(Updated -26 Sept 2012)
How to Invest in the Philippine Stock Market
Finally! Here is my guide in Investing in the Philippine Stock Market. Whether you want to have a part time income, to buy a new house, or to prepare for your retirement, the stock market is a good investment vehicle (a place where you can put your money). Why? Because investing in the stock market over the long-term provides greater returns and protection against inflation compared to savings accounts, time deposits, government securities and bonds.
Based from a report conducted last year, 2009, only 0.47% of the total Philippine population actually participates in the Philippine stock market. That’s less than 500,000 out of 94 million people! 😮 Philippine Stocks Exchange president and CEO, Francis Lim said “Clearly, the message is that there is a lot of work to be done in raising a nationwide awareness that the stock market could be a safe investment alternative.”
Why do I encourage Filipinos around the world to Invest in the Philippine Stock Market?
It will help our economy to grow, since it provides a boost up to local corporations wishing to grow large. It is said that the stock market’s sophistication means that information on companies is easy to obtain, and this increases the trust of investors from around the world.
The cost of Philippine stocks is relatively cheap compared to other Asian or US stocks. With the purchasing power of USD or SGD, you can buy more shares with your money.
Perception on stocks trading
First of all, let’s remove our negative perception about stocks trading or stocks investing.
Below are some examples…
“Investing in the stock market is only for the rich.”
Most people thought that they need to have a capital of P1 million in order for them to invest in the stock market. You can actually open a regular trading account for a minimum of P25,000 and start trading online.
“Investing in stocks is very risky; it can wipe out your savings!”
All investment vehicles have their own risks, you just need some time to learn proper money management and risk management. Always remember; never invest more than you could afford to lose.
“How can I buy and sell stocks, do I need to call the stockbroker every time?”
With the advent of the internet, the stock market has evolved tremendously, you can trade online, from your desktop or from your mobile device (smart phone, tablet PC, notebook)
“You need to wait forever to profit from stocks”
If you’re a long time investor you can choose to wait for years, but if you’re a trader (day trader, trend follower, market maker, scalper, momentum trader), you can profit from small capital gains which is done frequently.
Alrighty, now let’s answer the common questions about stocks.
What is a stock?
A stock is a security that represents ownership in a publicly traded company and is sold by the share. Each of these shares denotes a part ownership for a shareowner or shareholder of that company. For example, if you buy some shares (common or preferred stocks) of Bank of the Philippine Islands (BPI), you become a part-owner of BPI.
How do I earn from stocks?
There are two ways in earning from the stock market;
First, is through an increase of stock price or a capital appreciation. Investors and traders buy a particular stock/share because the goal is for the price per share to increase over time so the investor can have a profit. The golden rule in stock market is, “buy low, sell high” but this is not as easy as it sounds. 🙂 Another way of viewing this is like buying a house and lot for Php 2,000,000 today and selling it after a year for Php 3,000,000, the difference is your capital gain.
Second is through dividends declared by the company. Dividends are payments made by a company to its shareholders. This is the portion of company profits paid to shareholders.
There are two types of dividends, cash dividends and stock dividends.
If the company declares a cash dividend of Php 1.00 per share and you own 10,000 shares of that company, you’ll get Php 10,000 gross of tax in cash.
On the other hand, if the company declares a 10% stock dividend, your 10,000 shares will have an additional 1,000 shares at no cost. The stock dividend can be sold anytime after the shares have been issued.
Invest in the Philippine Stock Market: How do I open a trading account?
You can open an account online or visit any local stockbroker in the Philippines, but of course, you would rather choose online brokers. 😉
I’d personally recommend CitisecOnline (COL) since they conduct free seminars for their customers and they have a wide array of data, like stock info, broker info, time and sales on their website that you can use in real-time while trading. They’ve also been my online broker ever since I started.
Download the forms from their website, e-mail them the requirements and fund the account. In funding the account, you can wire transfer your deposit to any of their preferred banks or you can send the deposit to any remittance centers near your area. A minimum investment amount of Php25,000 (USD522 or SGD758) is needed to open a regular trading account.
To know more about opening a trading account from COL Financial (formerly known as CitisecOnline), you can go to this page: https://www.colfinancial.com/ape/Final2/home/open_an_account.asp
Invest in the Philippine Stock Market: Invest in your education
If you’re like Warren Buffet, you can buy a fundamentally sound company’s stocks slowly over time until you fully own the company. That is, if you’re willing to wait for years and you don’t have the urge of selling any of your stocks. Warren Buffet earned his gazillions from stocks not because of trading but because of long term investing. Either ways, if you want to become a good investor or a trader, you still need to invest in your education.
You need fundamental analysis (FA) to know more about the company and technical analysis (TA) to study charts, graphs and historical prices to know the future price of a stock. Although there are lots of info on the internet about stocks trading, it is still best if you have someone in front of you teaching the do’s and don’ts of trading.
In any endeavor, if you want to be a success, you need persistence and never ending desire for knowledge so I’d suggest you do the following below:
a. Enroll in an intensive training workshop on Technical Analysis or attend any free T.A. seminars around your area. Your technical analysis knowledge is useful not only for stocks trading but also for futures and commodities, fixed-income securities, forex, etc.
b. Buy books or search for e-books about stocks trading, technical analysis, or investing. (books by John J. Murphy, Dr. Alexander Elder, Martin Pring and Benjamin Graham).
c. Use the internet to your advantage. Read the articles on investopedia.com, stockcharts.com, babypips.com (for forex) or watch stocks trading videos from Youtube.com! You can also join online forums, eg. Finance Manila, Traderspizza.com, StockmarketPilipinas.com to get the latest rumours, facts and humours about a company’s stock. :p Financial news on BworldOnline.com, Business Mirror, or Inquirer.net.
d. Know or meet someone in your neighborhood or any friend that do stocks trading. It’s better to have someone to guide you along the way.
There you go! I hope this article can clear your mind about stocks trading. I hope, in my own little effort, encourage my “kababayan” to Invest in the Philippine Stock market their hard earned money.
Some reference I used can be found on the following:
Invest in the Philippine Stock Market – GMAnews.tv
Invest in the Philippine Stock Market