Guide for Filipinos: How to Invest In the Philippine Stock Market
Planning to invest in the Philippine stock market? We have a simple and easy-to-read guide and tutorial — intended primarily for newbie investors who are thinking of taking that first step to become a stock trader or stock investor!
This article is a 5-minute read on the basics of stock investing. We’re sure that after reading this article, you’ll have a fundamental grasp of stock market investing.
For a more comprehensive tutorial about stocks, check out our FREE educational materials below!
FREE: Comprehensive Guide to Stock Investing for Filipinos
- Part 1: What are Stocks?
- Part 2: How are profits made in the stock market?
- Part 3: How much do I need to invest in the stock market?
- Part 4: What are the types of stock trading orders?
- Part 5: How do I start trading stocks?
- Part 6: What are Price Trading Bands (Price Floor and Price Ceiling)?
- Part 7: Ex-Date, Ex-Dividend Date, Record Date
- Part 8: What are Stock Rights?
- Part 9: When is the best time to sell your stocks?
- Part 10: Meanings of Stock Recommendations: Outperform, Market Perform, Overweight, Underweight
- Part 11: How to Use the PSE Board Lot Table
- Part 12: All about Dividends in Stock Investing
Scroll below for our short, 5-minute primer on stock investing!
What are stocks?
Stocks represent your share of ownership in a corporation. As a stockholder, you are considered a part-owner of the company.
As part-owner, this means you have various rights in the company — including the right to vote the company’s Board members, the right to receive dividends, the right to inspect the books and financial records of the company, and the right to take part in the residual distribution of income, among others.
How do I make money from stocks?
There are at least three (3) ways to profit in stock market investing.
- The most common form of income is Capital Gains or Price Appreciation. This is simply the difference between the current price of a stock and the price you initially bought it.
If, for example, you bought a PLDT (stock code: TEL) share for P1,500 last week and today, it is trading at P1,700, the price difference of P200 (that’s P1,700 minus P1,500) represents your capital gain from owning the PLDT stock. Capital gains are considered “paper losses” until you’ve sold the stock. Once sold, you get to realize and book “actual or real profits”.
2. Another form of income in stocks is Dividend. This represents the distribution of earnings of the company to its shareholders. Dividends may be in the form of cash or stock. If you want to learn more about dividends, read through our Guide on Dividends in Stock Investing.
3. Another way to earn money is by receiving stock rights. Stock rights are options given to current shareholders to buy additional shares of the company’s stock at a price lower than the market price. Since the set price is lower than the market price, a shareholder can already sell these stocks in the stock market for instant profits.
How much do I need to start investing?
The correct answer to this question is that it depends on the minimum amount needed trade, as specified in a Board Lot.
The PSE Board Lot table shows the minimum number of shares that can be bought or sold for a given stock and the minimum price increment required for each trade. Here’s a guide on How to read and use the PSE Board Lot table.
However, you cannot buy or sell PSE stocks without a broker, so that means you need to open a trading account with them to start investing in the stock market. At present, some brokers merely require P5,000 to open an account. So technically, you can start stock investing for as low as P5,000 in the Philippines.
Where do I find a stock broker?
There are dozens of active and duly licensed stock brokerage firms in the Philippines. Want to see which ones are preferred by PinoyMoneyTalk members?
Here are the results of a poll asking about the best online stockbrokers in the Philippines.
Do I need to pay taxes when I invest in stocks?
When you make a buy or sell transaction in the PSE, you are automatically charged VAT and stock transaction taxes for every trade. That means there is no need anymore to pay separate income tax or capital gains tax for your stock investments.
For a sample computation of the fees and taxes paid when buying and selling stocks, click this link.
How much should stock prices rise so that I’ll earn despite the fees?
Because there are fees and taxes charged to you when you buy or sell stocks, make sure you consider these charges when computing the price to sell your stock. The so-called “price breakeven point” will depend on the broker’s commission fee.
For a sample 0.25% broker’s commission (charged typically by online stockbrokers), the stock price should increase by at least 1.09% so that you can break even considering the costs and fees charged to you. (See sample computation of fees and charges in PSE stock transactions.)
After selling my stocks, when can I receive cash?
Cash proceeds from sale of stocks are usually credited to your account after three (3) working days.
This means you will have to wait 3 days before the cash is credited to your account before you can request for a withdrawal. Some brokers, however, allow you to execute new buy trades using those proceeds without the need for clearing.
Are stock investments safe or guaranteed?
Like any typical investment, stock investing carries with it risk, or in other words, the possibility that you will lose money. To reiterate, yes, it is possible to lose your money in stock investing.
Also unlike bank deposits, stocks are not covered by the Philippine Deposit Insurance Corp. (PDIC). Stockbrokers or the companies you invested in will not and cannot make a guarantee that you will earn money from stock trading. So educate yourself before you venture into stock trading!
We hope this short tutorial has given you basic information about investing in stocks. If you need more a detailed or comprehensive guide, check out our free tutorials in the links above.
Happy smart investing!
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