The Philippine Stock Exchange
The Philippine Stock Market or Philippines Stock Exchange is a place where shares of publicly listed companies and bonds are issued and traded.
Either through exchanges or over-the-counter markets.
To simply put it means being bought and sold.
It is also known as the equity market.
Providing Philippine stock exchange listed companies with access to new capital in exchange for giving stock market investors a share of ownership in the company.
Photo: Source: https://www.flickr.com/photos/acullador/2225741250
It has become one of the most vital components of a free-market economy.
The Philippines Stock Exchange makes it possible for ordinary people like you and me to grow small initial amount of money into large ones.
And even to make a person wealthy without the risk of starting his own business or making the sacrifices that often comes with a high-paying career.
Why would a company want to share its assets and earnings with the general public?
Because it needs the money.
Companies only have two ways to raise money to cover start-up costs or expand the business:
It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).
Companies sell stock to get money to;
•Research better ways to make things
•Create new products
•Improve the products they have
•Hire more employees
•Enlarge or modernize their buildings
Stocks are units of ownership in a company.
How The Stock Market Works?
The stock market lets investors take part in the financial successes of the companies they bought shares from.
As a Shareholder, you can now take part in the company’s growth and success through stock Price Appreciation.
If the company’s profits go up, you “share” in those profits.
Capital or price appreciation is an increase in the market price of your stock over time brought about by an increase in its potential value and the demand to buy its shares.
The faster a company can grow, the faster its price can appreciate.
Profitable companies can also issue dividends, whether in cash or more shares of stock as a means for shareholders to share in their distributed profits.
You must also remember that you can lose money if the companies whose stocks you hold loses money.
If you sold your stock on a day when the price of that stock falls below the price you paid for it, you would lose money.
The goal is to buy a company/s stock, hold it for a time, and then sell the stock for more than you paid for it.
The duration you would hold a company stock really depends on you.
Our mentor in TrulyRichClub suggest around 10-20 years.
Stocks are long-term investments, though there are no guarantees.
There are two main sections in stock market.
The primary market where new issues are first sold through initial public offerings or IPO to the general public.
Institutional investors typically buy most of these shares from investment banks.
All succeeding trading goes on in the secondary market where participants include both institutional and individual investors.
Buying and selling
Just like any market, there are buyers and sellers of stocks.
All buy and sell orders go through traders or brokers, whose job it is to match orders and get the best possible price for buyer and seller.
The price at which you want to buy the shares is known as the bid price and the price at which a seller wants to sell the shares is known as the offer price.
Why Do You Need To Invest in the Stock Markets?
Traders and investors continue to trade a company’s stock after the IPO because the perceived value of company changes over time.
History has proven time and again that investing in quality stocks can provide greater returns than most investment instruments available today.
Photo: https://en.wikipedia.org/wiki/S%26P_500_Index
This offers you the best chance in achieving your financial goals and gives you the ability to later enjoy the benefits of your money working for you.
Anyone who tries to predict which stock will rise or fall, and when, often find it difficult.
Which is why many investors choose to buy a basket of stocks and hold them for the long-term.
The track record of the stock market also shows that a good basket of stocks climb more often than decline.
Reducing risk over the long-term.
Another reason why stocks can outperform other asset classes is because it can compound the value of your investment.
Companies can reinvest the profits they make to generate even more profit.
Moreover any dividends you receive can also be used to buy more shares and thereby growing your value as well.
How to invest in stock market?
Is it just a coincidence that most wealthy people also invest in the stock market?
While you can make a fortune investing in stocks you also have the risks of losing your hard earned money.
If you’re absolutely brand-new to stock market investing, spend as much time as you can reading about the stock market and the larger economy.
Get some basic knowledge about it first.
Read some basic stock market investing books .
You must at least know what a stock is, to succeed in this.
But, it is important to start with a solid understanding of how stock market investment works.
“Warren Buffett said it before with derivatives, ‘If it’s too hard to understand, maybe I shouldn’t invest in it.”
If you want to try investing in stocks, set aside a small percentage of your portfolio — and be willing to lose it all.
You should determine your tolerance for risk.
Risk tolerance is a function of two variables: your ability to take risks and your willingness to do so.
As my mentor always tell me, invest only the amount you are willing to lose. A good sleep in always better than any amount of returns.
No matter what, it should be an amount of money that you don’t need to achieve your goals.
Once you’ve got a nice nest egg started, you should have a mentor, that can give you financial advice that’s in your best financial interest, ahead of their own.
In his recent TrulyRichClub Stock update, my mentor Bo Sanchez has this to say;
“I just want you to know that my personal stock market earnings will always be smaller than your
stock market earnings.
Here’s why: I’ve imposed a rule on myself.
I will only follow my own recommendations one week after I recommend it.
Reason? So I don’t take advantage of my position. I want to be a person of integrity.
You see, it’s very easy to manipulate and earn from my recommendations. Some stock market gurus do it:
Before they recommend to their followers to buy a particular stock, they already bought it at the lowest price.
And before they tell their followers to sell, they already sold it at the highest price.I won’t do that.
Even in my heart, you will always come first.
Money is not the most important thing in the world.
Love is.
And I like it that way.”
Do I believe it? Until I prove otherwise then YES.
After getting a basic knowledge about the stock market and what it can do for you, the next important thing to do is setting your financial goals.
As a beginner investor, before starting to invest in the stock market you must first establish your goals and have a clear investment plan.
You must have a clear understanding on why you want to invest in the first place. In other words, where would you like to be financially, and how much do you have to invest to get there?
Successful stock market investing also means that you hold for the long term, five to ten years or preferably longer. And to invest regularly and systematically.
Don’t be tempted to sell when you see your portfolio going down, I have done this before when I was new to stock market investing and before I met my mentor TrulyRichClub.
This is also means avoiding to sell when you see your stocks going up, unless it reaches your target price. In TrulyRichClub, we have already set a buy below price, and target price.
How to pick the best stock to buy now for your long term investment goal?
I have always been fascinated by the stock market and how people create wealth from stocks.
I even remember when I was a fresh graduate in college and heard that one of our site inspector is investing in the stock market.
I heard my colleague saying he is just doing in until 12 noon and earning a good money out of it.
I have never heard of stock market again from that time until almost 10 years later.
I was working abroad that time and my Indian Supervisor was investing in the Indian and US stock market.
It again pick my interest and start asking my Supervisor about it which he willingly teach me along with my co workers.
The first thing he teaches us was learn about the stock market and how to pick a stock to invest on.
There are thousands of stocks trading strategy out there currently and many new investors-myself included get lost while trying to pick the most profitable stocks to include in their portfolios.
What factors affect stock?
Which is the best industry to invest in?
How many stocks of each company should I buy?.
These are some of the most difficult questions that I had to answer before even thinking of investing my money in the stock market.
Volatility versus stability
My search for these answers led to important insights and which guides my investment decisions in the stock market to date.
Firstly, what makes stock a good investment option over stock B.
Most finance websites, books and financial investors will outline factors like company’s profitability, future expectations of the company, financial ratio’s as the main determining factors in making investment decision when dealing with stocks.
The truth is that only two features determine whether a stock is a good option or not; volatility or stability.
Remember you make money in the stock market when you buy a stock at a lower price and sell it when the price increases, hence how do you make money from a stock that is not volatile?.
This strategy works perfectly for investors who have specific goals that they hope to achieve in the stock market.
For instance, are you investing for retirement or are you simply looking to make some extra money.
If you want to invest for retirement, then a stable stock is the best option for you since the risk-factor is least as fluctuation in price is smaller.
(If you want to learn how to invest in the Philippine stock for the long term, but don’t know how to start, TrulyRichClub of Bo Sanchez can help you.)
But, if you want to buy stock, hold for a short while and sell them when price increases, then a volatile stock is the best option for you.
Intrinsic value
Another popular strategy on how to pick a stock is by looking at its intrinsic value .
Although I found this strategy complicated at first, it is an inevitable concept for anyone who wants to succeed in the stock market.
Financial investors talk of the book value of a stock and the market value, what do these terms mean to an ordinary investor?.
Simply, a stock can be undervalued or overvalued such that its book value and the prevailing market price differ.
Warren Buffet is one billionaire who has popularized this strategy leading to a important conclusion that every stock trader should know:
-If the price to book value is less or equal to two, the expected return on the stock is estimated to be 14% annually but,so if the price to book value of a stock is greater than or equal to two, then the estimated return is 2.4% annually.
In simple terms, you are better off buying an undervalued stock and this has worked for me in many stocks.
PEG ratio
PEG is used to explain the price of a stock in relation to the growth rate of a company and this makes this one of the popular Stock-Picking Strategies particularly with experienced analysts.
One of the first lessons I learned about stock is that the growth rate of a company is a leading determinant while picking stocks.
Is the company a startup, growing or scaling for heights?
The reason for this is that the stocks of a company reflect the true performance of a company and when a company is experiencing growth, this growth is reflected in its stock price, similarly a company experiencing declining growth will exhibit a declining stock price.
For this reason, an investor is better positioned to make money if you invest in a growing company as opposed to aging company.
Although their stock price may not be as attractive currently, just hold on to them a few more years and you will be smiling to the bank.
There are many Stock-Picking Strategies that serve as a guideline to any investor in the stock market and these are simply a few.
If you are an aspiring investor, conduct extensive research, talk to stock brokers and read widely about stocks before investing.
Price to Book less than or equal to 2 produced a +14.0% annual return (6.6% better than average)
Price to Book greater than 2 produced a +2.4% annual return (5.0% worse than average) –
See more at: Zacks.com
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