Guide to Investing in the Stock Market 2022

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Important Terms to Remember

Before we begin, let’s establish the definitions of some important terms you must remember if you want to understand how the stock market works and how you can invest in it.

1. Stock Market

Let’s start with a term we’ve mentioned several times already. Stock market. The stock market contains places where both the buyer and the seller can meet to exchange what is called equity shares of a public company.

Buying a share means buying partial ownership of a company. An equity share to be specific gives the shareholder the right to vote on the company’s decisions and is entitled to receive a certain amount of profit.

A stock market is just like a regular market. However, instead of selling poultry, fruits, and vegetables, the stock market sells stocks or shares of different companies.

2. Broker

As an investor, you can either buy or sell stock. A broker, then, is someone who buys or sells stock on behalf of you, the investor. If you were a singer, think of a broker as your agent.

There are tons of broker companies you can make use of. Most people prefer online brokers as they are cheaper and make it easier for you to place online orders.

There are other brokers, however, such as the discount broker and the broker that charges a regular amount.

Your broker should be able to help you buy or sell stocks and walk you through the process of opening necessary accounts, speaking to companies, etc.

3. Performance Indicator

When you’re investing, you want to make sure that you can track the progress of your investment. This will help you figure out if you made a good or bad investment. That’s what the performance indicator is for. There are 5 key performance indicators.

These are revenue growth, revenue per client, profit margin, client retention rate, and customer satisfaction. These 5 will help you track your investment and see how well or badly it did.

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How does the Philippine stock market work?

The Philippine stock market works like any other. The corporation in charge of the Philippine stock market is called the Philippine Stock Exchange or PSE. Once you buy or invest in stock through PSE, you’re able to become a shareholder and are now a part-owner of that company.

There are over 300 publicly listed companies on the Philippine Stock Exchange from which you can buy your stock or invest in. You can buy or invest in stock by investing with stock or money.

When you invest in a company, you’re able to earn in 2 ways. The first way is a dividend. When companies earn a profit, you being the equity shareholder will have the right to a dividend or a certain amount of that profit.

This can be given to you in the form of cash, shares, products, etc. The second way you can earn money from investing in a good and growing company is through capital gain. What people usually do is buy stock for low prices and sell it when those prices soar or increase in the future. The profit they get from selling those shares is capital gain.

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5 Different Types of Stock to Invest In

1. Common Stock

Common stock is what most people invest in. Common stock is the type of stock in which you get partial ownership of a company. If the company you invested in gets dissolved, you’re able to receive a share of any of the remaining assets.

2. Large-cap Stock

Large-cap stocks are stocks with market capitalizations of around PHP 520 billion or more. Market capitalization is the total worth of the shares of a company. The bigger the company, the bigger the market capitalization. Thus, investing in large-cap stocks is often thought of as conservative and safer as you already know that they are large companies with a large profit.

3. Domestic Stock

Aside from their value, stock can also be categorized by location. Therefore, as the name suggests, domestic stock is stock coming from domestic companies. Their official headquarters is found within the country. The opposite of this stock is an international stock where the stock comes from international companies.

4. Growth Stock

Growth stock, although risky, is a type of stock that has potentially large returns. However, this stock is the embodiment of “great risk, great reward”. Although companies whose stock is categorized as a growth stock are usually large companies, they are also companies with strong competitors.

5. Dividend Stock

Another common type of stock is dividend stock. As mentioned above, when investing, you usually get two things out of it: dividends or capital gain. In this case, dividend stock is the type of stock where you gain dividends.

This means that the company you’re investing in will make dividend payments regularly if they continue to grow and earn profit. The bigger the profit and share, the bigger the dividend.

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3 Pros of Investing in Stocks

Now that we’ve established some terms and helped you understand how the stock market works, why should you invest in it? Here are 3 pros of investing in the stock market in the Philippines.

1. If done right, you’ll be able to earn passive income.

Earning passive income can be done. Building wealth can be done if you invest well. If you’ve invested in a stock that’s lasted over long periods of time and that’s been able to grow and give you some money in the process, you can either keep taking dividends or capital gain from the company or sell your shares for more than you bought them for.

Investing right doesn’t take a genius. You don’t need a degree in finance. All you have to have is a good head on your shoulders, some sound advice, patience, and solid research.

2. It’s easy to buy and invest.

Buying stock isn’t as hard as you think it is. There are some steps to it but it’s generally quite simple. The gist of it is finding a company you want to invest in, contacting a broker if you’re interested, and buying the shares you want. For a more comprehensive guide to doing this, keep reading.

3. You don’t need lots of money to start.

Let’s get rid of this notion that to invest in something, you need to be a millionaire because you don’t. Think of it as shopping for bags. There are cheap bags and expensive ones. If you’re gunning to stay within a certain budget, you can always opt for cheap bags. Expensive bags aren’t your only option.

Similarly, you can buy affordable shares of a certain company instead of expensive ones. Working with a good broker will help you achieve this if you’re still unsure.

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3 Cons of Investing in Stocks

Although investing in the stock market in the Philippines does have its pros, it also has drawbacks you must be aware of. What are the drawbacks of investing in the Philippine stock market?

1. It’s incredibly risky.

Stocks can be incredibly volatile and risky. One minute, they’re worth millions of pesos. In the next, they’re worth thousands instead. The value of the stock market goes up and crashes down so quickly. You have to be smart about where you invest your money and how much you’re investing. Make sure to do things deliberately. Never do something out of panic and fear.

2. You’ll need to do lots of research.

Investing will require tons of research. First, you’ll need to know how to invest properly and even then, you still might lose money. You’ll also have to research the company you’re thinking of investing in. The research will take time and patience.

After all, large amounts of money aren’t something you just spend spontaneously. You have to think about it and be sure of your decision.

3. It takes time.

Most people go into investing in the Philippine stock market thinking they’ll be millionaires overnight. This is not true. Earning large amounts of money from investing will take time. It’s a whole process. You must have patience if your goal is to fully live off of your investments.

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Steps to Investing in the Philippine Stock Market

If you’re doing your research right now, you’ve probably looked up how to invest in the Philippine stock market. There will be tons of search results, enough search results that it would be too overwhelming. Not to worry. This comprehensive guide will give you the answers you need. If you’ve decided to invest, here’s what you should do.

1. Build your profile and list your goals.

The first step you’ll need to take is to establish things. By building your profile, we mean answering relevant questions such as how much money you’re willing to spend or if you can invest in stocks.

Build your profile and list down what you can spend, how much you’ll be able to afford, and the industries and companies you can invest in given your budget. Don’t forget to list down your goals. What do you want to achieve?

2. Understand the stock market.

Again, research is a vital part of stock market investing. The first thing you should aim to understand is the stock market. How does it work? How do you properly invest in something? How can you make sure that you’re earning more money than you are spending or losing? Make sure to understand the stock market and ask all the relevant questions.

3. Figure out which industry you want to invest in.

Third, figure out where you want to invest. Which industry do you want to buy stocks from? This will help you narrow down the companies you’ll buy stocks from and invest in. There are tons of industries. These include but aren’t limited to the clothing industry, gadgets, cooking, etc.

4. Create your account.

Once you’ve figured the first three steps out, you can create your account. You can do this with a stockbroker. We’ll list down the top brokers below for reference. Create an account on the Philippine Stock Exchange website.

This is the link: https://www.pse.com.ph/. This is the website where you’ll be choosing companies to buy stocks from, ordering stocks, etc. Start your investment journey here.

5. Choose the stock you’d like to buy.

You can now start choosing the stock you’d like to buy. This website will have tons of options to choose from. Choose wisely. Make sure to choose the stock that suits you and your goals.

6. Buy the stocks.

Once you’ve chosen, you can finally buy them. You can accomplish this or ask your stock broker to. This can be easily done through the Philippine Stock Exchange website.

7. Trade.

If you so choose, you can start trading. Think of this as investing with stocks instead of money. Once your stocks’ prices have risen, you can sell them for prices greater than what you bought them for.

8. Keep track of the performance.

Don’t forget to track the performance of your stock. This can be done through key performance indicators. You can also do this by checking your account and seeing how your stocks have performed. The website will show you the statistics. You don’t have to check every day. You can check once a week if you so choose.

Top Brokers in the Philippines

Stock market investing has never been easy. If you’ve decided to work with trustworthy brokers, here are 3 top brokers in the Philippines you can consider. They’ll help you figure out how to invest in the stock market.

1. First Metro Sec

First Metro Sec is a stockbroker company owned by the Metrobank group. The accompanying app, First Metro Sec Pro, is an online trading platform available for those wanting to invest in the Philippine stock market.

2. Philstocks

Another great broker that’s been receiving good reviews is Philstocks. Here, you can create an online trading account alongside your PSE website account.

3. BPI Trade

Much like the other brokers, you can also consider BPI Trade. If you want to expand and not limit yourself to the Philippine Stock Exchange, BPI Trade is a great broker you can associate yourself with. Every company listed is trustworthy and legitimate.

Read more: Top 15 Franchise Business in the Philippines

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Conclusion

With the sheer amount of search results you’ve probably gotten from Google, you’re probably overwhelmed. We’ve compiled all of that information into this article. After all, stock market investing is tricky. You’ll need all the help you can get.

We hope that this article has helped you figure out how to invest in the stock market. Start your passive income journey. You might be the next Warren Buffet.