I’m pretty sure most of you have at some point experienced buying or selling something, might be for necessity, for fun, or for a cause. Even kids at grade school might have also asked to sell lemonade or candies for a cause or for a special project. Main goal of buying/selling is to gain something in return, be it in cash, in kind or a promise of anything. Here’s my thought – If anyone can understand the fundamentals of a sale, anyone can also invest or trade in the Stock Market.
Around 2003 when I started to learn about investing and stock trading, only did I open an account with a stock broker on 2008. My first mistake- I wasted so much time. I didn’t know what a financial freedom means then, I only thought of finding something I am interested to do – controlled gambling. Not that I was hooked up in casinos or street gambling. I did not quit my day job, too risky for me. And mind you, I only started with an amount I was willing to lose, a small fraction of my buffer (enough to handle 6 months expenses without work). This way, even if I had to lose all, I still felt secured.
My first attempt of trading was not so bad, I bought 1,000 worth of shares of a certain mining company, and then I sold it the following day for 5% gain net of commissions and taxes. I was overwhelmed and thrilled. The rest is history. At present, my portfolio is now 230% higher -a bank couldn’t and will not ever beat. And best of all, to date, I already had a total of 4 recruits. It feels nice to educate others of what I already know, but again, I can’t claim to be an expert in this field. If I am, then I’d be glad to quit my day job (night actually) right away.
Let us know more what a stock means. Stocks are shares of ownership in a corporation. When we buy stocks of a company, we become stockholder (part owner). We can be entitled to vote in certain decisions or can be a member company board(large shares) however our ownership is relative to the number of stocks we own thus the more stocks we own the more the vote counts. Relatively, if we have more shares, we will get more dividends (earnings) from the company.
Why do we invest or trade?
First, the stock price may appreciate in value (called Capital gains), which we can sell for a profit. Say, We bought 10 shares of PLDT for P100/share. Then couple of days later, the value of the stocks appreciates to P120/share. So if we sell this, the calculation would look like this.
|June 25- Buy||(10*P100)||1,000.00|
|June 27- Sell||(10*P120)||1,200.00|
|Less: Taxes/Commision (5% apx)||10.00|
Second, the company can pay you dividend (Cash or Stocks).
- For Cash. Let’s say the company declares net income for the year worth P10,000 and you are 10 owners of the company with 100 shares each (total of 1000 outstanding shares). If the company declares the P10,000 as dividend, you will receive P1,000 (calculated as 10share/100 outstanding share x P10,000 dividend).
- If the company declared stock dividend 20% of each share. Here is the calculation
|June 25- Total Shares||1000||10.00||10,000.00|
|June 26- Dividend Declared-20%(1000*.20)||200||10.00||2,000.00|
|Total Amount of shares after dividend||1200||10||12,000.00|
How to start?
Step 1. There are tons of materials available in the internet but I suggest that you visit the Philippine Stock Exchange official site. They have also a gaming platform wherein you will get P1M virtual money and allow you to play/trade the live stock market. You can practice trading on this platform and see if you can increase your portfolio using the virtual money. Read, read, read blogs, forums, etc.
Step 2. Find the right stock broker to be able to start investing/trading. With starters, it is best to go with online Stock Brokers. A stockbroker is a person or organization authorized and licensed by the PSE and SEC to trade stocks/securities. I was loyal to Philstocks.com.ph as my broker. But here is a list of stock brokers you can choose from. I refuse to recommend any of them, mainly because they have similar commissions/rates. Second, when you’re trading/investing, you are the driver, you choose what company to buy or sell.
Accord Capital Equities Corporation
BPI Securities Corporation
First Metro Securities Brokerage Corporation
RCBC Securities, Inc.
AB Capital Securities, Inc.
Step 3. Open an account with your chosen broker. Fill up the necessary documents and submit 2 valid ID’s. The initial minimum investment you can open is usually P5,000. Once approved, you will be assigned your Log-in information (ID and Password). Log in to their portal and you can start trading. They usually have a user friendly application. Nowadays, they also have mobile applications so you can access them anytime using your smartphones or tablets.
Step 4. By now, you should be ready trading/investing. My first tip, navigate the system/application first. The broker will initially run down the system with you and teach you the basics.
With that you shall be all set. A little heads-up, think twice, then think thrice before hitting the buy button. Research more tips and strategies. That my friend will be my next post “Palengkera Trade Tips and Strategies”. Rest assure that I will not be very technical about it. J