One of the outperforming equities or stocks exchange in the world today is the Philippine stock exchange market. The PSE has been consistently good for the past few years, and yet you find only a small fraction of the people taking advantage of the opportunity. This is because a good number of them don’t know where and how to get started.
To excel in this type of investment, it is important you have knowledge and secrets on how to invest in the Philippine stock market. While there is no rulebook outlining what to do and stocks to invest in, in this article I intend to provide you with as much you need to know about trading stocks in the PSE market.
Stock investment is no doubt a worthy move for those looking for not just high returns, but low initial involvement/investment. All over the world, people are making millions from buying and selling stocks. This is not to discard/deny the fact that a good number of people have lost money as well – either due to bad luck, ignorance, or both.
Like every investment, stocks come with risk; at the end of the day, your success will depend on how much of this risk is minimized.
- 1 Why Invest In Stocks?
- 2 Two Approaches To Stock Investment
- 3 Steps On How To Invest On PSE
- 4 Charges and Fees Associated With Investing In PSE
- 5 Final Words On How To Invest In Philippine Stock Exchange
Why Invest In Stocks?
According to history, stock investments have always proven to be a better type of investment, compared to fixed income instruments such as government securities, time deposits, and others.
But, before we talk about investing in any stock markets, it is important to first of all, understand what the stock market is all about and the benefits that come with it.
The stock market refers to shares or pieces of company ownership sold or bought. Buying shares of a company makes you a part-owner of that company. This part-ownership qualifies to take part in the earnings as well as the loss of the company. This means that when the company makes profits and grows; your share grows as well. But, when the company experiences loss, your shares are not left out.
Better Tax Treatment/ Tax Deferment
Taxes and inflation are usually a concern with a lot of investments, owing to the negative effects. These two factors usually eat up on long term investment gains. With equity or stock investment, investors are given a better treatment which in the long run minimizes the effect and impact of tax and inflation.
Although not all, most stocks allow for what is known as a dividend, as extra income potential. This is usually a token reward provided annually to shareholders of a company’s equity, and this usually originates from the net profits of the company. Dividends can be paid out in the form of cash or additional stock.
One of the miracles we have in the financial world today has been compound interest. This concept during the course of a given time helps grow money faster than ever. The longer you’re able to hold your shares, the more and faster your money grows.
Two Approaches To Stock Investment
Short-term – Day Trading
This is for those interested in quick gains. This option allows you to buy into your choice shares and trade daily. It will involve learning the nooks and crannies of trading. Get a foundational knowledge of technical analysis and getting real-time price updates, especially as a beginner.
Long-term – Diversifying The Portfolio
This approach involves even more research and study. You want to look out for companies that show signs of doing well in the long-term – say in the nest 5 – 10 years. Once found, you must be willing to push in funds to sleep for a long time without bother. The longer you’re able to hold, the higher your chances at more gains.
Steps On How To Invest On PSE
1. Profile Assessment
The first thing you need to do towards investing in stock is usually to do a study on your own profile; this is to help you know how much to invest. You want to have a close look into your status financially and your career stage, as a lot will depend on it.
2. Amount to Invest
One of the benefits of stocks is that you can begin with small amounts to some degree. For instance, some stockbrokers allow you to start investing with as low as ₱5,000.
But, investing with more funds means a minimized risk through diversifying your holdings. Still, you don’t want to put in too much. The rule of thumb here is not to invest what you cannot afford to lose.
3. Open an Account
This is where you search for a reputable broker to open an account with. For a list of accredited and reputable stockholders, you can visit the official website of the Philippine Stock Exchange (PSE).
General requirements for opening an account include two valid IDs, proof of billing, and specimen signature cards.
4. Choice of Stock
This is where you choose what stock you want to invest in. This will need you to study particular stocks. Again, one resource that proves useful for this is the PSE website.
You can also check the websites of the firms of your interest, or read books (click here for Bo Sanchez FREE ebook) and reports on stock investing. An alternative for those who studying particular stocks will be a bother, is to buy into a mutual fund, as they are composed of a wide variety of stocks.
5. Place your order
After all, has been said and done, it’s time to place your order. This can be done in a lot of ways. Depending on your chosen broker, you can place your order by a call or text or even via the internet for online brokers. On completion of your order, you will be sent a confirmation invoice that captures the transaction details.
Transactions are usually settled three days after the trade is done for traditional brokers. But, it takes a day for online brokers to settle transactions.
Charges and Fees Associated With Investing In PSE
It is no doubt that fees are an integral part of any financial system. So, it is important that one gets familiar with the charges and fees that come with trading stocks as they will have an impact on the returns. With different brokers come different calculations, but the whole idea is the same.
PSE Transaction Fee
The Philippine Stock Exchanges is the regulatory body in charge of stock trading and there’s usually a fee accrued to them. This is generally a charge of 0.005% of the transaction amount’s gross trade.
As the name implies, this is a fee that only applies when an investor sells his/her stocks. Whether the said transaction resulted in a gain or not, the seller pays a rate of 0.5% of the amount of gross sales.
Brokers usually charge a fee for using their service, otherwise known as trading fees. This is basically for any investment advice or for executing orders on securities sold or purchased. This is also inclusive of VAT.
While the rate may vary, this fee is charged anytime an investor makes a trade, whether or not there is any profit made.
Securities Clearing Corporation of the Philippines (SCCP) Fee
Also known as clearing Fee, the SCCP fee as an ancillary of the PSE helps in facilitating the settlement and clearing of transactions relating to stocks. This fee is usually 0.01% of any transaction.
Final Words On How To Invest In Philippine Stock Exchange
Gone are the days when stocks investment is considered for the affluent alone. This is one opportunity anybody can leverage on. It does not need to have a huge amount of cash in to get started. Particularly with the PSE, it is quite affordable, and with minimal scandal involved. With just ₱2,500 or ₱5,000 depending on the broker, you can buy a sizeable amount of stocks/shares.
At first, investing in stocks may seem daunting and complicated. With time, you will gradually get past the learning curve and begin building a secure financial wealth as you continue improving your portfolio by buying and selling shares.
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