Learn Stocks from Scratch: Your Comprehensive Guide to Starting Investment in

Stocks are units of ownership representing a share in the capital of joint-stock companies. When you purchase a share in a company listed on the Saudi market, you become a partner in it to a certain extent, gaining rights such as receiving a portion of the company's profits (via dividends) and participating in decision-making through voting at general assemblies. Stocks are classified as equity assets, and their value fluctuates based on company performance and market conditions. In the Saudi market, stocks can be bought and sold through approved electronic platforms, with ownership regulated by the Saudi Capital Market Authority (CMA). It is important to understand that owning stocks is not only an opportunity to achieve capital gains from price increases, but also a way to benefit from cash dividends if the company distributes regular profits.

The Saudi stock market, known as 'Tadawul', is the official exchange for trading stocks in Saudi Arabia. Established in the late 1980s, it is supervised by the Capital Market Authority. The market includes over 200 listed companies representing diverse economic sectors such as energy, banking, industry, telecommunications, real estate, and more. Both local and foreign investors can buy and sell stocks under regulations that allow foreigners to own significant stakes without strict restrictions. Stock trading is conducted electronically during official business days (Sunday to Thursday), and stock prices are determined by supply and demand, reflecting investor expectations and company performance. Tadawul provides real-time data and periodic reports to help investors make informed decisions.

To start investing in Saudi stocks, you must first open a trading account with a brokerage firm licensed by the Capital Market Authority. This requires providing identification information and linking the account to a local bank account. Once registration is complete, you can deposit funds and begin buying and selling stocks via the broker’s platform or mobile app. Beginners are advised to review company reports, monitor financial data, and understand how to execute buy and sell orders (market price vs. limit price). It is also important to understand trading fees and commissions, and to regularly update your information to maintain account security.

Stock prices in the Saudi market are influenced by several factors, including: company financial performance (profits, revenues, dividends), oil prices (especially for energy and petrochemical companies), local and global economic conditions (interest rates, inflation), government policies (privatization projects, investment incentives), and the activity of foreign and local investors. Global events such as financial crises or energy price fluctuations can immediately impact market performance. Therefore, investors should understand these factors and monitor economic indicators such as the Tadawul All Share Index (TASI) and sector performance before making any investment decisions.

Financial indicators are essential tools for understanding a company’s position and evaluating a stock’s attractiveness. Key indicators include:
- Price-to-Earnings Ratio (P/E): The share price divided by its annual earnings. The lower the ratio, the less expensive the stock is relative to its earnings.
- Earnings Per Share (EPS): Net profit divided by the total number of shares, showing the profitability of each share.
- Dividend Yield: The ratio of annual dividends to the share price, reflecting how generous the company is in distributing profits.
- Market Capitalization: The total value of the company in the market (share price × number of outstanding shares).
- Revenue Growth: The rate of annual revenue increase, indicating the company’s ability to expand and grow.
Understanding these indicators helps investors compare companies and select the most suitable ones for their goals.

The Saudi market is divided into several main sectors, most notably:
1. Energy and Oil Sector (e.g., Aramco), which depends on global oil prices.
2. Banking and Financial Services (Al Rajhi Bank, Saudi National Bank), influenced by interest rates and lending activity.
3. Chemicals and Industry (SABIC), affected by raw material prices and industrial changes.
4. Telecommunications (STC, Zain), growing with digital transformation and increasing demand for tech services.
5. Real Estate and Retail, driven by local demand and government housing policies.
Competition among companies within each sector is reflected in their financial results and stock prices. It is advisable to study the sector before investing to identify potential opportunities and risks.

To practically understand how to evaluate stocks, here are examples from three leading companies as of early 2025:
- Saudi Aramco: Share price SAR 36, market cap SAR 700 billion, P/E ratio 8-10, annual dividends about SAR 12 per share (yield 7-8%).
- SABIC: Share price SAR 95-110, market cap SAR 200 billion, P/E ratio 9-11, dividends SAR 3.75 per share (yield 4-5%).
- Al Rajhi Bank: Share price SAR 95-100, market cap SAR 150 billion, P/E ratio 8-10, dividends SAR 8 per share (yield 8-9%).
These indicators are subject to change, and official sources should always be reviewed before making any investment decisions.

Investing in stocks can be long-term, meaning buying shares of strong companies with the intention of holding them for years to benefit from profit growth and dividends. Short-term trading (speculation), on the other hand, focuses on taking advantage of daily or quarterly price fluctuations to achieve quick profits. Each approach has its risks and advantages: long-term is less volatile and more stable, while short-term requires close market monitoring and continuous technical analysis. Beginners are advised to start with long-term investing to gain experience, with the option to try active trading later with caution.

The Capital Market Authority (CMA) supervises the regulation and governance of the stock market, setting rules for listing, trading, and financial disclosure. Listed companies are required to disclose any material information that may affect the share price, such as business results or acquisitions. The authority monitors compliance, imposing penalties for violations such as insider trading or publishing misleading information. The aim is to protect investors and ensure transparency and integrity in the market. The CMA also provides platforms for investors to submit complaints and inquiries.

The Saudi market has recently introduced advanced trading tools such as margin trading and contracts for difference (CFDs) on selected stocks, offering investors additional opportunities to diversify investment strategies. The participation rate of foreign investors has risen to over 30% of trading volume. Several companies in technology, healthcare, and real estate sectors have been listed, raising the number of listed companies to over 210. These developments reflect the market’s dynamism and provide new opportunities for investors, highlighting the importance of following official news and reports to identify opportunities and risks.

Major risks include price volatility, liquidity risk (especially in small-cap stocks), regulatory changes, and exposure to local and global economic events. Economic crises or falling oil prices can cause sharp declines in stock prices. Some sectors are more susceptible to fluctuations than others. To reduce risks, it is advisable to diversify your portfolio across different sectors, avoid relying on a single stock, and continuously follow news and analysis. Avoiding rumors and investing based on official sources are fundamental to success in the market.

To effectively follow the Saudi market, rely on the official Tadawul website for stock prices and important announcements, as well as the Capital Market Authority bulletins and companies’ quarterly reports. Economic newspapers such as 'Al Eqtisadiah' and 'Saudi Gazette' provide daily coverage and specialized analysis. Mobile apps allow real-time price tracking. Social media platforms also publish analyses, but always verify their credibility and avoid making investment decisions based on rumors or unofficial forums.

At the start of learning about stocks, you will encounter many terms, such as:
- Preferred and common stocks
- Closing price and opening price
- Market order and limit order
- Book value
- Return on investment (ROI)
- Dividends
- Free float shares
Understanding these terms is essential for correctly interpreting financial data and press reports, and it helps you communicate with brokers and understand their periodic reports.