If you’re looking to invest in the Philippines’ stock market, just follow these four simple steps:
- Learn a bit about the stock market.
- Open an online trading account.
- Pick a stock to buy.
- Buy your first stock.
Now, let me guide you through each step…
Step 1 – Learn a bit about the stock market
You don’t have to know everything before you start investing. It would be much easier and interesting to know more about it once you’ve started. Right now, all you need to learn are the basics – what it is, how it works, and how to earn from it.
What are stocks?
- Stocks are shares of publicly-listed companies.
What is a stock market?
- A stock market is where shares are issued and traded.
How to earn from the stock market?
When you buy shares of a company, you become a shareholder. Meaning, you own a small part of the business. So, if the company makes a profit, you simply earn a profit. And when the company loses money, you lose money as well.
As a shareholder, you earn in two ways – through dividends or capital appreciation.
- Dividends – this is when the company decides to share their profits to shareholders.
- Capital appreciation – this is when you buy shares at a lower price and sell them at a higher price point after a certain period of time.
Why invest in the stock market?
There are a lot of investment options available in the market today. You can invest in properties or even put up a small business. But in most cases, you would need a huge capital upfront.
Now, if you’re just starting out, the stock market can be a good option especially if you’re looking to invest long term as it is one of the most accessible, affordable, and profitable investments you can start with today.
- Higher returns – historically, stocks yield higher returns compared to other asset classes such as savings, bonds, time deposits, 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.
Philippine Stock Exchange (PSE)
In the Philippines, we have the Philippine Stock Exchange or PSE that handles all trading transactions electronically. Trading hours are from 9:30a to 3:30p, Monday to Friday.
PSE Index (PSEI)
The PSE Index or PSEI consists of the top 30 companies which serves as a benchmark for measuring the performance of the Philippines’ stock market.
Click here to view the list of companies that comprises the PSEI.
Step 2 – Open an online trading account
There are two types of stock broker, traditional and online. Your best option is to open an online trading account where you can invest directly without the hassle of placing your order over the phone with a traditional one.
Click here to view the list of online stock brokers from the PSE website.
For starters, I recommend opening an account with COL Financial. They’re one of the leading online stock brokers in the Philippines and they also provide excellent customer support especially when you’re overseas.
Using their trading platform will also get you access to a variety of Mutual Funds as they are the first fund supermarket in the Philippines.
To open an account, visit www.colfinancial.com and click “Open an Account.”
If you have P25,000, I would recommend opening a COL Plus account. This will allow you to purchase stocks not less than P8,000 to maximize trading fees.
Otherwise, just open a COL Starter account with a minimum investment amount of P5,000 only. You can always upgrade later on to access more features and other services once you’ve raised enough capital in your account.
Next, download and fill out all the forms. Provide the necessary documents and submit your application. Once approved, your account will then be created and ready for funding.
The application process can take approximately 3 to 5 working days upon submission.
Step 3 – Pick a stock to buy
As of this writing, there are a total of 270 publicly-listed companies from the Philippine Stock Exchange.
Click here to view the list of companies from the PSE Edge website.
You can do your own studies which can be financially rewarding but time-consuming or simply take advantage of COL’s research reports such as the Investment Guide or COLing the Shots to easily filter out undervalued stocks.
Based on the above, COL has recommended stocks in different sectors such as property, gaming, consumer, etc. Take note, these stocks are not guaranteed to perform well and provide positive returns.
They are most likely recommended for having strong financials and are trading below their fair value or perceived value based on their own research.
The above recommendations also provides an opportunity to diversify your stock portfolio in multiple sectors so you don’t lose everything in case a particular stock or sector does not perform well.
To use the above table, simply refer to the stocks’ market price and “Buy Below” values. If the stocks’ market price is trading below the “Buy Below” price, buy the stock.
The “Buy Below” price is usually discounted from the Fair Value or “FV” to achieve a minimum of 10 to 15% return . FV can also be referred to as the Target Price wherein you would likely consider selling the stock.
For example, if you divide MEG’s “FV” of 6.33 by 1.15 (15% discount), you’ll get 5.50 for the “Buy Below” price. So, if you had bought the stock at 5.50 and sold it at 6.33, you would have gained 15% return.
Step 4 – Buy your first stock
Once you have opened and funded your account, you can now buy your first stock.
Sign in to your account. Click on the “Trade” tab. Under “Enter Order” place your order details.
For this example, we’re going to buy Megawide Construction Corp. (MWIDE).
Make sure the following items are set correctly:
- Transaction – Buy
- Board – Main
- Term – Day
Type in the stock code “MWIDE” or choose from the drop-down list. The number of shares must be in multiples of 100 as per the board lot. Then choose the top-most price on the Ask table to get the lowest price available from the sellers.
This order will most likely be executed right away since we only need to buy 400 out of the 19,500 shares available at P22 per share.
When done, click “Preview Order” to review your order details. Make sure there’s enough fund to cover the purchase. Then enter your account password to confirm.
After placing your order, you might still be able to view or modify it by clicking on the “View/Modify Order” tab. If you can’t find anything there, then your order had already been successfully executed.
Head over to your portfolio or click the “Home” tab to view “My 5 Last Trades” on the dashboard to check the details.
And that’s all you have to do to get started. If you need to buy another stock, just follow steps 3 and 4.
In this article, you’ve learned the following:
- A bit about the stock market.
- Opening an online trading account with COL Financial.
- Picking a stock to buy using COL’s research reports.
- Buying your first stock using COL’s trading platform.
I hope this article has helped you get into the Philippines’ stock market. If you have some questions, feel free to drop me a comment below.
Thanks for reading!