This post is part of Your Ultimate Guide to Investing for Beginners. To read all posts in order, start with What is Investing? then continue reading the rest of the series on this page.
Start a business with only Php 5,000? Sounds insane! Not all of us can afford to put up our own business or even have the time to manage it. But, with that amount, you can be a part owner of some of biggest companies in the Philippines like SM, PLDT, San Miguel and Jollibee and share in their profits. And there’s plenty more where you can choose from: banks, media, real estate, power generation, and even mining!
Want to partner with Business Tycoons?
How? INVEST in the Stock Market!
Is Stock Investing For You?
If you want to take greater control over your investments, take advantage of the highest potential profits and better returns than other types of investments, understand how the stock market works and have the discipline to monitor market trends, economy, political and other current events, and company-specific factors – stock market investing MAY be the most suitable investment for your!
What is the Stock Market?
The stock market is an exchange or marketplace where people can buy and sell shares of stock in companies. When you buy a share in a company, you own a piece of the company. You want the company to make huge profits, in the hope that the shares of your stock, will increase in value, and in turn, make you more money.
Note: Why do companies issue or sell stock in the first place? Companies issue stock to raise money from investors—it’s that simple. Maybe a company needs to fund groundbreaking research, open an office in a foreign country, or hire a team of talented engineers.
How do you Earn in the Stock Market?
From Dividends. Dividends are portions of a company’s profit paid to its shareholder. Most companies give dividends yearly. You can decide to take the dividend as cash and do what you want eith it, or choose to reinvest the dividend to purchase additional stock shares. Investors who are looking forward to steady income buy income stocks.
example: For every bottle of beer sold (San Miguel), text message sent (Globe), every Chicken Joy eaten (Jollibee) – you get a cut in the company’s earnings.
From Capital Appreciation. Capital appreciation means the increase in price of stocks after a certain period. Over time, the price of the share that you own may go up or down. If the company grows and succeeds over the years, the value of your shares rises as well. When you sell the shares for more than what you bought them, then you make money.
example: In 2010, the stock of international fast-food chain Jollibee Foods Corporation (JFC) was Php 80 per share. If you bought 100 shares, it would amount to Php 8,000. Fast-forward to 2014, JFC stock price is Php 210. Your 100 shares in 2010 (Php 8,000) is already valued at Php 21,000 in 2014. If you decide, to sell them, you would have earned Php 13,000!
How do I Invest in the Stock Market?
- Choose a stockbroker. In order to buy and sell stocks, you must go through a licensed stockbroker. You may choose from traditional or online stockbrokers licensed by the Philippine Stock Exchange. Determine which one will suit your needs best.
- Open an account. Opening an account with a stockbroker is easy. You will be asked to fill out the necessary forms, submit the required documents (TIN Id, Billing Statements, etc.) and fund your account.
- Buy stocks and shares. Once you’ve chosen a company, contact your stockbroker to facilitate your purchase. How much you’re willing to invest depends on you. Develop the discipline of accumulating stocks on a regular basis.
- Monitor your investments. Keep yourself informed about the stocks you bought. Research online or read the business section of the newspaper to see if the company is doing well or not.
- Sell stocks. When the price reaches a targeted price, contact your stockbroker to facilitate the sale.
- Reinvest. Reinvest whatever profit you make, or whatever dividends you receive. This could potenitally grow both your capital investment and your earnings.
What are the Costs in Investing in the Stock Market?
Expenses are incurred when buying or selling stocks. Fees include brokers’ commissions, value added taxes, transaction fees and sales tax (for selling transactions). The fees are usually a minimal percentage of the gross trade amount.
How do you Choose which Company Stock to Buy (and Sell)?
Learning to pick stocks takes time and effort. A place to start is to buy what you know. Start with an industry or a company that’s familiar to you – like your favorite brands. But, that’s not all the information you’ll need. You have to fully understand how those companies planned to make money. Start digging into the company’s financial reports. All public companies have to release quarterly and annual reports. What you’re looking for is a consistent history of profitability and financial health.
Does all this seem like too much effort? Well if you don’t have the time then there are other ways to invest in stocks – Mutual Funds and Unit Investment Trust Funds (UITFs).
Or if you are still decided on stock investing, you can get a mentor to guide you as you start.
The Truly Rich Club
When I first opened my online brokerage account with COL Financial and funded it, I was excited to finally buy my first stocks. But, when I realized that there was a long list of companies in the stock market which I am familiar of or didn’t know about. I became confused. I didn’t know which stock to buy and at what was a reasonable price to buy it.
This is how I got started with The Truly Rich Club by Bo Sanchez. It has guided me on my journey as a newbie stock investor. Along with their inspiring newsletter and seminars on managing my money, they have a Stocks Update section in the Club (updated on a daily basis). So whenever I login to COL Financial, I simply consult my Stock Updates in Truly Rich Club page to decide which stocks to buy (or sell). Easy right? Think of it as a company researcher and stock market adviser.
The Stocks Update contains the following information:
- what stocks to buy
- the current price of the stock in the market
- the maximum price that you should buy it for
- the price that your stock should hit before you start selling your stock
- which action to take – whether to continue buying, stop buying, hold the stocks or sell the stocks
To JOIN or to know more about Truly Rich Club, CLICK HERE!
You did it! I hope you’ve learned new lessons for your investing journey. If you did place your first stock trade and know you see how easy it really is, feel free to share your experience by sending me an email or leave a comment below.
Related Post: How to Invest in Mutual Funds
Related Post: How to Invest in Unit Investment Trust Funds
Related Post: Where Can I Invest my Money?
Note: Before investing, remember that none of the returns are guaranteed, so have an emergency fund first so that you’re covered if the worst does happen to your investments. When choosing your investment portfolio, go with the one that most matches your risk appetite, time horizon and your financial goals.
photo credit: Makati, Philippines via photopin (license)
9 thoughts on “How to Invest in the Stock Market”
If I need to contact my broker every time I would like to sell or buy stocks. Isn’t it will be too late if I want to sell a stock at its high during the trading period? Or when I know the price is dropping, but still I have to call my broker before I can sell it?