A Beginner’s Guide to Investing in the Colombo Stock Exchange (CSE)

Entering the stock market is a significant step toward financial growth. 

This guide is designed to clear up common concerns and provide a clear path for new investors to start trading with confidence.

Step 1: Open a CDS Account

The first requirement is to open a Central Depository System (CDS) account. This acts as a digital vault for your shares.

  • How to Apply: You can register through the CSE Mobile App or directly via the CDS website.

  • Links: * CSE Mobile App (Google Play)

  • Requirements: You will need to provide your National Identity Card (NIC) number, personal bank account details, and a photograph.

  • Security: Your data is safe; the system strictly follows GDPR and data protection regulations.

Step 2: Choose a Stockbroker

You cannot trade directly on the floor; you must select an authorized Stockbroker to facilitate your trades.

  • Facilitation: Brokers act as a bridge between buyers and sellers.

  • Selection: You can find a list of authorized broker houses on the CSE website. While services are generally similar across firms, you can seek recommendations from experienced investors.

  • Activation: Once you submit your application, it is sent to your chosen broker for verification. If information is missing, they will contact you to finalize the setup.

  • Identification: Once activated, you will receive a unique identification number and be assigned a Stock Broker Advisor.

Step 3: Funding and Trading

To begin buying shares, you must have funds in your account.

How to Buy Shares

There are two primary ways to execute a trade:

  1. Via Investment Advisor: You can instruct your assigned advisor to buy specific shares at a specific price. If the order fails (e.g., the price changes), your advisor will explain why and help you adjust your strategy.

  2. Via Trading App: Most brokers provide a direct trading app, allowing you to buy and sell independently without involving your advisor.

Understanding Fees

Every time you buy or sell, you will be charged taxes and broker fees.

  • Total Cost: The total combined cost is typically less than 1.3% of the trade volume.

  • Example: If you buy LKR 1,000 worth of shares, your total cost will be approximately LKR 1,013.

Step 4: Managing Your Portfolio

Once you are active, it is important to understand how "Buying Power" and settlements work.

FeatureDescription
Account Balance

The actual cash you have deposited with the broker.

Buying Power

The total limit you can spend, which may be higher than your cash balance if you have a healthy portfolio.

Settlement (T+2)

If you buy shares on credit (negative balance), you must settle the payment within 48 hours.

Dividends

When a company shares its profits, the money is transferred directly to your registered bank account.

Important Note: If you fail to settle a purchase within 48 hours, the broker is legally permitted to perform a "force sale" of shares in your portfolio to recover the funds

Final Advice

This guide is intended for educational purposes to help you get started. .

For specific legal or complex financial advice, always consult your authorized stockbroker.


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Location: Makumbura, Pannipitiya, Sri Lanka

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