of such a technology company - firstly, this company recently conducted a public offering on the Moscow Exchange, and secondly, the purchase of its shares most often interests our readers.
Disclaimer:This topic is of a general informational nature, so for those who are well versed in the topic and find this post not very interesting for themselves, we suggest sharing knowledge in the comments. In addition, the text contains several links to our corporate website (not everyone likes this).
Bit of theory
Let's start with a small theoretical digression and talk about how the company's shares generally get on the stock exchange, and what can be done there (using the example of the domestic Moscow Exchange).
So, in order to have the opportunity to buy or sell the shares of a certain company on the exchange, this company, as the issuer (the one who issues the shares), goes through the process of listing its shares on the exchange. Based on the results of this process, the stock exchange makes shares on the Quotation List of the 1st, 2nd or 3rd level ( List of securities admitted to trading at CJSC MICEX Stock Exchange as of 02.07.2014).
Schedule of price changes for Yandex shares on the Moscow Exchange
From this moment, it becomes possible to buy / sell shares of the company through a professional participant in the securities market - in this case, a professional participant is a broker and a depository (more about the structure of the Russian stock market can be found here and here ). To do this, the client needs to conclude a contract for brokerage and depository services. Under the broker agreement, the client will make transactions on the stock exchange, and within the framework of the deposit agreement, the stock will be stored in the depository and the client’s rights will be taken into account.
By purchasing shares, the client becomes a shareholder of the issuing company and receives the right to participate in the management of the company and receive income in the form of dividends. The client exercises the right to manage the company through participation in meetings of shareholders at which the composition of the governing bodies of the company is selected, as well as voting on important issues. If a company makes a profit as a result of its activities, the board of directors may recommend that a portion of the profits be used to pay dividends, and if a decision is made at the general meeting of shareholders to pay dividends, the shareholders will receive income from ownership of the share.
But not all shareholders will receive dividends, but only those shareholders who owned shares on a specific date. The client makes a profit not only from receiving dividends, but also from increasing the market value of the share. In general, all of the above is true for stocks representing the IT sector, as well as companies from other sectors.
It should be noted that in the stock market, the main source of income for traders is still speculation (buy at a lower price, sell at a higher price). In the comments to one of the previous topics, the hub user Zerkella described this mechanics very well (although he called the stock market a sweepstakes, which cannot be agreed on at all), so let us quote a part of his comment:
The business model of companies implies constant growth and investment in the development of itself, and therefore dividend payments are rare and are considered more likely as a negative incident (the company has stopped in development and is not able to come up with profitable methods for further business expansion). The company - as a person - either grows and develops, or grows old and soon dies. Therefore, companies prefer to grow by investing all their free money in their business.
The usual method of obtaining income from investments in the stock market is to buy shares at a lower price and sell at a higher price (speculation). This is consistent with the company's continuous growth model, and dividends are not needed for such income. The mechanics are simple - the number of shares is constant, and the company's value is growing, as it develops and instead of paying dividends, it increases its number of assets (in the case of Yandex, it purchases data centers and programmers, creates more advanced user tracking and advertising targeting systems). Accordingly, the value of the stock is growing.
This means that buying stocks on modern stock exchanges based on dividends is not a good idea, since the company may never pay them on completely legal grounds. It would be much more logical to hope for an increase in the stock price in order to sell them profitably (or for a fall, in order to borrow shares, sell, and then buy back at a lower price - the so-called short position).
How to buy Yandex shares on the Moscow Exchange
Yandex shares appear in the list of securities admitted to trading on the Moscow Exchange (due to the fact that the company is legally a foreign company, “Foreign Issuer Shares” is indicated as the type of security).
Since an individual cannot easily trade on the stock exchange, intermediaries are needed, companies that are professional stock market participants are brokers. Accordingly, in order to buy stocks (or futures and options ), you must open an account with a brokerage company. Brokerage services are provided not only by such companies, but also by some banks (a list of possible options for opening an account, as well as indicators on the number of customers, the trading volume of each company on a particular market of the Moscow Exchange can be foundhere ). One of such accredited brokers is, for example, ITICapital - we have representative offices in various cities of Russia and in the capital of Azerbaijan, Baku - respectively, information on opening an account can be found either there or by opening an account online through the website .
After opening an account, a client can make a purchase or sale of shares and other financial instruments using the trading terminal or by calling his brokerage company by phone and submitting an application by voice (first, of course, you will have to confirm your identity). Another option is to create an automated trading system that will connect to the brokerage system using the API and complete the purchase and sale operations according to the established algorithm.
Workspace of the SMARTx trading terminal
An important point - it is not recommended for beginners and traders to rush into the real stock market right away. It is much more logical to first practice on a test account with virtual money - the Moscow Exchange has implemented a fully virtual stock market that is no different from the real one, including using it you can virtually buy shares of the same Yandex.
In the trading terminal, you need to select the desired market - Yandex shares are traded in the stock market section. Accordingly, you can select a stock for purchase in the terminal in a special quotation table and buy it by compiling an application using a special window. After this, the shares will be credited to the account from which, in turn, the money will be debited. In the same way, the user will be able to sell shares and receive money.
A commission is charged for each purchase and sale transaction - both the exchange and the broker take it. All commission fees of the Moscow Exchange are listed on a special page, for a more complete understanding of possible costs, on our website tariffs include both exchange and brokerage commissions. There are various tariff plans that are suitable for different styles of work in the stock market.
How to buy shares on foreign exchanges
Securities of various Russian companies are traded on many sites abroad, the most popular are the LSE (London Stock Exchange), and New York NYSE and NASDAQ.
In order to trade on these exchanges, you must either contact your local broker to open an account (which is not so easy to do), or find a Russian broker that provides access to trading. The shares of Yandex, which we are considering as an example today, are traded on NASDAQ, respectively, we will need a Russian broker who has access there (a good post for beginners about finding trading options on NASDAQ can be read here ).
That's all for today. We hope that the scheme for acquiring shares of Russian companies of interest has become a little clearer for habra users. If you have any questions, we will be happy to answer them in the comments.
PS If you notice a typo or mistake, please send it to us by personal message, and we will quickly fix it.
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