Here are the basics on how to invest in the stock market in the Philippines for beginners. This post also includes the actual dividends from investing in blue chips and earnings from trading different stocks in the Philippine Stock Exchange (PSE).
Investing in stocks is just one way to grow our wealth. However, along with that opportunity, is also a risk of losing its value. The growth and shrinking of our investment depend on our chosen company stock to buy with our hard earn money.
To minimize the risk, we can choose to study strategies in buying and selling stocks. This can be about the fundamental analysis of the company by looking at its financial statements, and technical analysis of its stocks’ price action in the form of charts. Both types of analysis can help grow our investment if done correctly and can also reduce it if executed wrongly.
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What are Stocks and where to Buy in the Philippines?
In general term, stocks or shares refers to the portion of the company owned by an individual person or investing firm. Stocks are usually sold by private and public companies.
However, the stocks of private companies are not available to every individual and it is not traded in the stock exchange or in the PSE. On the other hand, stocks of publicly traded companies are available to everyone as long as they have funds to buy stocks through an accredited stockbroker. It is also listed on the stock exchange. Owning a stock entitles you to the company’s earnings and a portion of assets.
In the Philippines, investors and stock traders buy and sell stocks at the Philippine Stock Exchange (PSE). The latter is the national stock exchange of the country.
Types of Stocks
There are two major types of stocks. The first one is common stocks and the second is the preferred stocks. They have different degrees of ownership that comes also with advantages and disadvantages.
For example, common stock owners are allowed to vote at the shareholders’ meeting that can affect the policies and decision-making of the company. It can also receive dividends based on the company’s performance. However, common stock owners received dividends after owners of the preferred stocks received theirs. The former also received dividends depending on the companies performance.
Preferred Stocks’ owners, on the other hand, do not have the voting rights when comes to the decision-making of the company. They received dividends based on the settled amount per share and is on a regular basis. The preferred stock owners received dividends first than common shareholders.
When the company goes bankrupt or needs to be liquidated, preferred stocks holders received the proceeds first before the common stockholders received theirs.
Different Sectors of Stocks
In the Philippines, there are companies from different sectors that are publicly traded in the PSE. These sectors include but not limited to Services. Financials, Mining and Oil, Industrial, Properties, and Holdings companies.
To give you an idea, companies under the Service sector include telecommunications companies, TV networks, Education, and Airline companies. Banks are under the Financial sectors. Manufacturing companies include food and beverage processing. The utility sector covers companies that produce and distributes power and water.
Why Invest in Stock Market in the Philippines
There are pros and cons to investing in stocks. Allow me to share with you some of the common reasons that I have known.
Advantage of Investing in the Stock Market
1. Can Potentially Grow your Wealth
If done correctly, the Stock market can be a medium to grow your wealth. You can do stock trading for the short term, investing in the long term, and periodically earn dividends from stable companies.
2. Become part-owner of Publicly Listed Companies
For a small amount, You can become part-owner of your preferred companies in the Philippines. You can buy shares of Jollibee, Meralco, manila water, Ayala land, and a lot more. In the Philippines, for as low as 1000 pesos you can start buying shares of local based companies.
3. You can do diversification of your investment easily
With the stock market, It is possible to spread your eggs in different baskets. You can buy stocks of companies from different sectors. It can be stocks of power companies, real estate, food, oil and gas, utilities, and infrastructure. It is really up to you on where you want to put your hard-earned money.
4. You can beat inflation by investing in stocks
Unlike leaving your money in the bank which incurs penalties and low-interest rates. The small gains, while stored in the bank, are just eaten by inflation averaging from 3 to 5 percent year after year.
This just means that every year, your savings are losing its buying power. Investing in stocks can beat inflation if done and timed correctly and if you were able to pick the right stocks to invest in.
5. The stocks are Easy to sell
With the current technology, you can now sell your shares online through your online stockbroker. You can do it in less than a day. Unlike with real estates where it will really take a long time to find the preferred buyer at the right price.
Disadvantages of Investing in Stocks
1. The Most Volatile Compared to Other Investment Medium
This medium is the most volatile among other investments. While it is true that you can grow your wealth in a much shorter period of time utilizing it, you can also lose money if for some reason that company you chose to invest has poor performance or has made bad future decisions. The wrong decision can affect their earnings making the stakeholders dissatisfied. As a result, the stocks can go down in value due to the massive sell down of shares.
2. Takes time to learn about Stocks
You need to study the fundamentals of the company you want to invest in. Or if you decide to become a short term trader, you have to get familiar with the technicals of the charts. Or you can study both fundamentals and technicals. It is up to you. The bottom line is you need to spend time to study the stocks you want to acquire.
3. Stock value is Affected by global issues
There are many factors that can affect the value of stocks. According to wallstreet.com the value of stocks is affected by interest rates, economy, news, and a lot more. These factors can trigger panic and eventually sell down. This is related to pros #3. Since buying and selling are done online, everyone can sell their stocks easily when a piece of bad news gets into their heads.
Blue Chips Stocks in the Philippines List
When we say “Blue Chips” stocks, these are companies that have huge capital or high liquidity that is normally in Billions of Pesos. They are well managed and financially stable companies that are paying their shareholders dividends consistently. These companies are usually common household names because their products or services are most of the time utilized at home by every consumer.
For example, electricity is distributed by MERALCO with ticker MER. Our telephone numbers are services offered by Globe Incorporated with ticker GLO, and PLDT Inc with ticker TEL. They can be considered as the best stocks to buy every year.
There are numerous blue chips stocks in the Philippine stock exchange. They are spread in different sectors such as services, industrial, utilities. PSE has shared on their official website the top 30 blue chips companies in the Philippines. These are arranged in alphabetical order:
- 1. Ayala Corporation (AC)
- 2. Aboitiz Equity Ventures, Incorporated (AEV)
- 3. Alliance Global Group, Incorporated (AGI)
- 4. Ayala Land Incorporated (ALI)
- 5. Aboitiz Power Corporation (AP)
- 6. BDO Unibank Incorporated (BDO)
- 7. Bloomberry Resorts Corporation (BLOOM)
- 8. Bank of the Philippine Islands (BPI)
- 9. DMCI Holdings Incorporated (DMC)
- 10. Emperador Incorporated (EMP)
- 11. First Gen Corporation (FGEN)
- 12. Globe Telecom Incorporated (GLO)
- 13. GT Capital Holdings Incorporated (GTCAP)
- 14. International Container Terminal (ICT)
- 15. Jollibee Foods Corporation (JFC)
- 16. JG Summit Holdings Incorporated (JGS)
- 17. LT Group Incorporated (LTG)
- 18. Metropolitan Bank and Trust Company (MBT)
- 19. Megaworld Corporation (MEG)
- 20. Manila Electric Company (MER)
- 21. Metro Pacific Investments Corporation (MPI)
- 22. Puregold Price Club Incorporated (PGOLD)
- 23. Robinsons Land Corporation (RLC)
- 24. Robinsons Retail Holdings Incorporated (RRHI)
- 25. Security Bank Corporation (SECB)
- 26. SM Investments Corporation (SM)
- 27. San Miguel Corporation (SMC)
- 28. SM Prime Holdings Incorporated (SMPH)
- 29. PLDT Incorporated (TEL)
- 30. Universal Robina Corporation (URC)
How to Invest in Stock Market in the Philippines to Grow Your Wealth
In the Philippines, there are two ways to grow our money or investment when we buy stocks. This depends on our risk appetite and how big our capital is. This is by dividends and growth in the value of the stocks. Allow me to explain it from the point of views of an investor and or stock trader.
As an investor
we buy company stocks and keep it in our portfolio for a longer period of time. Our objective here is for growth or increase in price per share of stocks overtime. Aside from that, we can also receive dividends on quarterly semi-annually and annually basis depending on the performance of our chosen company. To allow our money/capital to grow faster we can reinvest the dividends by buying new stocks of the dividends paying companies.
As a stock trader
we buy stocks depending on our technical analysis skills. This is based on the price action of the company shares in the chart. We hold the stocks in a few minutes or days as long as our biases such as stop loss or target profit are not met.
Traders do not look at the name of the company. They only focus on the price action of its shares in the chart and what other technical indicators are telling them as signals for buying and selling of the positions.
There is no short selling in the Philippine stock exchange as of the moment yet. So, the only way for stock traders to earn is when the price of the stock is going up. This is unlike the other stock exchange that allows traders short selling of positions so that it is also possible to earn when the share price is going down or lowers its value.
Actual Earnings from Investing and Trading Stocks in the Philippines
There are ways to earn or make money investing and trading stocks in the Philippine stocks exchange. What I am going to show you are based on my experience as an investor and also as a stock trader.
Dividends from Blue Chip Companies
I happen to invest in some of these blue chips stocks. I would like to show you some of the dividends that my chosen stocks have earned. During these times, I use my COLFinancial online account to purchase these stocks. When the dividends are paid by the companies, Colfinancial would send me an email about the amount in peso of dividends that I received per company. I have MERALCO (MER), Manila Waters Corporation (MWC) stocks, Globe Incorporated (GLO), and PLDT Incorporated (TEL) stocks.
You might think that the numbers are small as some of the dividends did not even reach Php 1000. But we are talking about becoming an investor where we continuously buy stocks and hold it in our portfolio for many years. Over time the dividends will grow bigger up to the point that it can equal the monthly salary of an employee. That would be nice, right?
Earnings from Trading Stocks
I have also tried trading the stock market so I will show you some of the stocks I’ve traded years ago and the earnings I got from it. I used my technical analysis knowledge for me to spot these stocks. Most of these stocks are not part of the blue chips stocks in the Philippines. As you can see in the photo, the price per share of each stock is mostly affordable for common investors/traders like you and me.
Also, the holding time of these stocks is only in days. If I remember it correctly, I never hold a stock longer than 1 month.
How to Buy Stocks Online of Philippine Companies Steps for Beginners
If you want to buy stocks of companies based in the Philippines, the fastest way is to seek the service of online stock brokers. The latter will purchase the shares of choice on your behalf. Usually, they will reflect the stocks you bought on your online account with them.
There are brokers that provide research regarding what is the best stocks to buy for your investment. Other online stock brokers allow you to use their platform to buy stocks online on your own.
Step 1: Open an Online Investing / Trading Account with a Stockbroker
The Philippine stock exchange literally has hundreds of registered online stockbrokers. I’ve written a post regarding some factors to consider when selecting an online stock broker. I suggest that you read it before opening an online account.
Now, Assuming you already an account with enough funds. I suggest that you learn your online trading platform. The basic how-tos and get familiarized with it.
Step 2: Select the Stocks based on your Parameters / Objective
Define your objective when buying a stock. Is it for long term hold (investor mode) or short term hold (trader mode)?
There are many stocks to choose from. Give consideration to your capital with respect to the price per share and the board lot.
For example, your initial capital is 10,000 pesos. You won’t be able to purchase a globe GLO or PLDT TEL stocks.
Globe’s price per share is 2000 pesos and the minimum board lot is around 10 shares. So it means the minimum capital to buy shares of the telco is around PHP 20000. You are 10k short plus commission and taxes. I hope you get what I mean on this one.
Choose the correct ticker or stock code with respect to your chosen stock.
Step 3: Buy the Stock
If you are familiar with your trading platform this is going to be easy.
On your platform set the share price, and board lot. Determine the total cost of the purchase. If you have enough funds then press the buy button.
Step 4: View the Stocks in Your Portfolio
First of all, congratulations you are now a part-owner of the company.
Checking your stocks is a standard procedure to know if all of your planned quantity of shares are met. Keep it on your portfolio based on your trading or investment plan.
Step 5: Sell the Stocks
You can also sell your stocks depending on your plan and also based on your fundamental or technical analysis. Don’t buy stocks based only on hearsay.
Buying and selling stocks in the Philippines is quite easy and fast due to the technological advancement of the trading platforms. What is difficult is determining the best stocks to buy with our hard-earned capital. The reason is our investing or trading skills and knowledge will determine if our capital will grow or shrink over time.
In order for us to have an edge in the market, we need to equip ourselves with knowledge regarding when to buy or sell our stock positions. We should at least have knowledge when comes to fundamental analysis of our chosen companies’ financial documents, or technical analysis of the price action of its chart.
How to do that? Read books, attend the PSE Free stock market seminar, find a mentor, and practice what you have learned from them. Improve along the way by learning from your mistakes.
There you have it. I hope this helps you on how to buy stocks in the Philippines. I also hope that you’ve learned something from this post regarding the possible ways to earn in the stock market.