How to Invest in Stock Market for Beginners Philippines – Investing in the stock market can be a risky endeavor, but investing in the stock market for beginners Philippines is not as hard as it may seem. The first thing you need to understand about investing in the stock market is that there are risks involved.
A quick guide on how to invest in the Philippine stock market for beginners, covering topics that an investor should take into consideration before making his or her first investment. This book breaks down the basics of stock investing by providing insights on what you should know prior to investing.
Stocks are shares of ownership of a company listed in the PSE. When you purchase stocks of a PSE-listed or publicly owned corporation, you become one of its shareholders or stockholders, which means you’re a part-owner of that company. You can join in the company’s growth and profits in the future. But this also means you may lose some of your investment if the company performs poorly or suffers a loss.
Table of Contents
Learn the Ins and Outs of Stock Market Investing
Stock investing seems a complicated process for beginners to comprehend. But as with any field, it can be learned. It takes a lot of research (and patience, of course) to educate yourself on the stock market before you get started.
Most Important Things Novice Investors Should Learn About Stock Investing
- How the Philippine stock market works
- The best time to buy and sell stocks
- How to choose the best stocks to buy
- The risks of stock investing and how to minimize and manage them
- How to properly diversify your portfolio of stocks
- Trading and transaction fees (broker’s commission, VAT, etc.)
- The board lot table that specifies the minimum shares that can be bought or sold at a particular price range
Free Learning Resources for Stock Investing Beginners
To gain more knowledge about investing in stocks, you can read online resources and attend seminars on the basics of stock market investing.
Here are some free learning resources on stock investing for beginners:
- PSE’s Stock Market 101 seminars[1]
- PSE Academy E-Learning Resource[2]
- COL Financial’s Stock Market seminars[3]
- FirstMetroSec’s Stock Market 101 seminars[4]
- Philstocks’ WINvesting seminars[5]
- Marvin Germo’s Stock Tips Philippines blog[6]
Determining your Profile and Goals
Deciding whether you should delve into stocks isn’t as easy as blinking your eye or waking up the next morning with the sense of urgency to open an account and start trading. You have to think about this thoroughly and perform an assessment if you are financially and mentally ready for it.
Plan Your Stock Investing Strategy
You can’t start investing in the stock market without a strategy. Some people are active traders who buy and sell stocks within a day, a week, or a month. Others are long-term investors—they buy and hold stocks over a long period (either in lump sum or periodic investments) and then sell them after reaching their target date or hitting their target ROI.
Peso Cost Averaging Strategy
For stock investing beginners, the recommended strategy is peso cost averaging. It involves investing a fixed amount on profitable companies at regular intervals (monthly, quarterly, semi-annually, or annually) over a long period (usually five to 10 years).
With peso cost averaging, you buy more shares of a stock when its price is low and fewer shares when the price is high. This keeps your average cost low and helps you reduce the risk while earning good returns.
Blue Chip Stocks in the Philippines
Long-term investing in blue-chip stocks is also a great strategy because of their stable and high potential for profits, as they come from top-performing companies in the Philippines.
As of this writing, here are the blue-chip stocks based on the PSE Index:
| Company Name | Stock Code |
|---|---|
| Ayala Corporation | AC |
| Aboitiz Equity Ventures, Inc. | AEV |
| Alliance Global Group, Inc. | AGI |
| Ayala Land Inc. | ALI |
| Aboitiz Power Corp. | AP |
| BDO Unibank, Inc. | BDO |
| Bloomberry Resorts Corporation | BLOOM |
| Bank of the Philippine Islands | BPI |
| DMCI Holdings, Inc. | DMC |
| First Gen Corporation | FGEN |
| Globe Telecom, Inc. | GLO |
| GT Capital Holdings, Inc. | GTCAP |
| International Container Terminal Services Inc. | ICT |
| Jollibee Foods Corporation | JFC |
| JG Summit Holdings, Inc. | JGS |
| LT Group, Inc. | LTG |
| Metropolitan Bank & Trust Company | MBT |
| Megaworld Corporation | MEG |
| Manila Electric Company | MER |
| Metro Pacific Investments Corporation | MPI |
| Puregold Price Club, Inc. | PGOLD |
| Robinsons Land Corporation | RLC |
| Robinsons Retail Holdings, Inc. | RRHI |
| Semirara Mining and Power Corporation | SCC |
| Security Bank Corporation | SECB |
| SM Investments Corporation | SM |
| San Miguel Corporation | SMC |
| SM Prime Holdings, Inc. | SMPH |
| PLDT Inc. | TEL |
| Universal Robina Corporation | URC |
List down the things you want to achieve.
In order to have a definite mindset of the things, you want to achieve, write it down to remind yourself that these are the things that will keep you motivated on going down the long process of achieving these things.
May it plans for retirement or business and maybe buying your own house and saving up for your future family, these should be written down in order for you to be aware of time and be wary of the opportunities or chances you might have been missing out because you always this thought that things can be finished tomorrow or after a week.
Choose Your Stockbroker
This step is crucial because you can’t buy and sell stocks on your own. You need a stockbroker to execute those things for you.
What is a Stockbroker?
A stockbroker or trading participant is an individual or company accredited by the Philippine Stock Exchange and Securities and Exchange Commission to place buy and sell orders on behalf of investors.
There are two types of stockbrokers: traditional and online. Traditional stockbrokers provide a licensed salesperson who takes orders through phone calls or email. Online stockbrokers enable their clients to make buy or sell placements through their web-based trading platform.
For first-time stock investors, investing through online stockbrokers is the better choice. Online trading platforms provide quick access to stock research reports, real-time stock market information, portfolio management, and order placement services.
Best Online Stockbrokers for Beginners in the Philippines
Currently, 30 online stock brokerage firms are authorized and licensed to trade stocks in the Philippines. Out of that number, here are the top five online stockbrokers that make stock investing for beginners a lot easy and affordable:
- BDO Nomura[7] (requires a BDO savings or checking account and a BDO Online Banking account)
- BPI Trade[8] (requires a BPI savings or checking account and an average daily balance of PHP 500 for the settlement account used solely for BPI Trade transactions)
- COL Financial[9]
- FirstMetroSec[10]
- Philstocks
Check the PSE website for the full list of online stockbrokers in the Philippines.
Stockbrokers such as COL Financial and Philstocks offer a free seven-day trial account that provides access to their online trading platform. Take advantage of such offers to experience how it is like using their platform and which one you think works best for you.
Have a financial goal
Before getting into stocks, ask yourself, ‘What’s your financial goal?’ This is to understand why you’d invest and save money. The financial goals should be as accurate as possible for you to enable to narrow down the time you’ll need to have and the strategies you’ll have to come up with in order to achieve these things.
This even starts with how you save with your monthly income, if you’ll start in stocks, how much are you willing to spend on stocks themselves? How much for the daily expenses and other important matters?
There are lots of techniques out there and how you can perfectly save up money – take the 50-20-30 rule as an example. It says that 50 should be spent on daily expenses, 20 on leisure activities, and 30 will go to your savings (e.g. retirement plans and alike).
Open an Online Trading Account
Once you’ve chosen a stockbroker, it’s time to open an online trading account with the brokerage company.
You just need to submit a filled-out customer account information form, photocopy of your valid IDs, and your tax identification number (TIN). Other brokers may require specimen signature cards and proof of billing.
After submitting the requirements, wait for the approval of your online trading account, which may take one to two working days
Resilience on future risks
As they say, stocks have their own small ups and downs or tremendous ups and downs which can greatly affect us in terms of our future plans with it, so upon entering into stocks, you should have prepared yourself of the possible risks by studying and learning more from those who’ve been on this field for a long time.
Fund Your Trading Account
As soon as your online account is approved, you can already fund it. Depending on your stockbroker, you can make an over-the-counter or online bills payment transaction through any of the broker’s accredited banks. The amount is credited to your account within the day or the next banking day.
BDO Nomura clients can quickly deposit funds by logging into their online trading account and clicking “Cash Deposit” in the dashboard of the platform to transfer funds from their BDO savings/checking account. The amount is instantly credited to the BDO Nomura account.
As for BPI Trade account holders, one of the options to fund the online account is to perform a fund transfer transaction from their BPI deposit account via the BPI online banking facility.
Knowing the industry you’re going to take
As much as possible, read a lot of informational materials that will give you hindsight to the industry that you’re going to take.
Take it from the experts when it comes to giving efficient tips on what kinds of stocks are good to go and predictions on how the stock will work in a month or so.
Set your expectation on stock market
Since stock market requires you to be efficient both in art and science because it requires a thorough understanding and analyzing of financial data about market performance.
An instinct on what data should signify and shouldn’t be should be one of the asset skills that you should have.
Understanding Stocks Marketing
Stocks is known to be shares of ownership in a corporation. It’s in the stock market where buying of stocks is happening and in the Philippines, it’s PSE or Philippine Stock Exchange that handles and governs the local stock market.
After successfully buying stock from a company, this means that you’ve now become an owner or shareholder of the particular corporation and be part of the company’s growth and success, and even the losses.
Investing Wisely on Stocks
Investing your money on stocks sounds to be a risky and bold thing to do for the money you have saved up? But why do you think many people have taken this bold step?
- Early Investments Opportunity – Always look at the bigger picture of your life, no one would like to work until they can’t. Investing earlier will give you the chance to save up for your retirement and future plans you’ll want to have.
- Regularly Investing Opportunity – Investing regularly will also help you in having a higher chance of earning more by the time you’re ready to settle down.
Knowing your options
There are two types of investments that you may choose from as someone starting in this field.
- Equity index funds or exchange-traded funds – These are the funds that allow you to buy small pieces of many different stocks in one transaction. This means that when you invest in a fund, you also own small pieces of that companies.
- Individual Stocks – Targeting a specific company, it allows you to buy a a single share or a few shares with a company or corporation.
Buy Your First Stock
At this point, you should be ready to place an order to buy stocks. The cheapest and most convenient way to purchase stocks is to use the online trading platform of your stockbroker. The instructions on placing a buy order can be found on the stockbroker’s website.
When you don’t have internet access, you may contact your broker’s customer service hotline to place a buy order.
Remember that trading days in the PSE are Mondays to Fridays (except for holidays), from 9:30 a.m. to 3:30 p.m. (with a break from 12 p.m. to 1:30 p.m). You can place orders only around that schedule.
Within one or two working days after placing your order online, you’ll receive an email message from your stockbroker that confirms and shows the details of your transaction.
Conclusion
If you are interested in being financially free, then stock market investing may be for you. It is not uncommon to have friends or family members get rich through investing. If so, why not you? What are the investment options available to investors?