The Beginner’s Guide to the Philippine Stock Market
Due to many financial literacy programs and campaigns in the country, Pinoys are now getting more interested and curious about the stock market. You may have heard about it from your friends, your boss, or your financial adviser. It is not unusual for a person in his or her early 20s to have a background in the stock market. For those feel that they are late in jumping on the bandwagon, here’s an easy-to-understand guide on the basics of the Philippine Stock Market.
Here are a few lessons from Jeffrey Reyes, owner of Piso and Beyond. Jeff shares the GoBear advocacy of helping Filipinos make smarter financial decisions through literacy. Click here if you wish to see his version of the Complete Idiot’s Guide to the Stock Market.
What is a stock market anyway?
A stock market is simply a place where stocks are bought and sold. The goal of trading in the stock market is to buy a stock, hold it for a desired time, and then sell the stock for more than what you initially paid for it.
What are stocks?
They are units of ownership in a company. Companies sell stocks to the public for more funding to create new products, expand their business, and improve current products.
How does stock market trading work?
When you buy a stock, you own a share in the company. For example, when you buy a stock of Jollibee, you have a claim on the company’s earnings. This makes you a shareholder of Jollibee. If Jollibee’s profits go up, so does your stock price. If it falls, then the price of your stock also falls.
The rise and fall of stock prices: Is it risky?
Every investment has a risk. In the stock market, the prices of stocks rise and fall every day. For example, Jollibee’s stocks could rise today and fall tomorrow. Remember #ChickenSad? That may have caused a fall in Jollibee’s profits, hence a fall in their stock price. But what if Jollibee releases a series of marketing campaigns that will tug the heartstrings and cause you to buy more Yum burgers? Oh wait, they already did that with #KwentongJollibee. If the campaign is effective, then Jollibee’s profits will rise and so does the price of your stock.
Here’s the caveat: If you sell your stock on the day when the price of that stock is less than what you paid for it, then you lose money. The goal of investing in the stock market is buying a stock with the hopes that over the years you can sell your stock for a profit.
Can you predict when the stock prices go up or down?
Unless you have superpowers, no. That’s why most financial advisers recommend investing in the stock market for long term – that’s 10 years or more. It’s also important to make sure that you buy stocks from good and stable companies. After all, you will be sharing in the profit or loss of those companies.
I’m ready to invest in the stock market. How do I start?
Remember that signing up for an account in one of these brokers is just a first step. Learning which stocks to buy is the challenging part. Educate yourself by reading books or articles on investing online, so you can be a SMART investor. With numerous financial tools at your disposal, you can make wiser decisions with your finances.