The Philippine stock market boomed after many years of struggles. As 2012 ended, it had reached its remarkable peak which is 33% higher from the closing year of 2011. And the numbers continued to rise. In the middle of this year, on April 6, 2015, the PSE Composite hits the 8,000 mark — several paces higher than the 5,800 closing mark it experienced at the end of year 2012. The 6,000 mark was reached on January 7, 2013 and the 7,000 mark was surpassed in the middle of that year.
With these remarkable improvements, many investors were attracted to do business in the Philippine market.
What are Stocks?Stocks are also called as equities or equity securities. They serve as evidence that you own a fraction in the total business entities. When one has shares, he is called as shareholder or stockholder. The percentage is measured depending on the number of shares you own in the company. For instance, when you own 2,000 shares from a 100,000-share company, your ownership interest is 2%.
Private institutions and individuals invest in the Philippine Stock Exchange or PSE, the organization that provides facilities for the buy and sell of securities. Each investor has a unique reason for making an investment; such as amplifying their savings or wanting to earn from trading as their bread and butter. However, in this competitive arena, not all investors take the Philippine stock market seriously. You can only determine it when a serious investor takes a hold of his shares on a long-term basis.
In the Philippine Stock Exchange, there are different kinds of stocks that an investor can buy or sell. Each one has unique features and advantages. Let’s check them out:
- Common stocks – When you buy common stocks, you can have control over the management and ownership of the company. It gives you the privilege to have voting rights as well as dividends. Common stocks are classified into two. These are the Class A and Class B. The former is only reserved for the Filipinos while the latter is open to all nationalities. Moreover, both classes can experience the same benefits, including the dividends.
- Preferred stocks – In the preferred stocks, a fixed minimum amount of dividends is given to the holders. It is provided depending on the percentage of stock per value or in peso.
- Convertible preferred stocks – These kinds of stocks provide an option for the holder to convert his preferred shares into a fixed number of common shares. However, a provision also exists that a company can force such conversion.
- Cumulative preferred stocks – There are instances that a company may encounter financial crisis. With this, they will likely suspend the dividend payments to the holders. However, if the company resumes payment, the preferred shareholders should receive it first before the common stockholders.
The Minimum Investment
The amount of investment differs from one stock to another since the market price and the amount of shares to own also differ. For instance, the market price of a particular stock is PHP 50.00 and the minimum shares are 100. With this, you will simply have to multiply PHP 50.00 with 100 shares to come up with PHP 5000.00 as your investment.
Where and When to Buy or Sell Stocks
In this competitive arena, knowledge about the “ins” and “outs” of stock is paramount. So when you have decide to buy or sell stocks, then the stock market is the place where you can make trades. Additionally, trading is usually done electronically. It is linked with other trading systems; therefore, all orders can be viewed.
Since the PSE operates in the Philippine stock market, trading usually happens between 9:30 AM to 12:00 noon. There are no trades held during Saturdays and Sundays.
How to Buy and Sell Stocks
During trading, there is always the potential for the trade to be successful or fail. Since the latter is a bitter option, it is important that an investor knows how to do the process in the stock market. So how are you going to buy and sell stocks?
- Stockbroker selection. Before you go into any action, make sure that the broker or person is a member of the PSE; this can be found in the PSE membership department. Once you have selected the most qualified one, then you will earn fruitful results in the long run. The broker renders efficient services to you. These will include trade executions, making trade reports, give advice about stock selection, and many more.
- Brokerage account. By opening a brokerage account after the selection, you are now allowed to engage in stock transactions such as buying and selling shares.
- Buy and sell through your broker. You can now place your orders with the details (number of shares to buy or sell, price, what stock to buy or sell) to your contact person or trader. Afterwards, he will execute the tasks.
- Transaction settlement. Transactions are usually settled with book-entry. The cash and shares are electronically transferred to the brokerage account.
Making Money in the Stock Market
You can gain your profits in two ways. The first one is through dividends while the other one is by capital gains. As for the former, it refers to the payment that the company periodically pays from the profits gained. It can be given in two ways: in cash or in stock dividends.
On the other hand, capital gains refer to the stocks’ increased in value where the investor gains high profit after his stocks are sold. For instance, stock that is bought for PHP 50.00 has increased its value to PHP 55.00. When the investor sells his 100 shares, he will earn PHP 5,500.00 instead of PHP 5,000.00
Investing on stocks predisposes an investor to financial loss. With this, an investor should know how to limit the risks probability and/ or minimizes loss. Therefore, stop making stock transactions, especially when you have reached your bearable maximum level of loss. In this manner, you can allot money in other important things.
Indeed, the Philippine stock market is at its peak. However, one should not disregard the possibility of losing some of his finances. Hence, it is only right to say that one should have a good foundation/knowledge about the stock market to fully optimize the earnings and/ or minimize loss.