As of this writing,the Stock Market is trending down and it gets me more excited to encourage others to start buying shares of the best companies in the country.
What is a Stock Market? How to possibly earn in stocks? According to investopedia,The stock market is the market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets.
Dont take it too hard, parang palengke lang ho yan, dito shares lang ng companies ang benebenta!
Stocks have been proven to outperform all other asset classes in terms of return and it is able to beat the inflation rate because of it’s awesome compounding interest. Inflation means, the depreciating value of your money. Before ang isang kilo ng bigas ay 10 pesos, ngayon ay 50 pesos na! That is the effect of the inflation! If you will just put your money in the bank, it will soon depreciate because of low interest rate.
There are two ways that you can earn when investing in stocks:
- Capital Appreciation (Ang Pera mo tumaas ang halaga)
- Dividend (Incentive/Bonus)
Capital appreciation is a rise in the value of an asset based on a rise in market price. For example if you have bought Stock A for 5 pesos per share then after a day it went up to 7 pesos,it means you have 2 pesos profit in one day. Lets say, you bought 2000 shares, you have already 4,000 profit in one day. How about for 10 years,you were able to buy 100,000 shares or more and the value of the stock keep on going up,Viola! Do your own calculation and you will be amazed.
On the other hand, Dividend means a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).It is some form of bonus provided to the shareholders and is disclosed ahead of time. You can check it in the website of Philippine Stocks Exchange for full disclosure.
Easy Steps to Start as a Newbie Investor:
1.Get familiar with the Industry (Aral muna bago invest)
Learning a new thing is quite overwhelming!Take it from my experience…I invested in stocks for quite a while, When I first started,Wala akong malapitan. Lahat ng kakilala ko no idea about it. I went to the bank,binentahan lang ako ng insurance! Gusto ko talaga matuto. So I invested in books. Every sahod, I paid myself first with a book. One book at a time. Instead of going to parties, I just went to quiet place and read,read,and read.
In my previous blog Best Pinoy Books for Investor-Wannabes,I have reviews of books that have helped me a lot as a newbie. They are all available in the bookstores or kung wala ka pang pambili, tambay ka na lang dun and scan na lang muna. Sarap tumambay sa bookstore!
Aside from reading books,you need to find a strong support group,a community…I created a community group called “Investambayan” where we are exchanging ideas about personal finance,business,and investments for free. Same mindset,same goals in life. Same feathers flock together ika nga! As soon as you will start spending less, you might lose your spender friends!
These are my recommended FB Community Group that you can maximize and you can learn for free:
You can also go search some good YouTube videos which are simple and easy to understand:
2. Get out of Debt
In my previous blog post: The Borrower’s Way, I wrote the dangers and pitfalls in getting into bad debts. In your life as an aspiring investor, get away with it. If you are into debts right now, make a way to resolve it. It is very hard to invest while “Baon sa Utang”!
Buy in cash,stay away from debt. When you buy it in cash it is yours. Statistics shows that you tend to spend more if you buy things in credit especially if you use your credit card. Do not fall into the 12 months zero interest scheme. Credit card is the most emotionless and painless way of spending money. But once the billing statement comes “Ouch!” the pain sets in.
Millennials are the main credit card users.Once you misuse it or abuse it, you are putting yourself to the bondage of debt.
3.Build your Emergency Fund.
According to investopedia,An emergency fund is an account used to set aside funds needed in the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major expense.It is encouraged to build a fund worth of 3-6 months of your monthly expenses before jumping into investing.
In building your emergency fund,you will get close with saving and budgeting. When I was building mine,I did the 70-30 principle… When I receive an income from any source, I set aside 30% for saving…Pinagkakasyahan ko ang 70% sa lahat ng mga gastos. I simplified my life, avoided unnecessary expenses, mag jeep instead mag taxi, magluluto sa bahay instead of eating in McDo. That was a humbling season. I got bored of the long wait, so I did a radical move, I made it 50-50 which is 50% for the Emergency Fund and only 50% only for all of my budget and expenses. It was hard at first but things got easier as I continued…Being single helps a lot!
I have a separate blog post on Practical Tipid Tips for Every Pinoy which you can apply as well in your daily life.It is important to save little by little. Every coin counts in building your Emergency Fund.
4.Do your homework.Assess your goals.
You need to make a checklist or a questionnaire like this;
- Are my debts already paid?
- Do I have a stable emergency fund?
- When do I plan to retire?
- Can I invest my money for the period of 10 years?
- Am I willing to wait that long?
- Am I willing to lose money and take the risks?
- Do I prefer to invest quick return of investment?
(If you are on the conservative side, and you cant risk on losing more money, long term investing can work for you. However, if you are the type of person who is a risk-taker, you can go with short-term investing or trading)
5.Choose the best Stockbroker
Considering that you have accomplished all the needed things before jump starting,you can now apply for a Stockbroker account…Aws! Sounds technical? Before turning your eyeball, let me make it simple. Stock Market is like our typical market, you buy and they sell; and it needs a “tindero” so that you can buy some.You can’t directly buy in stocks exchange!
There are 2 types of Stock brokers: a live stock broker and online stock broker.Live stockbrokers are the traditional ones. They take calls and process the transactions via phone. If you have watched Pursuits of Happiness by Will Smith,you will understand what it’s like.
Online stockbroker is the newest form of brokerage firm. It’s fast,reliable,and affordable. The transaction charges are also lesser than traditional stockbroker. I encouraged you to just go with the online broker like what I did. Once you will have your account number and password. You are ready to go. It is just like logging into your social media account.
Now, you have a bigger picture of what a stock broker is.You have to decide first your preference. With regards to the charges,there’s very slight differences with the charges between one broker to another. For the sake of consistency, I will use my stock broker which is Colfinancial. Just a disclaimer, I am not connected to Colfinacial aside from being them as my stock broker…
So for starter, the capital investment is 5,000, for trading account 25,000,for premium 1 Million.No registration fee. Your initial investment is already your buying power and you can cash it out anytime during market hours. Just be sure to not do online transaction below 500 pesos because you’ll pay 10 pesos each transaction.
Colfinancial Basic Requirements:
- Bank account for cash out purposes
- Photocopy of one valid government issued ID (Photo and Signature must be cleared)
- Downloaded forms from their website
For instance that you don’t have the requirements above, you can bring the following;
- Billing Statement no later than 3 months
- Credit card under your name
- Valid government issued ID same address on filled out on the forms
- Copy of certificate of employment
- Billing statement of your immediate relative with the same address filled out on the form
You can mail the requirements for people outside Metro Manila and for Metro Manila residents, you can submit it front counter or they can pick it up for you. Once the requirements are submitted, please wait for few days for the account number.You will receive an email to have your account activate,if you will receive the confirmation, you are ready to go. Mine was approved after 3 hours!
Here are the most popular broker in the Philippines:
I suggest if you have already your bank account lets say Metro bank,you just open platform with them which is First Metro Sec or if you have BPI then you can open BPI trade so that you can take advantage the convenience of their online banking. Just be sure when you are getting stockbroker, one of your friends is using it so that you can get a direct feedback!
6.Choose your Strategy (Long-term vs. Short-term)
Since right now, you already have full access of your account, you can now start to buy stocks that you want. Just be aware of the board lot (minimum shares) needed ng company.
I would suggest that you will start with peso-cost averaging where you regularly top up an amount to the stocks you are investing and invest in blue chip stocks (Big and stable Companies) or Dividend Players. You can also take advantage of the available research and studies of your stockbroker. You will not go wrong if you go with long term investing. In my portfolio, I go with 70% long term and 30% trading.
My trading profit is also reinvested to buy stocks for long term.So technically, nothing has been cash out yet. My goal is very clear that I will get retire after 20 years and that my investment strategies revolve with it. I hope you will do that too… makes me sad, that some of my colleagues are getting into stocks but after few months, they are pulling out their funds at a loss because they did not have the right strategy. So have a right strategy, you’ll soon get the hang of it.