A Beginner’s Guide to the Philippine Stock Market
Suck at money? Congrats. You’re part of the 99 percent of people in their 20s floundering when it comes to finance. Adulting is hard, and money is harder—especially when it’s your own and not your parents. My Two Cents is here to break down everything you need to know about finance, business, and entrepreneurship. We’ll tackle all the basics, from how to get a business permit to how to invest in stocks, to educate the fledgling adults on how to not go broke.
Welcome to the idiot’s guide to money. Sixth lesson: A beginner’s guide to the Philippine stock market.
The stock market is not an easy beast to master. It’s complicated at best and unpredictable at worst. But the stock market is one of the tools that shapes our economy, primarily because of the people who invest in it. Dealing in the Philippine stock market might seem daunting, but it’s not as hard as it seems if you understand the basics.
What are stocks?
Stocks are the shares in a company that give the stockholder or shareholder a certain amount of ownership in the company. The more stocks you buy, the more of the company you own. But if the company loses in value, you also lose money. If the company gains in value, you also gain money.
Shareholders gain money from stocks in two ways: stock price appreciation and dividends. Stock price appreciation is when the market price of your price goes up. This is where the ”buy low, sell high” principle comes in. When the value of the stock is now higher than when you bought it, you have earned the difference. If you sell the stock when it is at a higher value, you gain profit from the sale. Meanwhile, dividends are given out when profitable companies share their profits with their shareholders through additional cash or stocks.
You can only buy and sell stocks of publicly listed companies that have released their initial public offering (IPO).
The playground for all of these stocks? The stock market, or in our case, the Philippine Stock Exchange (PSE), Inc. This is where all local stocks are bought and sold in hopes of raising individual capital.
Is it risky to trade stocks?
As they say, no pain, no gain. In the world of stocks, no risk means no profit. There is definitely a level of risk at stake when you play your hand in the stock market, but the greater the risk, then greater the (possible) reward. At the same time, great risks can also result in great losses.
Risk is always part of investing, but you can decide just how much risk you’re willing to take. Small risks in stable stocks can result in steady, reliable long-term growth, while big risks in new stocks could skyrocket your capital.
How do I start trading stocks?
1| Save enough money to open an account with a PSE registered broker. The minimum amount at each broker is about P5,000.
2| Decide on the licensed stockbroker or a trading participant with which you want to trade with. There are over 100 stockbrokers accredited by the PSE. The stockbrokers are divided into the traditional stockbrokers where a licensed salesman will take your orders through written instructions or phone calls, and online stockbrokers where investors can handle their own stocks using an application or website. You can find a list of traditional traders here and online traders here.
3| Once you’ve settled on a stockbroker, open a trading account by investing the minimum investment amount and paying a fee if necessary.
4| Start trading by posting your buy or sell orders on the Philippine stock market via a traditional or online trader.
5| Track your investment decisions and the status of the various publicly listed companies on the stock market. The general rule of thumb is to monitor and invest in companies that foresee good long-term growth.
What makes a good stockbroker?
First, they should fulfill the minimum requirements set by PSE. These include, confirming your securities transactions after trading hours, delivering your invoices the day after the transaction day, sending your statement of account every month, and informing you of any developments or correspondences relevant to your investment.
For online traders, the most important element may be the interface—if it’s clear, simple, and understandable. And more importantly, if it runs smoothly without any hiccups. For both traditional and online traders, reputation and track record are huge indicators on whether the stockbroker is reliable to its shareholders, so look up reviews and recommendations so you find the best stockbroker for you.
What should you keep in mind when trading?
According to COL Financial, a respected PSE trading partner, there are four principles to follow for successful stock investments. These are: Invest early, invest regularly, invest long term, and invest using diversification. Basically, invest early in things that will benefit you in the long haul, and avoid putting all of your eggs in the same basket.
For further reading, PSE has an entire online academy with resource materials for rookie investors. You can access the Philippine stock market resource material here.