Let’s take stock marketing trading in Philippine Stock Exchange (PSE) as an example. Philippine Stock Market Trading is probably one of the OFW Investment tips an OFW should closely work on and prioritize for its tremendous benefits.
Stock market in Philippines is now considered a good investment in Philippines for OFWs because workers will be ensured that all their hard work abroad will pay off and will grow more without doing a lot of physical work.
“As a former OFW, I’m trying to find ways of how can my hard-earned money earn more. I have bank deposits (savings, and time deposits), though I got to know that these are not investments.
- Ever ask yourself if you’ve been spending your money properly? Or what are you saving for? If it’s mostly because of the materialistic things you’d like to have, think again. For there are various ways that you can use this money that will beneficial for you and your long term plans in life.
- Thinking about buying a? new gadget?
- How to find the perfect trade setup?
On this article, simple steps and tips will be shared in learning the basics of stock investing that will start as a Beginner’s OFW Starting Complete Guide in the Philippine Stock Market while you’re working abroad.
1. Determining your Profile and Goals
Deciding whether you should delve in stocks isn’t as easy as blinking your eye or waking up the next morning with the sense of urgency to open account and start trading. You have to think this thoroughly and perform an assessment if you are financially and mentally ready for it.
2. List down the things you want to achieve.
- In order to have a definite mindset of the things you want to achieve, write it down to remind yourself that these are the things that will keep you motivated on going down the long process of achieving these things. May it be plans for retirement or business and maybe buying your own house and saving up for your future family, these should be written down in order for you to be aware of time and be wary of the opportunities or chances you might have been missing out because you always this thought that things can be finish tomorrow or after a week.
3. Have a financial goal
- Before getting into stocks, ask yourself, ‘What’s your financial goal?’ This is to understand why you’d invest and save money. The financial goals should be as accurate as possible for you to enable to narrow down the time you’ll need to have and the strategies you’ll have to come up with in order to achieve these things. This even starts with how you save with your monthly income, if you’ll start in stocks, how much are you willing to spend on stocks itself? How much for the daily expenses and other important matters?
- There are lots of techniques out there and how you can perfectly save up money – take the 50-20-30 rule as an example. It says that 50 should be spend on daily expenses, 20 on leisure activities, and 30 will go to your savings (e.g. retirement plans and alike).
4. Resilience on future risks
- As they say, stocks have its own small ups and downs or tremendous ups and downs which can greatly affects us in terms of our future plans with it, so upon entering into stocks, you should have prepared yourself of the possible risks by studying and learning more from those who’ve been on this field for a long time.
5. Knowing the industry you’re going to take
- As much as possible, read a lot of informational materials that will give you a hindsight of the industry that you’re going to take. Take it from the experts when it comes on giving efficient tips on what kinds of stocks are good to go and predictions on how the stock will work on a month or so.
6. Set your expectation on stock market
- Since stock market requires you to be efficient both in art and science because it requires a thorough understanding and analyzing of financial data about market performance. An instinct on what data should signify and shouldn’t be should be one of the asset skills that you should have.
7. Understanding Stocks Marketing
Stocks is known to be shares of ownership in a corporation. It’s in the stock market where buying of stocks is happening and in the Philippines, it’s PSE or Philippine Stock Exchange that handles and governs the local stock market. After successfully buying a stock from a company, this means that you’ve now become an owner or shareholder of the particular corporation and be part of the company’s growth and success, and even the losses.
8. Investing Wisely on Stocks
Investing your money on stocks sounds to be a risky and bold thing to do for the money you have saved up? But why do you think many people have taken this bold step?
- Early Investments Opportunity – Always look at the bigger picture of your life, no one would like to work until they can’t. Investing earlier will give you the chance to save up for your retirement and future plans you’ll want to have.
- Regularly Investing Opportunity – Investing regularly will also help you in having a higher chance of earning more by the time you’re ready to settle down.
9. Knowing your options
There are two types of investments that you may choose from as someone starting in this field.
- Equity index funds or exchange-traded funds – These are the funds that allow you to buy small pieces of many different stocks in one transaction. This means that when you invest in a fund, you also own small pieces of that companies.
- Individual Stocks – Targeting a specific company, it allows you to buy a a single share or a few shares with a company or corporation.
Starting on your investments
10. Open an account with a trustworthy stock broker
- To ensure that you’ll have a legitimate list of accredited stock holders, you may visit the Philippine Stock Exchange (PSE) website at www.pse.com.ph. You can open an online stock trading account starting with as low as 10k and invest in Philippine Stock Market. Instead of doing the traditional way of calling the broker to place stock orders, you can do it on your own by opening your account online.
- Choose your preferred online broker, fill out all the forms needed and together with other documents that they’ll be requiring you, visit their office and submit these to have your account opened. Did you know that you can actually start with little money as a beginner? You can invest at least ₱5,000.00 to ₱10,000.00 as a start in trading stocks in Philippines.
- After successfully opening your online trading account, you’ll have to fund your account by making an initial deposit. Remember that there’s no required amount of monthly funding for your trading account, it’s all your choice as to how much you’d like to fund it, but the fund on your account also will determine how much you can purchase on the stocks.
- There are many stock brokerages in Philippines that you can choose from. Here’s a list of some of the more popular firms that many retail investors use.
- Top 20 PSE Online Stock Broker in The Philippines
11. Choose a stock to pick
- There are various stocks to invest in, but always opt for stocks that suit your investment needs. It’s ideal to choose stocks that pay little or no dividends, but in return gives more than expected growth rates. Most starting individuals in this field opt for individual companies or invest in a mutual funds wherein the money came from several investors and placed in stocks or bonds. But since fees can be higher, you should be careful on this type of stock for you may end getting low rate of return and slow down your financial progress. Every time that you will invest in a stock, always have thorough analysis if the costs and fees of this would be beneficial and will not entirely reduce your gains.
12. Place your order and monitor your stocks
You may place your order online or have a broker or stock broker firm to do it for you. You need not to check your account every day which means you may do it on weekly or monthly basis and see how your stocks performed.
13. Start trading
- After buying and earning a profitable amount and getting around the stock market, this is the time wherein aside from buying, you may now sell the stocks you have.
- Learn about Philippine Stock Market & How to Invest
14. How long should I hold onto stocks I have?
It’s best to keep the stocks for long term, probably for five to ten years or so. If the market has a bad or good day in a month or year, don’t tempt yourself into selling your stocks because keeping it longer will bring profitable changes for your account. Nevertheless, it’s advisable if you’ll buy low cost stocks and sell them in a high pricing on systematic process monthly.
15. Keeping a Good Portfolio
16. Have an established benchmarks
- It’s vital that you are aware and you continuously keep a steady and finite benchmarks for you to measure if your stocks have been performing well in accordance to your plans and expectations. Setting a benchmark will help you in understand if the investments have been working well and if it’s worth pursuing.
17. Observe the performance of your stocks keenly
- If the stocks you’re investing on isn’t performing well and you’re definite that it would be a continuous downhill, it’s about time that you should sell it on spend your money on more profitable stocks. But always bear in mind that one to three years in stocks would be the first tough years of your journey since this is a long term investment.
18. Seek a broker, banker, or investment adviser’s help
- One of the things to keep on surviving in this field is to never stop learning and exploring stocks. Keeping either a broker, banker, or continuously seeking an investment adviser’s help will profoundly help you in choosing what stock to invest on, what should you pull off, and know how to get around the market well.
Seeing the fruitful outcome from trading in stocks may come in fast or slow, but nevertheless this requires a handful of knowledge, understanding of its pros and cons, and knowing that with great success from trading, comes great responsibility in purchasing and maintaining your stocks.
Bonus Candlestick Cheat Sheet
- SEE ALSO:
- OFW Investment Tips: Why it is Important to Invest in Gold?
- The Definitive Guide to Stock Trading & Investing in the Philippines
- Is Buying a Condo (Townships) a Good Investment in the Philippines?
- 10 New Investments in Philippines That Work GREAT
Have something to add about Investing in Stock? Share it in the comments.
Being an Overseas Filipino worker, you might have asked yourself in what ways you can have an additional income without necessarily having to exert physical effort and allot an ample amount of your time.
And rest assuredly, the best and the most convenient way is through the stock market. Why? You don’t have to exhaust yourself further just so you could add some more to the money you remit to your family back home.
All you need is a basic knowledge of how stock market works.
Now if you are an OFW with less knowledge about how stock market works, but wants to invest in the Philippine stock market, here is a complete guide, as a beginner, of the essential things you need to know about how the stock market works.
How You Make Money through the Stock Market?
- Making money through stocks starts when you buy an ownership from a real operating business.
- When you buy a share of stock, you are also buying a piece of the company. Basically, what happens is, company owners approach an investment bank which would be responsible for issuing or selling stocks to the public in an Initial Public Offering (IPO). The owners, then, would price the stock so that future investors can earn a percentage of their investment plus whatever growth their stock generates. For you to have a better overview of how you make money through the Stock Market, here is a hypothetical scenario when investing in the Philippine stock market.
Take for instance, Jollibee Foods Corporation (JFC), a fictional business who has sales of ₱10 million and a net income of ₱1 million. Now, what happens is that this corporation decides to sell their stocks for ₱100 per share since that seems affordable for interested buyers. Given that it’s ₱100 per share, then they are going to cut the company into 110,000 “pieces” or shares of stock (110,000 shares x ₱100 = 11,000,000). This also means that each “piece” or share of stock is entitled to ₱9.09 of the profit (₱1,000,000 profit ÷ 110,000 shares = ₱9.09).
This figure, ₱9.09, is what you call Basic EPS (Earnings Per Share.) In other words, when you purchase a share of Jollibee Foods Corporation, you are purchasing the right to your pro-rata profits.
Now, assuming that you decide to purchase 500 shares for ₱50,000.00, you would be purchasing ₱4,545 in annual profit plus whatever future growth (or losses) Jollibee has generated.
What You Need to Know as a Beginner in the Stock Market
1. How much can I earn from stocks?
How much you earn from stocks will gravely depend on how the board of directors and the management allocate your capital. Actually, what makes the situation indefinite is that you don’t see that ₱9.09 that belongs to you. Rather, the management have options available to them. And their decision is that which will determine the success of your holdings. These options are:
- The management sends you a cash dividend, either some portion or the entirety of your profit. This is one way for them to “return capital to shareholders.” You also have options on how you plan to use it. You can either use the money to purchase more shares or you spend it any way you wanted to.
- The management repurchases shares on the open market and then destroy them. Long term wise, this can make you a very, very rich in the long-run. Explaining this requires a lengthy discussion. If you want a thorough explanation, you can refer to some books such as “Stock Buy Backs: The Golden Egg of Shareholder Value.”
- For the future growth of the company, the management reinvests the funds by hiring more employees, building stores, increasing advertising, or any other capital expenditures that are presumed to increase profits.
- The management uses the money to build up liquid assets, or, if applicable, reduce debts, so as to strengthen the balance sheet.
As a shareholder or owner, the best option for you depends entirely on the rate of return the management can earn when they reinvest your money.
2. From what is my wealth primarily built from?
With regard to how much money you make, you should know that your wealth is built primarily from:
- An increase in share price. An increase in share price is the result of picking one, or a combination of two or more of the four available management options reiterated above. Over the long term, an increase in profit can be a result of share repurchases or business expansion, as these make each share represent greater ownership in the business.
- Dividends. Dividend is the sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves). This is what is being referred to earlier in the example mentioned previously. These dividends can be paid out to you in cash, in the form of additional shares reinvested on your behalf, or via a direct deposit into your brokerage account, checking account, or savings account.
3. What are the investment types I can choose from?
- Equities, Equity index funds or exchange-traded funds
These funds enable you to buy small pieces of many different stocks in a single transaction. These funds you can put together so as to form a diversified portfolio. By investing, you also get to own a small pieces of those companies.
- Equities, Equity index funds or exchange-traded funds
- Mutual Funds
This is applicable if you are after a certain company.
- Mutual Funds
4. When can I get the money I earned from the Philippine stock market?
In instances, such as market bubbles, you can make a profit by selling your stocks to someone more than how much the company prices it. This is one way for you to earn in the short run. Now, in instances like this, you can get the money informally depending on your agreed date with the buyer. However, in the long run, as implicitly stated earlier, the investor’s returns are dependent on the increase in share price as well as the dividends that are generated by the operations of the businesses you invested in.
5. How much money do I need so that I can start investing?
Perhaps, even before, you are already interested to learn about the stock market. However, you are intimidated by it or are apprehensive about it due to the cost of investment. But no worries, you don’t need to have hundreds of thousands or millions of pesos just so you can start.
Actually, how much money you need depends on only two things:
- Company price per share
- Number of shares you are willing to buy
Just take another instance, Jollibee Foods Corporation, the actual, tangible one. As of July 28, 2017, the price per share is ₱220. If this is something you think you can afford, then go ahead and try to purchase. However, stock markets do not allow you to buy a single share, as every company sells their share at multiple called board lot. Often times, this means 100 shares. However, in the case of Jollibee, the minimum share you can buy is 10. Therefore, 220 x 10 = ₱2,200 is the minimum amount you need in order to start investing in Jollibee.
Now if you already have the money, the next thing that you need to do is to find yourself a stock broker, who is “a professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission” .
Fortunately, in this information age, you can transact on almost everything online. So, even if you are an OFW who is there abroad, you can transact with online brokers in the Philippine Stock Exchange who would allow you to open an account with them for as low as ₱5,000. Given this little amount of money, you can use this to start participating in the Philippine stock exchange. But if you have more budget, then you can add some more.
In general, investing in the stock market is not as intimidating as it seems. Just take note that you learn the basic knowledge you need, such as knowing the best stock option that would suit the kind of investor that you are. Are you a conservative or a risky investor? There are online tests that can help you determine these things.
Be that as it may, as a beginner in the Philippine Stock exchange who’s reading all these, I’m sure there are still some things that we might have not discussed or have discussed should have elaborated further. This is understandable as the basics of investing cannot be taught in less than 2,000 words. Now, if you want us to clarify anything or if you have any more questions, feel free to leave a message below.
6. Basic terminologies
- Board lot
- – standardized number of shares defined by a stock exchange as a trading unit
- – a regulated professional individual, usually associated with a brokerage firm or
broker-dealer, who buys and sells stocks and other securities for both retail and
institutional clients, through a stock exchange or over the counter, in return for a
fee or commission
- – a sum of money paid regularly (typically quarterly) by a company to its out of its profits (or reserves).
- – generated by assets held for longer than six months.
- – the term used to describe a proportionate allocation. It is a method of assigning an amount to a fraction according to its share of the whole.
- – generated by assets held for less than six months
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