The Road to Becoming Stocks Smart
“When you’re ready, the teacher will come,” said my yoga teacher, when about two years ago, I began going to Ashtanga Yoga.
One Saturday some months ago, while my friends were busy preparing for a half marathon, I was conquering a different fear: getting to know the ropes of the stock market. It was after six months of debacles with a friend to get me into the world of stock market.
To me, all stock brokers look like Shia. :D Hehe.
“You have had stock certificates since you were a child and have been to the trading floor and have had brokers for childhood friends. What do you need a stock market class for?” asked my friend as we walked along Ayala Ave. where currently, the Makati Stock Exchange stood.
“I never really understood it, and while my mother knew all about it, my comprehension was too young then to truly understand why I should care,” I responded.
Fifteen years after my first ever stock certificate, I am finally getting to know the Philippine Stock Market, thanks to a friend, Marvin Germo, who is doing a great job in educating the Philippine market {who I believe is now ready} for the world of stocks.
As a newbie, I thought I’d share some of the stuff I learned over the weekend:
1. Companies who go into stock market sell their shares for the public to buy it. The money they raise from the IPO (Initial Public Offering) is often used for expansion projects or looking for additional financial capital.
2. A stock market is like an actual market: there are buyers and sellers, who will trade for a certain price.
3. Before thinking of all the money you can earn in the stock market, list down your goals first on why you want to earn money.
4. Make sure you’ve stashed away your emergency fund and that you’re not using it to invest. This keeps you from giving yourself mini heart stress when the stock market goes up and down.
5. There are two ways to earn from the stock market: a) Capital Appreciation – say you buy Stock A at PHP 1.00 today. When its price goes up to say, PHP 1.20 and you sell your shares, you earn PHP 0.20. The same way, you can also lose, if you buy at PHP 1.20, its price goes back to PHP 1.00 the next day and you sell.
b) Dividends. When the stocks you buy are what they call “Preferred Stocks,” the company owning the preferred stocks release dividends, usually annually. As a word of advice though, always check the track record of the company when buying preferred stocks for dividends. For preferred shares – you can choose this instead of putting annually just put cyclical or regular basis. Common shares also give dividends though.
6. A stock’s price is not dictated by the actual worth of the company. Often, it is dictated by the market’s pulse: on how much should it cost per share.
7. The Philippine Stock Exchange Index (PSEi) is the list of top 30 most active companies in the stock market. It tells one at a glance where the market is going, up or down. If you’re a newbie, best to invest in PSEi-listed companies first, according to Marvin Germo.
8.One’s reason for investing (buying a company’s stock) should be based on a grounded reasoning and strong belief that THAT company will get better.
This will help one tide over some days when the stock market fluctuates due to speculations and external factors. It is for this reason that investors should always be in the know of things. Read the news always and conduct your research well.
9. A bullish market is when there are more buyers than sellers. A bearish market is when there are more sellers than buyers. It is a simple application of the law of supply and demand.
10. There are two kinds of traders: the short term and the long-term investors. As I had discovered, while the stock market is deemed volatile {I am after all, a mutual funds kind of girl}, the stock market is a friend for the long haul. While they will NOT always behave like this, it is good to note that things do go up after a long time. DMCI for example, went up 21,000% over 10 years.
There’s so much more to the Philippine Stock Market and I, like many, is stoked to be understanding all these things. Stay tuned in this space as we go through the journey to a brighter life!
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