GUIDE: Five tips to start investing in the Philippine stock market

There are several investments even an ordinary Juan can put their money into like savings accounts, pooled funds, insurance policies, and the stock market.

And with expectation that the Philippine economy would grow by seven to eight percent this year, especially with cheaper oil prices, excess cash could be used to take advantage of these investment instruments.

Out of these four, trading stocks could prove to be the one that gives you the highest returns.

But when it comes to stock trading, there is no single rulebook that will tell you what you should do or where you should invest in.

Here are some tips from financial gurus interviewed by GMA News Online for newbies to stock trading.

1. Know your investment goal

It is important to know where you will be using your money in the future, First Grade Finance Inc. managing director Astro del Castillo said.

"Whenever I talk to an audience not familiar with financial markets, tinatanong natin kung ano ang investment goal nila before going to any form of investment," he said.

Do you plan to have an extra source of income? Do you plan to buy a car or a house in a few years' time? Or are you saving up for retirement?

Because knowing your goals will help you choose which form of investment you need – whether that's the stock market, time deposit, insurance or fixed-rate instruments, del Castillo said.

So entering the stock market should be a long-term goal, financial consultant and stock market trader Marvin Germo said.

"Basically, they have to make sure they're investing for the long term, like more than 10 years because there's a learning curve," he said.

Germo authored "Stock Smarts," which teaches the basics of trading in the stock market, and regularly blogs about financial freedom.
 

2. Know what the stock market is

The stock market allows you to buy shares of companies, under normal circumstances, ordinary people would not have access to, Germo said.

"The stock market gives you the opportunity to buy in companies, parang nakikipag-partner ka sa mga malalaking negosyo, like SM, GMA, Jollibee," he said.

Companies list – that is, they sell portions of the corporation – on the Philippine Stock Exchange to raise capital, instead of borrowing from financial institutions or draining its cash flow.

This makes you part-owner of a big Philippine company with a good track record.

Now that you've familiarized yourself with the stock market, the learning does not stop there.

"In stock trading, you have to allocate time to study more for this kind of investment. You have to educate yourself, attend trainings and seminars so that you could be properly guided because stock is not an easy form of investment," del Castillo said.
 

3. Know your risk profile

Are you conservative investor or a risk-taker?

Your investment strategy should reflect on the stock you are buying, Germo said.

"May stocks na volatile na mas malaki potential to go higher pero malaki din ang potential bumagsak. May stocks naman na habang umaakyat yung market, steady lang pero pag bumagsak ang market, maliit lang din ang pagbaba," he explained.

One way of knowing your risk profile is to attend stock trading seminars or training.

Del Castillo noted there are a number of brokerage firms or financial gurus that offer free seminars and workshops for stock trading.

"If you attend workshops, usually they guide you and give you a recommended list of stocks to invest in if you're a conservative, mid-risk or high-risk type of investor," he said.
 

4. Set aside money when going into stocks

While trading stocks is one investment that could give you the highest returns, there are no guarantees that there will be returns all the time.

That is why a potential stock market investor should set aside money for that, Germo said.

"It should also be separate money, money na hindi gagmitin pang araw-araw. When you're starting, hindi siya yung pera na aasahan mo," he said.

The PSE said an investor would need at least the minimum amount of investment of P5,000 to open a trading account.

Now that you have the money to invest, it is now time for you to choose a stockbroker or a trading participant where you will open an account with.

According to the PSE, there are over 100 licensed stockbrokers, and your choice depends on the type of service you need, traditional (orders are done via phone call) or online.

You can get a complete list of accredited stockbrokers by visiting the PSE website, www.pse.com.ph, or contacting the PSE at (632) 688-7600 or (632) 819-4100.
 

5. Allot time for investing

Del Castillo likens stock trading to driving a car. One needs to learn how to drive first and once you start driving, you need to adjust your mirrors, navigate through traffic etc.

"Sa stock market, you can earn more, multiple times even. But again you have to learn the what your investment type is," he said.

An investor has to look at the fundamentals-like earnings, prospects, downside, managers of a company–as well as the technicals-such as charts, price performance of a stock–to know his /her investment strategy.

"Don't be greedy, don't be emotional. You should have a good strategy," Del Castillo said.

Meanwhile, Germo advised that an investor should set their personality.

"How frequent or how less frequent you should check your investment, not just when the market is going up. You need to define a time frame regardless whether the stock market is up or down," he said. -- JST, GMA News