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How to Invest in the Stock Market in the Philippines

How to Invest in the Stock Market in the Philippines

Did you know for as low as P1,000 “every Juan” can start investing in the stock market?

Curious, serious, but don’t know where or how to start? Here’s a simple guide on how to start investing in the Philippines.

As a beginner, the secret is to be teachable, curious, and serious to learn. Along the way, you’ll know if it’s for you.

Read more to know the pros and cons and the benefits, too.

Why invest in the stock market?

Stocks are the shares of ownership in a corporation. You get to be a shareholder of a company if you buy stocks listed in the Philippine Stocks Exchange (PSE).

Let’s say you buy stocks from Jollibee, MegaWorld, and SM Investment Corp. You become a shareholder of those companies. In other words, you become a co-owner of the company. So, why invest? As the company grows, then your shares also grow and receive profits. But if they experience losses, you experience them, too.

Stocks offer the most growth potential compared to short-term bonds or other investments. The rates are higher than the rates that most banks offer on an annual basis. So, if you’re doing it long-term, your money grows for long-term.

For example, the gross interest rate per annum from banks today ranges from 0.10% to 0.20% as of 2019. If you deposit your money let’s stay in LandBank as ATM Savings, you get:

Minimum Initial Deposit PHP 500.00
Minimum MADB Requirement PHP 500.00
Minimum Balance to Earn Interest PHP 2,000.00
Gross Interest Rate Per Annum 0.10%

If you start investing in stocks, you can gain more than that and even have a 30% if you’re into day to day trading. You can manage to grow your investment portfolio every year at 8%, and for long-term in stocks.

A safe estimate, though, and of course, better than 0.10%.

Two approaches in investing—short-term vs long-term

Day trading and quick gains (for short-term)

If you want quick gains, you can open an account online on COL Financial. You can start buying the stocks that you believe in most and trade daily. As a beginner, you’ll have to learn the basics of technical analysis, get real-time updates on prices. It would be best if you learned the nooks and crannies of trading.

Buy stocks and diversify the portfolio (for long-term)

Another approach is to study, research, and more research. Research before buying the stocks from companies you think will do well for the long-term. Let’s say 5 to 10 years from now.

Long-term means you are willing to let your hard-earned money to “sleep” for that long.

The longer you hold them, the better the gains. But again, you need to understand that investing in the stock market involves risk.

You may want to start buying blue-chip stocks. These stocks have higher liquidity and are easy to trade. They are not accompanied by high-risks and are considered safe investments compared to other stocks.

Hint: Think of the basic needs: food, homes, electricity, banks. More on blue-chip companies on our next blog.

How can you make money in stocks?

1. Capital Appreciation

Each stock has a corresponding price. Capital appreciation happens when the price of your stock increases. It’s the difference between the price you paid when you both your shared and the current market price.

For example, if you buy stocks from Company A at P200.00 After three days, the price went up to P230.00 then your capital appreciation is P30.00. The realised gain of P30.00 only happens when you sell at P230.00 If you hold it, let’s say after 30 days, then it went up for about 270.00, your capital gain is P70.00.

If the price decreases, then you sell it at P200.00, you have no gains.

2. Dividends

Corporations issue dividends to shareholders. These dividends represent the earnings of the company to be shared, either via cash or additional shares of stocks.

How to Invest in the Stock Market

Ready to invest? You can get started in this simplified 4-step processes

There are hundreds of licensed brokers accredited by PSE. You can choose the type of service you want based on your convenience and preference.

1. Choose your broker

2. Online (COL Financial, First Metro, and Phil Stocks)

The online stock brokers directly communicate with the customers online. Clients execute the orders, and they have direct access to the market’s information. COLF has been receiving great reviews as the best and easy to use the online platform as a stockbroker. You can start funding your account for as low as P1,000.00 as of this writing.

how to open a stock market broker account col3. Traditional (Use a licensed broker or salesman to handle account)

These are assigned licensed salespeople to handle your account, and they take orders via phone call.

4. Open your stock market brokerage account

You can avail COL Financial’s entry-level account at P1,000. You can download the forms here. Fill up the forms and attached with the requirements and send them over via mail. If you want quick verification of documents and approval, you can drop by at their office in Ortigas.

5. Fund your account

You can fund your account via online banking. Once approved, COL will provide the bank details so you can fund your account. You’re given a grace period of three months to fund your account for activation.

You can either fund your account via bank deposit or personally deposit the money to your broker’s office.

6. Place your order: buy or sell, via online or phone call to your stockbroker

Again before you buy or sell, you may want to read more on the companies you want to buy stocks from. For starters, you can read The Intelligent Investor by Benjamin Graham and Increase your Financial I.Q. by Robert Kiyosaki.

For beginners, you can buy stocks on a regular schedule with the same amount of fund. Do this if you’re going to invest for long-term. It’s the Peso-Cost average where you grow your money in the long run.

7. Monitor or track your investments

Investing is an ongoing process as you may want to track and monitor the progress of your stocks. If you choose the online stock brokerage like COL, you can log in to their website. You can access all the information and data you need.

But wait there’s more!

What are the risks involved in stocks?

In any investments, risks always exist. It’s a matter of how much money are you willing to risk. Think for long-term gains, instead of instant gratification.

First, you don’t have any control over the prices of stocks in the market. One day you may have gained 50% from one blue-chip company, and the next day you lose 30% from losses.

Second, prices are always volatile. They can go up and down. There’s the risk of a banking crisis and recession similar to 2008-2009. Moreover, if this will occur, a massive chance of a global recession can crash the market.

Third, the markets also experience corrections and crashes.

Last but not least, political and economic concerns may affect the markets. You don’t have control over the markets. For example, the peso value and stocks rose when President Duterte claimed his presidential win in May 2016.

 

Investing in stocks is never risk-free. But if you start young and early, you get to enjoy the growth of your money if you’re going to do it for the long-term. Always stay curious, be a learner, and explore as much as you can as you invest.