Investing in the stock market is one of the many ways you can grow your hard-earned money and build wealth. But before you start investing, you need to understand the basics first – what it is, how it works, and how to earn from it.
Now, there are no guarantees when it comes to investing. You may earn or lose money in the process. A lot of risks are involved and if you don’t know what you’re getting into, that’s a sure fire way to lose money.
But knowing those risks and learning how to manage them can help you succeed in your investing journey. So, let’s get started.
If you want to get started right away, here’s a quick tutorial on How to Start Investing in the Philippines’ Stock Market.
What are stocks?
Stocks are shares of ownership in a company.
What is a stock market?
A stock market is where shares are issued and traded.
How to make money in stocks?
When you buy shares of a company, you become a shareholder. Meaning, you own a small part of the business. Over time, the company may make or lose money. If the company makes a profit, you simply earn a profit. If the company loses money, you lose money as well.
As a shareholder, you earn in two ways – through dividends and capital appreciation.
- Dividends. This is when the company decides to share their profits to its shareholders.
- Capital appreciation. This is when you sell your shares at a higher price point compared to when it was bought.
Why invest in stocks?
There are a lot of investment options available in the market today. I know some people prefer to invest in properties or even put up a small business. But in most cases, this would require a huge capital upfront.
If you’re just starting out, the stock market can really be a good option especially if you’re looking to invest long term as it is one of the most profitable, accessible, and affordable investments you can start with today.
- Higher potential returns – historically, stocks yield higher returns compared to other asset classes such as savings, time deposits, bonds, and other cash/fixed-income assets.
- To beat inflation – every year, price of goods and services becomes more expensive and if you’re just saving money, you’re not actually saving but losing it.
- For retirement – instead of saving money, you’d be better off investing your hard-earned cash in the long term for higher returns.
- Liquidity – Unlike properties, you can easily sell your shares.
- Low initial investment – you can start investing for as low as P5,000.
Before you start investing
There are things you need to know and must have before investing in the stock market.
- Investment goal. Having a goal will tell you exactly the type of investment you need and the time you have to stay committed for it. The stock market is a high-risk investment and is best suited for long term investors. If you have a short term goal, then the stock market isn’t for you.
- Money. You need money to invest. Without it, you won’t be able to open an account and buy shares of companies.
To start investing, you need a stock brokerage account. Once you’ve opened an account, you can start buying shares of companies.
- How to Choose a Stock Broker
- How to Open an Online Trading Account with COL Financial
- How to Know What Stock to Buy
- How to Buy a Stock using COL’s Trading Platform
If you’re looking for an easy and convenient way to own stocks over time.
Here are some investing tips for you.
- How to Maximize Trading Fees
- How to Buy a Stock when the Market is Closed
- Using the PSE Board Lot Table
Other ways to invest in stocks
If you don’t have time to study the market, here’s another way to invest in stocks.
Other things you may want to know.
If you want to become a better investor, learn the basics of fundamental and technical analysis. These tools will help you evaluate companies so you know what stock to buy and when to enter or exit the market.
Here are two free resources from PinoyInvestor.