Understanding the Stock Market

The Trinidad and Tobago Stock Exchange

What is the Trinidad and Tobago Stock Exchange?
How does a Stock Exchange work?
What are the trading hours for the TTSE?

Investing in the Stock Market

What are Shares?
What are the different types of Shares?
What are the rights of Ordinary Shareholders?
What are the rights of Preference Shareholders?
What are the risks and rewards of investing in the stock market?
How do mutual funds work?

The Trinidad and Tobago Stock Exchange

1. What is the Trinidad and Tobago Stock Exchange?

The Trinidad and Tobago Stock Exchange (TTSE) operates under the Securities Industry Act 1995. It is a centralized market for the trading (buying and selling) of stocks (shares) that are listed with the TTSE.

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2. How does a Stock Exchange work?

The stock exchange provides for an orderly means of trading listed stocks and ensures that the prices being bid and asked for shares are properly disclosed to the public.

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3. What are the trading hours for the TTSE?

The TTSE is open for trading every Tuesday, Wednesday and Friday from 9:30 a.m. There is no trading on weekends, public holidays or on Carnival Tuesday.

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Investing in the Stock Market

1. What are Shares?

Shares represent ownership in part of a company. When you buy a share in a company you become a joint owner of the business along with other shareholders and share in the future (profits or losses) of that business. Shares are also referred to as equity or stocks.

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2. What are the different types of Shares?

There are primarily two types of shares listed on the TTSE. They are Ordinary Shares and Preference Shares.

Ordinary Shares

These are shares that represent ownership in a company and give the shareholder a vote at shareholders meetings and a proportionate but unspecified claim on profits.

Profits are paid out to all shareholders as dividends.

Preference Shares

These shares entitle the shareholder to certain rights and privileges not enjoyed by ordinary shareholders. The major privilege is that preferred shareholders are entitled to dividends are a predetermined rate which must be paid out of earnings before any dividends are paid to ordinary shareholders.

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3. What are the rights of Ordinary Shareholders?

A right to dividends if declared by the Board of Directors.
A right to information about the company in which an investment is made.
A pre-emptive right, which is simply the due right of a shareholder to maintain his proportionate share of ownership in a company.
A right to vote at the company's annual general meeting and any other meeting of shareholders duly authorized by the Board of Directors.
A right to share in the assets in the event of dissolution.

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4. What are the rights of Preference Shareholders?

" Priority over the common stockholders as to dividends.
" No pre-emptive rights (see above)
" No right to vote at the annual general meeting.
" Do not have any of the rights of creditors.
" In the event a company decides to liquidate its business such shareholders are usually entitled to a stipulated portion of the assets in preference to common shareholders.

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5. What are the risks and rewards of investing in the stock market?

Stocks are an effective way to generate returns from capital gains and dividends. As a general rule the higher the potential return on an investment the greater the risk. The stock market is generally fickle, as share prices move up and down. Before investing in the stock market you should understand your risk tolerances and financial objectives. West Indies Stock Brokers Limited stands ready to assist you in this regard.

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6. How do mutual funds work?

Mutual funds are not the same as shares although a mutual fund most often contains shares. A mutual fund represents a group of securities (bonds, shares, real estate etc.) chosen by the manager of the fund to achieve specific investment objectives, such as growth or income. You the investor pool your money with other investors. The combined sum of money allows the fund manager to purchase a diversified portfolio of investments. Mutual funds are sold in units. As the value of the fund's underlying securities goes up or down, so does the value of the fund's units.

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