The Saudi stock market is growing rapidly in terms of the number of traders, the amount of traded money, and the number of listed companies. Where once only investors with experience or professionals in the field were concerned, now it is something people can manage without any special expertise. But if you’re a young professional who wants to grow you savings, or someone who has just started to cultivate an interest in understanding how the financial markets work, there’s no shortage of options in the Saudi stock market to learn and invest properly.
Thanks to Vision 2030, the Kingdom has embarked on state of the art financial sector modernization. This includes making stock trading easier, making it easier for foreign investors to purchase stocks and also, getting the citizens to participate in wealth creation opportunities. If you’re on the fence about making your first ever stock market investment in Saudi Arabia, now may be as good a time as any to take the plunge.
First, what is the Saudi stock market?
Tadawul, or the Saudi stock market, is the official name. The Gulf region’s biggest stock exchange, they are one of world’s top emerging markets. Shares of companies in sectors such as banking, healthcare, retail, telecommunications and energy are listed by Tadawul. In addition, you’ll also find Exchange-Traded Funds (ETFs), Real Estate Investment Trusts (REITs), and sukuk (Islamic Bonds).
In Saudi Arabia, stock market investment involves buying and selling shares of listed companies through a brokerage account. Capital gains (when the price of a stock rises) and dividends (profit distributions made by companies to shareholders) are how investors make money.
Why the Saudi Stock Market Might be Reasonable to Invest If..?
It has a lot of good reasons to invest in Saudi Arabia on the stock market. One is that the market is backed by the strong government oversight of Capital Market Authority (CMA) and is stable. However, the CMA safeguards fairness, ensures transparency, and protects the interest of investors and their rights.
Second, the economy in Saudi Arabia is changing drastically, many of the local fast growing companies in the tech, logistics, tourism, renewables are situated inside of Saudi Arabian soil. When you invest in the early stage companies you get from their growth.
Third, by putting your money in the stock market, you get it to work for you. If you invest in the stock market in Saudi Arabia, your money would rather be making some return for you over time instead of being kept idle, provided that you decide to invest wisely and patiently.
Opening a Trading Account
The first step in starting to invest in the stock market in Saudi Arabia is to open a trading account with a licensed broker. Some of the well known banks and brokerage firms offering trading services in Saudi Arabia are Al Rajhi Capital, NCB Capital and Samba Capital. Online platforms open up investing for younger investors, too.
To open a bank account in Saudi, you will need a valid Saudi national ID or Iqama, a bank account, and a bit of money to put in your account. Almost all of your brokers allow apps or online dashboards so you can follow your investments, and read about market news, while being able to purchase or sell stocks with just a few clicks.
Understanding Risk and Reward
Generally, stock market investment is just like any other kind of financial activity – there is a risk involved. You can lose money if the company you buy shares in does poorly, or if the market does poorly. But risk comes with the territory when it comes to investing, and if invested properly, you can control it.
The main thing to note is to know your risk tolerance. For example, if you’re long term investing (e.g. savings for retirement or future goals), short term drops in the stock price won’t have much of an impact. Investing all your money in just one stock is something you don’t want to do either. Spread your money around: A well diversified portfolio meaning you invest in a number of different companies across a range of sectors can bring down risk.
Stock Market Investment in Saudi Arabia is by no means about becoming rich overnight. This is a matter of constant growth, and it is learning about how the market operates and how to make wealth in the long run.
Learning the Basics
In any case, it’s always wiser to educate oneself before investing one’s hard earned money. Fortunately, investment in the Saudi stock market in Arabic and English is very well explained by many free resources online. For example, Tadawul’s website provides investor guides and tutorials. Many of the brokerage firms also host webinars and are offering free training courses.
Study charts to learn how to read a stock chart and understand what earnings reports mean; read the news that pertains to the economy. There’s no need for a finance degree to begin, but the more you learn, the better your decisions will be.
In addition, you should know terms like “dividends,” “market cap,” and “P/E ratio.” Once you have these, you can easily assess whether you are looking to invest in a suitable stock.
Choosing the Right Stocks
If you’re a beginner, it’s probably better to start with companies you already know about. Find companies with a good reputation, and stable and growing earnings. Generally, large companies such as Saudi Aramco, STC (Saudi Telecom Company), and Almarai are often the first target for new investors.
Index funds and ETF’s are another thing you can think about, which allow you to invest in a group of companies at once. Great for individuals that don’t want to pick stocks individually and want a safer, long term approach.
If you choose it though, make sure it’s one that fits your goals. Dividend paying stocks may be for you if you like regular income. If you are interested in long term growth, then look at companies that are spending a lot in innovation or are expanding.
Common Mistakes to Avoid
When it comes to investing in the stock market, one of the most common mistakes is to act on emotions. Many people rush into the stock market out of excitement when it goes up in price. They panic and sell when the price falls. Successful investors keep their emotions in check and focus on achieving their long term goal.
Research is not done enough. Do not purchase a stock simply because someone you know suggested it or because it’s popping up on social media. It is always better to check the company’s history, financial health and future prospects.
Additionally, never invest money you can readily lose. You should not keep your emergency savings and investment funds in one place.
Staying Consistent and Informed
If you stay in the game long enough, Saudi means ‘stay in the game’ in the stock market. A dollar cost average is to set a monthly amount you can afford to invest, and stick to it. With this strategy you smooth out the highs and lows of the market over time.
Stay learning by following financial news, reading quarterly earnings reports and being aware of what government policies are being made. It’s simple. Saudi Arabia is set to change at a fast pace and without information, you’re not in a position to make the right decision.
Final Thoughts
Investing in Saudi Arabian stock market is not exclusively for the affluent and the experienced. Digital platforms, financial education and economic reforms have made it possible for more people than ever to become part of the stock market. Thinking about it this way, it’s an awesome way to grow money, support local business, and be part of the Kingdom’s exciting economic journey.
As with most things, start small, stay curious and look towards the long term. Knowing the basics, being selective, and steering clear of an emotional decision will help you in your financial future. Ready to invest in Saudi Arabia? Follow Know Saudi – your trusted partner, if you want to invest for retirement, education, or you want your money to grow, then stock market investment in Saudi Arabia is an easy step to take.
