Frequently Asked Questions About Philippine Stock Market

Are you excited to invest in the stock market? I hope so.

But don’t rush in where the fools rush in. I know that stories about stock investment success from a friend could trigger excitement in you that causes you to rush into stock market investing.  Before you part with your hard-earned money, take time to get to know what you are about to go into.

Here are some of the frequently asked questions about Philippine Stock Market


 

Frequent Questions About Stocks

What are stocks?

Stocks are shares of ownership in a company. When you buy stocks of a publicly listed company, you become part owner of that company.

For example, if google has 100 shares and you bought 1 share, then you become a 1% owner of the company.

In actual, a company can have as many as several millions of stock shares.

 

What is a stock market?

The stock market is a place where stocks are bought and sold.

You can picture out yourself going to the public market but instead of buying meat, chicken or beef, you only buy or sell stock of shares.

In the Philippines, stock shares are publicly traded through the Philippine Stock Exchange, Inc  (PSE).

 

Why invest in the stock market

  • History has proven that investing in the stocks of reputable and strong companies gives you better earnings in your investment. See below for the typical earnings from Philippine stock market.

Money to buy stocks

 

Other reasons why stock market is a good investment vehicle: 

  • Ownership of the stocks entitles you to profit sharing via dividend.
  •  Liquidity of funds – A stock market investor can sell his investment quickly compared to rental property or businesses.
  • Small capital – You need a 100,000 to have your time deposits earn some interests while an individual can start investing in stock market for as low as p5,000.00.
  • Earn through capital appreciation (your stock price goes up and you sell it for a profit)

 

Why do they ring the bell during stock market opening and closing?

The practice traces back its roots to New York Stock Exchange (NYSE). The opening and closing bells mark the beginning and the end of each trading day.

In the earlier days of NYSE, the start and stop trading signal wasn’t always a bell. The original signal was a gavel, but during the late 1800s, the NYSE decided to switch the gavel for a gong to signal the day’s beginning and end.

After the NYSE changed to its present location, the gong was switched to the bell format that we see today.

 

What is a bull market?

When the stock market goes up, it is commonly called a bull market. According to legend, the name bull was used since the direction of the horn is up. The horn points upward.

 

What is a bear market?

A bear market is a term used to describe a stock market that goes down. The name bear market was used since when the bear attacks, the bear usually strikes with his claw in a downward direction.

 

What is capital appreciation?

Capital or price appreciation is an increase in the market price of your stock over time brought about by an increase in its potential value and the demand to buy its shares. The faster a company can grow, the faster its price can appreciate.

 

What are stock dividends?

Dividends are your share in the profits of the companies you owned. Dividends are computed based on the number of shares you have. The higher the number of share, the bigger is your dividends.

 

What are the different dividends given by publicly listed companies?

  • Cash dividends – dividend given to share holders in the form of cash. For example, if PLDT gives a 1.00 dividend per share and you own 100 shares, you get 100.00 dividend.
  • Stock dividends – additional shares given to shareholders at no cost. Usually stock dividend is computed as percentage of the actual shares you own. For example, you own 100 shares of Megaworld and the company is giving 30% stock dividend. Your new total shares would be 130 shares.

 

Is there any risk involved in investing?

Yes, like most investment, stock market investing has risk. But like any other investments, the more you understand stock investment, the better you are at managing risk.

 

How do I start investing in the stock market? 

Getting started in the stock market is a simple process.

1. Choose your stockbroker or trading participant.

You can’t just go to PSE and buy shares or sell shares of the company. You need an accredited PSE stock broker to do the transaction for you. In return, they get paid for every buying and selling transaction you do.

Personally, I use COL financial. This stock broker is highly recommended by brother Bo to all truly rich club members. I’ve been using COL financial for several years and I am satisfied by their service.

 

2. Open a trading account with your stockbroker of choice.

3. Place your buy or sell order either online or through a phone call to your stockbroker.

4. Monitor and keep track of your investments.

 

What is the minimum amount of initial investment?

You can start investing with as low as 5,000. You can open an account with COL financial with that amount.

 

What is a board lot?

The PSE has a Board Lot table which shows the minimum number of shares that can be bought or sold given a certain price range.

 

How do I open an account with COL?

Here is the list of requirements and the step by step guide to open an account with COL financial.

 

How can an Overseas Filipino open a trading account?

You can check our step by step guide on how to open with COL financial. It has a section that discusses on how OFW can open account with COL financial. It has also instruction on how OFW can fund their account with COL financial without going home to the Philippines.

Yes, you can start investing in the Philippine Stock market even if you are working abroad. Click here to  download guide.

 

How do I place an order?

The conventional way of placing an order to buy or sell is through a phone call to your stockbroker. However, with COL financial, you just login to a secured page using your login and password. Then you can buy and sell stocks wherever you are in the world. All you need is an internet connection.

Note: You get password and login after your account is approved by COL financial.

 

What is bid price and ask price?

A stock can have a market price, bid price and ask price. The market price is the existing price of the stock in the market. Bid price which is usually lower than the market price is the price a buyer is willing to pay for him to buy the share of stocks. Ask price which is usually higher than the market price is the price a seller is willing to accept for him to sell his share of stock.

 

What is spread?

Spread which is also known as ask-bid spread is the amount difference between the bid price and the ask price.

 

What is the best investment strategy?

  • Buy only stocks of reputable company. Everything starts with that.
  • Invest regularly. It is advisable to buy stocks monthly
  • Invest long term

 

What is my personal advice to pinoy stock investors?

  • Open an account and start investing in stocks as soon as possible. The younger you are when you started investing in stock market, the bigger is your stock portfolio when you reach the age of retirement.  The BEST time to start investing in stock market is YESTERDAY!
  • Join truly rich club and follow the Truly Rich Club system.

Got questions, comments or clarifications about stock market or about Truly Rich Club? Just add them in the comment section below. I’ll do my best to help you.

(10) comments

Add Your Reply