How To Invest in Philippine Stock Market (First Attempt, Simplified)

I used to believe that investing in the Philippine Stock Exchange is only for the elite members of our society; those who are have acquired degrees and specializations on market securities, people with finance background, business moguls, the ‘rich and famous’ of our community with millions of disposable assets (but I was definitely wrong!). This very belief and my quest to financial freedom have led me to break some old school convictions and plunge into the world of stocks.

When I found out that even Bro. Bo Sanchez’s house-helps made it to the market and have earned decent gains, I thought that everyone can also actively participate and ride the with our country’s economic progress given the right level of awareness and basic knowledge on the Philippine Stock Market and stock investing. With 5,000 pesos minimum investment, I started my first stock investment.

As a rookie, I will skip on the expert-sounding exposition of market dynamics, fundamental and technical analysis and stick on the basics. Though those are very vital in one’s success in trading or investing in stocks, we need to start with the elementary steps since most people are too overwhelmed with the complexity and shun the whole idea without even starting.

The Basics

Philippine Stock Exchange (PSE) is a local market where STOCKS or SHARES of publicly-held companies are traded (bought and sold) and issued. In simpler terms, it’s like our local wet market (palengke) where we buy goods and where vendors sell their merchandise, only that in stock market we cannot directly buy or sell. We need a STOCK BROKER to buy and sell shares for us (but of course with our discretion, instructions or order).

Investopedia defines stocks or shares as:

"Stock" is a general term used to describe the ownership certificates of any company, in general, and "shares" refers to a the ownership certificates of a particular company. So, if investors say they own stocks, they are generally referring to their overall ownership in one or more companies” Technically, if someone says that they own shares - the question then becomes - shares in what company?”

Basically, shares are like units of ownership of an investor in a company and generally stock investment is the monetary equivalent of the ownership or how much an investor owned.

Wikipedia defines stock broker as:

“A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission” (www.wikipedia.com)

Today, brokerage firms and stock brokers have already grown from the usual over-phone transactions. With the aid of technology, you can easily open an online trading account and place a buy or sell order over the brokerage’s website or online platform.

The How Part

In order to invest in the stock market,

First, open a stock account through a brokerage firm or an individual broker. For convenience, I pick an online account for me through COL Financial. I filled up their application form and mailed it to their business address with the set of requirements (You can check out their website on how to open an online account at www.colfinancial.com)

Upon approval, I was instructed to fund my account; meaning, deposit the minimum amount of Php5,000 to the my platform’s account or fund in order to start buying stocks. Funding your account can be done through bank deposit or bank transfer (instructions are also found in their website).

Second, when the deposited amount is already reflected on your online account you can start buying shares at a certain price (I will try to post a detailed illustration on the next articles). After the transaction is completed, you now owned a portion of that company and the market value of your shares is your stock investment.

[Segway] So how do I earn? I would like to write about this on a separate note for greater emphasis but as an overview there are two common ways to earn from your stock investment. First, you earn through dividends. Most companies distribute a portion of the company’s earnings to their stockholders (you) through declaration of dividends which could be a percentage or rate of your investment or an amount per number of shares. Second, traders and investors earn through stock price appreciation; meaning you buy the shares at a low price and sell it at a higher price.

Deeper topics on stock investment will be introduced in the future writings or I will list books, articles, and other blogs which can help you along the way. Meanwhile, the steps presented earlier are the basics in order to start your stock investments and answer the fundamental question-HOW. A word of caution: before you buy your first stocks, ensure that you have studied, made your own research on the company you are buying. It is also important to know the right timing.

Again (and for the nth time), this post is only limited on your first encounter with the market. The next steps (stock selections, buy and sell timing, market analysis, stock analysis) are crucial in order to cement one’s success in the market and will be written somewhere. Read more and Study first.

In summary, I made an elementary drawing (and definitely just for fun) for the visual learners and to those who are now excited to start investing at the Philippine Stock Exchange.

START TODAY and ENJOY! Happy Investing! 

Learn more through Truly Rich Club: https://bosanchezmembers.com/amember/go.php?r=54130

References:

What's the difference between shares and stocks? (http://www.investopedia.com/ask/answers/140.asp#ixzz3cCn09VQe)

Photo credits: www.negosentro.com