6 Effective Online Stock Investment Methods You Need to Know

Why is online stock trading becoming increasingly popular?

The global stock market is becoming an investment channel that more people are paying attention to than ever before. Compared to traditional investment methods, stocks offer higher profit potential thanks to the flexibility and diversity of trading tools. However, to succeed in online stock trading, investors need to understand each product type, its characteristics, and associated risks.

What are stocks and why are they important?

Stocks (or shares) are financial assets representing ownership or debt rights. They can exist in the form of certificates, electronic data, or entries in a system. Stocks are traded on the stock market — where prices constantly fluctuate based on supply and demand and economic conditions.

Online stock trading has opened up many opportunities for retail investors. From individual stocks to complex derivatives, the market provides countless options to build a suitable portfolio.

6 Popular stock products in online stock trading

1. Initial Public Offering (IPO)(

An IPO )Initial Public Offering( is a stock issued by a company for the first time to raise capital from the public. This is a crucial step in a company’s development when it decides to go public.

Strengths of IPO:

• Significant growth potential in the long term
• Opportunity to buy at reasonable initial prices
• Transparent and publicly available price information

Weaknesses of IPO:

• Very difficult to acquire shares at the IPO moment due to high demand
• Price volatility is very high, meaning higher risks than regularly traded stocks

) 2. Individual stocks

When investing in individual stocks, investors confirm ownership of a certain part of the company. There are two main types: common stocks ###with voting rights( and preferred stocks )with priority in payments but no voting rights(.

Advantages of individual stocks:

• Low transaction costs, pay fees only when buying or selling
• Long-term profits often outperform gold, silver, and other assets
• Full control over timing of buy/sell and stock selection
• High liquidity, easy to trade on exchanges

Disadvantages of individual stocks:

• Difficult to diversify the portfolio if capital is limited, leading to higher risks
• Requires significant time for research and analysis of each stock
• Easily influenced by personal emotions when making decisions

) 3. Stock indices###

A stock index is a basket of stocks or bonds representing a specific market segment. For example, VN30 includes the 30 strongest stocks in Vietnam (accounting for about 80% of market capitalization), or S&P 500 includes 500 top stocks in the US, DJIA comprises 30 leading US companies.

Advantages of investing in indices:

• Automatic diversification with a single trade order
• Reduced transaction costs due to fewer buy/sell orders
• Saves time and effort compared to selecting individual stocks
• Reduces risks from emotional decision-making

Limitations of investing in indices:

• Cannot achieve super-high profits if some companies in the basket perform poorly
• Returns can be dragged down by weak components in the portfolio

( 4. Exchange-Traded Funds (ETF))

An ETF ###Exchange-Traded Fund( is an investment fund holding multiple underlying assets, and investors can buy and sell fund shares like regular stocks. In Vietnam, there are 7 active ETFs, with major funds like VFMVN30 ETF, FTSE Vietnam ETF.

Advantages of ETFs:

• Automatic diversification thanks to the fund’s structure
• Easy trading with low costs and periodic dividend payments
• Some ETFs allow advanced trading strategies

Disadvantages of ETFs:

• Management fees can be high depending on the fund
• Liquidity issues with smaller funds, causing wider bid-ask spreads
• Some ETFs have high tax rates

) 5. Stock index futures(

Futures contracts are agreements between two parties on the price of a stock index at a future date. In Vietnam, VN30 Futures are the most common, with different expiration periods )1 month, 2 months, quarterly###.

Advantages of Stock Futures:

• Allow short selling without owning the underlying asset
• Support leverage to increase potential profits
• Flexible trading strategies similar to Forex

Disadvantages of Stock Futures:

• Large contract sizes require bigger initial capital
• Continuous monitoring of the portfolio is necessary
• Complex trading methods, not suitable for beginners

( 6. Contract for Difference (CFD))

CFD (Contract For Difference) allows investors to profit from price changes without owning the actual asset. When trading CFDs, you can use high leverage and place Long or Short orders.

Advantages of CFDs:

• High leverage enables larger profits with less capital
• 24-hour trading across multiple global markets
• T+0 mechanism allows instant trading
• Low margin requirements make trading more accessible

Disadvantages of CFDs:

• Losses can exceed the initial investment when using leverage
• CFD owners have fewer rights than actual shareholders ###no voting rights, no dividends(

Important terms in stock investment

Bonus shares are small stock splits to increase the number of shares, helping companies raise additional capital. For example, a 100,000 VND share can split into 2 shares of 50,000 VND each.

Treasury shares are shares repurchased by the company from the market to reduce outstanding shares and influence dividend distribution.

ESOP shares are preferential shares issued to employees at favorable prices to retain talent.

OTC stocks are unlisted stocks on official exchanges, often with prices inflated beyond their true value.

Bluechip stocks are shares of leading, stable companies with significant market influence )e.g., stocks in VN30(.

Penny stocks are very low-priced stocks from small companies, highly volatile, potentially high profit but also high risk.

Defensive stocks )Defensive Stock( are stable stocks with low risk, usually from essential sectors like energy, pharmaceuticals.

Derivative financial instruments include CFDs, Futures, and other tools allowing flexible, 24/7 trading, suitable for complex investment strategies.

The first step in online stock trading

To start successful stock investing, investors need to spend time learning in-depth market knowledge, technical analysis, current trends, and most importantly, gaining practical experience through trading.

Beginners should start with foundational knowledge, understand each product type, related risks, and choose strategies aligned with their financial capacity and goals. Online stock trading requires patience, discipline, and continuous learning from trading mistakes.