Start Investing in the Philippine Stock Market after reading this!
The common misconception of investing in the stock market is difficult and that you needed vast knowledge to invest. But in this guide I will share with you how you can invest in the stock market with a minimal amount of time, a minimal amount of knowledge but will gain what the stock market has to give.
The Philippine Stock Market
The stock market is where companies enlist publicly to seek funding from the public. It is here where you can buy a stock or a share of a company and become a shareholder of these companies and enjoy the capital appreciation if the stock price goes higher and dividends if the company is giving out a dividend.
Here in the Philippines, the stock market is regulated by the Philippines Stocks Exchange (PSE). All the companies listed should comply with the rules specified by PSE.
How to buy and sell a stock?
You can only buy and sell stock through a stockbroker. Thus you need to open an account from them to transact in the stock market. There are 2 different types of broker. They are the traditional and online brokers. The traditional are usually cheaper in terms of commission and fees while the online brokers offer convenience and platform to freely buy and sell stocks yourself.
The Stock Market Index
Currently, there are more than three hundred companies listed in the Philippines. As a measurement or representation of the overall market performance, all the companies are represented by thirty (30) big companies. Their combination in stock market performance is called Index or the Philippines Stock Exchange Index (PSEi). The index members companies are the leading players in the Philippines Economy like for example Jollibee (JFC), VBanco de Oro (BDO), Bank of the Philippine Island (BPI) GLOBE Telecomms (GLOBE), Philippine Long Distance Telecomm (PLDT) and many others.
Investing in ETF
You already know the stock market. You already know about the index. You already know about stock brokers.
It’s time to invest!
Let me introduce to you the Exchange-traded funds or ETF. Basically, ETF is like a mutual fund which is a pooled fund but can be traded at the stock market and treated like stocks when you buy and sell. If this so, then the performance of an ETF depends on what type of investment its following. Here in the Philippines, there is only one ETF and that is the First Metro Exchange Traded Fund (FMETF). This ETF is following the performance of the Philippines Stock Exchange Index. So, whatever returns of the overall market it is supposedly the same with the ETF. The beauty of investing in ETF is that you don’t need research, no need to analyze financial data. You just buy the whole market and you’re perfectly diversified in all industries. Here’s a detailed article on how to invest in ETF from grit.ph.
The Power of Cost Averaging
You can make money in the stock market whatever happens. This is a bold claim and may sound like a scam right. But fear not, this is totally legit as long as you are discipline is using the cost averaging method. Below is a sample image on how the cost averaging works.
You just need to buy the stock at a fixed time interval and a fixed amount of cash. That’s it and you will make money from the stock market. It sounds so simple that it’s difficult to believe. It is easy to do but the discipline and temperament needed are crucial here. Some brokers offer automated buy so this is not a problem as long as there is money on your broking account.
This article outlines how you can take advantage of the performance of the stock market. On average, the stock market’s average gain is around 8-12% return per year. That’s very far from the interest rates you are having from your bank. My recommendation if you will do this is that make sure that the money you will be investing in is something that you will not use for a longer period of time. The stock market has it’s up and down and when it’s down and you pulled out your investment, there is a possibility of a loss. In the long run, the stock market direction is going up, that is why I suggest investing in the long term.
Do you have stock market experience or strategy you want to share? Comment below and share your ideas.