Question: “Hi Arnel, I’ve been following your blog. I’m very keen on starting with forex or stock trading but I don’t know where to start” – Jen Sow, Butuan City
Hi Jen, thank you for following my blog. I received lot of questions like this and I already addressed this on my previous blog Getting Started in the Stock Market. With so much interest, many are also asking how a person can possibly earn in putting his money in stocks.
Investing in stocks is like building a business, you have a certain goal beforehand. By this decision, you would be able to gauge yourself on how much money you can risk. There are many ways to earn in the market but they are divided in 3 different time frame: short-term, midterm, and long-term. Below are the list of approaches that you can do, depending on your risk tolerance and your financial goals.
1. Peso-Cost Averaging.
In a nutshell, peso cost averaging is an investing strategy where you invest the same amount of money in a regular schedule over long period of time. It is also best done concentrating your portfolio on the blue-chip stocks or the top 30 listed companies in the stocks exchange.
Here are the list of PSE index:
The Philippine Stock Exchange carefully selects 30 companies for the PSEI following strict and expert criteria.
Right as of this date, in alphabetical order, they are the following:
- Ayala Corp. (AC)
- Aboitiz Equity Ventures, Inc. (AEV)
- Alliance Global Group, Inc. (AGI)
- Ayala Land, Inc. (ALI)
- Aboitiz Power Corp. (AP)
- BDO Unibank, Inc. (BDO)
- Bank of the Philippine Islands (BPI)
- DMCI Holdings, Inc. (DMC)
- Energy Development Corp. (EDC)
- First Gen Corp. (FGEN)
- Globe Telecom, Inc. (GLO)
- GT Capital Holdings, Inc. (GTCAP)
- International container Terminal Services, Inc. (ICT)
- Jollibee Foods Corp. (JFC)
- JG Summit Holdings, Inc. (JGS)
- LT Group, Inc. (LTG)
- Metropolitan Bank & Trust Company (MBT)
- Megaworld Corp. (MEG)
- Manila Electric Company (MER)
- Metro Pacific Investments Corp. (MPI)
- Petron Corp. (PCOR)
- Puregold Price Club Inc. (PGOLD)
- Robinsons Land Corp. (RLC)
- Semirara Mining and Power Corp. (SCC)
- Security Bank Corp. (SECB)
- SM Investments Corp. (SM)
- San Miguel Corp. (SMC)
- SM Prime Holdings, Inc. (SMPH)
- PLDT (TEL)
- Universal Robina Corp. (URC)
This is long-term in nature and the secret to applying this strategy is really the discipline and consistency. Here “time” is your greatest ally and as you go along the way you would make the compounding interests do wonders for you.
2. Buy and Hold.
The greatest challenge to investing is the discipline to do it over and over again. To some, this will not work for them. This is another way of putting your money to stock market if you will have a big amount of money. Say you have 200,000 you can put it on a promising and growing stocks and leave it there for couple of years depending on your goals. The longer it is, the higher the return.
I wrote an inspiring story of Mr. Lambert Aquino, a former baker in Saudi, who’s able to grow his 500,000 investments to almost 5 Million. You can read it on my previous blog A Former OFW to a Multi-Millionaire.
3. Investing in Dividend-Players.
While the company is growing, it will give dividends to the shareholders like you from time to time. You are always part of the its success. This can be added to your investment portfolio aside from the price appreciation that you can have on a certain stock. Your money is literally growing while you are sleeping and working hard for you.
Here are the list of top dividend companies:
|Rank||Ticker||Short Name||Market Cap (PhP)||Last Price (PhP)||Dividend Yield %||Dividend Payout Ratio %||Dividend Frequency|
|2||SGI||SOLID GROUP INC||2,185,850,368||1.20||8.33||N/A||Irregular|
|5||HOUSE||8990 HOLDINGS IN||41,164,210,176||7.46||6.70||44.70||Semi-annual|
|7||GMA7||GMA NETWORK INC||21,140,985,856||6.29||6.36||91.94||Annual|
|11||BLFI||BDO LEASING & FI||8,152,531,968||3.77||5.31||77.84||Annual|
|21||LOTO||PACIFIC ONLINE S||5,113,492,480||11.48||3.48||26.09||Irregular|
|23||LFM||LIBERTY FLOUR MI||6,449,999,872||43.00||3.41||317.80||Irregular|
Note: All ratio/yield numbers are of annual frequency.
4. Buying from “IPO”
IPO means the very first day that a company declares that their company will be listed in the market and shares will be made available to the public (so that both you and me can avail). It will be put on headlines and news so people will be made aware. This is also great opportunity for bargain-hunter to possibly take advantage since price is just very cheap. I knew traders who are trading IPO and sold their shares once the value appreciates and have hit their target price. It is also announced that by this year, there will be possible 8 IPO to happen. So save up and wait for these events. Read more here: PSE targes 8 IPO for 2017
4. Scalp Trading (minutes-hours)
According to Investopedia, scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy, because one large loss could eliminate the many small gains that the trader has worked to obtain.
Time frame is very short and executed only on minutes and hours duration. Professional traders are doing it especially those who are very good at it and with time-tested trading system…and of course with fast internet connection!
5. Day Trading (within the day)
Day trading is the act of buying and selling a stock within the same day. Day traders seek to make profits by leveraging large amounts of capital to take advantage of small price movements in highly liquid stocks . If you have traded this stock last February 6,2017, your 100,000 would be already up by 45% on a single day.
6. Swing Trading (days-weeks)
A style of trading that attempts to capture gains in a stock within one to four days.Swing traders use technical analysis to look for stocks with short-term price momentum. These traders aren’t interested in the fundamental or intrinsic value of stocks, but rather in their price trends and patterns.
I identify myself as a swing trader since I am also trading to maximize profit in my trading portfolio. I would suggest that you would do the same. Once you get the hang of investing in long-term investing, you can open a separate account for trading purposes. In my own experience, I was able to maximize gain and set aside some amount to reinvest it for long-term stocks.
This is one of my stocks that I traded this year. When I saw that it gives a reversal pattern, I was able to ride the trend and sold it when the short-term trend weakens.
7. Position Trading (weeks-months)
A position trader is a type of stock trader who holds a position for the long term (from weeks-months to years). Long-term traders are not concerned with short-term fluctuations because they believe that their long-term investment horizons will smooth these out. Some traders preferred this type of strategy since you will just ride with the trend. Trend is your friend as they say it. It is best to use moving average and sell it when it breaks the trend line.