The Investing Perspective: What Are Stocks and How Do You Earn From It?

Although Filipinos recognize stocks as a form of investment in the Philippines, only few Filipinos are actually invest in the stock market. These might have sprung from misconceptions like "only rich people can afford to buy shares" or "I didn't finish a business course therefore I have no capability to invest in stocks" -- which I find really disheartening. Equity investments are good ways to generate profit and diversifying your portfolio and with proper knowledge, anyone (whether you are a student -- like me! -- or a working professional) can venture in it.

Stocks are simply define by a lot of authors and websites as an investors ownership over a particular corporation in which he invested in. For example, a company has issued 10,000,000 shares and you bought 1,000,000 which is 10% of the overall share. This make you owner of 10% of the companies equity. This is a from of capital structuring used by corporations in order to obtain much need capital so that they can continue to operate or expand their companies. There are 2 basic types of share: Ordinary share, which are common and gives its holder the right to vote during board meeting and Preferred shares which has a fixed dividend rate. Owners of preferred shares are prioritized when companies issue dividends. I want to focus this post to Ordinary share as they are more common and less complex.

Now that we've had a brief background of what stocks are, let's go over to how you actually earn from stocks. There are 2 common ways namely is through dividends and through market price appreciation.

Dividends

Dividends are portions of a companies earning which are distributed to shareholders. The gain from dividends depend on how many shares of stock you have in the company. Let's say that X Company's board of directors decided to distribute dividends amounting to 1 PHP/ share. This means that if you are invested in 1 million share, you get PHP 1 million less taxes.

Market Prices Appreciation

Your investment could also profit simultaneously through price appreciation. Let's say the you bought 100 shares of Y Company for 5 PHP. After several weeks the price per share went up to 8 PHP. the result gave you 300 PHP (8 - 5 = 3 x 100)  less of course taxes. The logic in this scenario is that you were able to buy the stocks cheaper than what they are currently priced in the market. This gives you an opportunity to sell them higher and realize gains from it. This method works well especially if you are a long term investor.

Now that you a have an idea on stocks, you're next step is to know When Should You Start Investing in it. Are you ready? Share you experience investing below!

Happy investing!


Disclaimer: The article is based on my personal opinions and experiences. the post is not sponsored or any of the sort.

Sources:
Dividends: http://www.investopedia.com/terms/d/dividend.asp
Stocks: http://economictimes.indiatimes.com/definition/stocks

The Investing Perspective: When Should You Start Investing in the Stocks?

To start, let's answer the following basic questions:

1. Are you knowledgeable of basic stock trading principles and terms?

2. Do you have investable money?

3. Are you aware and/or ready for the risk that comes with investing?

4. Ready to make it a long term trading a habit?

If you've answered YES to all four questions, then its evident that you should be starting NOW. If you've confidently answered YES, it means that you have the capacity to properly establish and monitor an stock and is more likely to gain profits than those that a not knowledge but a investing.

However, if you don't feel confident enough to answer 'yes', it is never to late for you to learn and

have a change of heart. Here's how:

Knowledge

If you are a student, I suggest you join or attend seminars conducted by the finance organization in your school -- if there are any. Most seminars are about the basics of investing. If you are a working professional, you will find that a lot of banks and financial institutions hold free investing seminars for you the attend to. Most of them also have investment products or funds where you might want to invest on. Stock brokerage firms will conduct seminars to teach you the basics of the market as well as how to use their trading platform. And lastly, if you are an OFW, there are webinars and live stream seminars conducted by banks or financial institutions that you will be able to watch online. 

If you want to test your trading skills without actually investing money in the market, you may want to try the Free Trials offered by online stock broker. You can also enroll in a stock trading school,if you have the time and resource to do so. In this case, try looking up Caylum Institute, a stock trading institute in the Philippines which caters courses and seminars to help you learn about the investing. I personally haven't enrolled in it. But I've seen it featured in some conferences I've attended and its key officers are well respected figures in the financial industry

Money

I want to emphasize the term 'investable'. This is very important especially if you are a student with no means of steady income yet just like me. Make sure that the money you will invest in stocks are surplus money (income or allowance less all deductible expenses). In short,  it should be your spare money. We don't want you borrowing money just to be able to invest or worst starve yourself just to save up for investing money.

Risks

As the saying goes, "the higher the risk, the higher the returns". This is very true in the stock market, which is one of the riskiest asset classes due to high volatility (degree in price changes) of the stock prices. This can make some stock prices rise 20% today and fall 15% tomorrow depending on market movements. 

with that bring said, if you plan to invest in stock, you have to be ready to won some and lose some. The key to lessening losses is  diversifying you investment portfolio. Invest in different market industries such as services, banks, property or gaming and also make sure to invest in strong and reputable corporations over fly-by-night ones.

Habit

If your starting early with investment horizon of 5 or more years, make sure to make investing a habit -- inculcate it in your lifestyle. I would recommend over investing a one time big time lump sum investment. This method will  better mitigate your cost in the long term. Remember to make it a habit to invest monthly, quarterly of yearly. It doesn't matter if the amount is small, what is important is that you create an attitude of habitual investing.

Time vs Timing

It's very important to distinguish this two concepts. I use the term "Time"to mean the actually start of your investment relative to how long you plan to keep yourself invested in the market. For example, the time I started investing was when I was 20 years old and I plan to stay investing in the stock market for the next 40 or 50 years.

I tend to use Timing to mean the market condition by the time you invested. Will you be starting when the market is high or low?  It is preferable to start buying when the market is low because stocks are cheaper but do not be discourage to invest even if the market is slightly higher because over the long term, there are still a lot of profit potentials especially for good stock picks.

Do you think you're ready to invest? Let us know! Leave your comments and questions below!



Happy investing!

Disclaimer: The article is based on my personal opinions and experiences. the post is not sponsored or any of the sort.

My Monthly Market Review: On Honeymoon Periods and the Brexit Dilemma

Hi guys! It's been a month since I've started The Investing P.O.V. I want it to be a blog about investing on market and also in yourself and in people around you which the first few post are all about my experiences as a student leader and a financial advocate.

But now that June has ended and we are headed to the 2nd half of 2016, I want to start a new segment entitled my Monthly Market Review, where I want to talk about and share my experience as an investor for the past month. 

June was such a wow month for me and that was mainly because I have experienced what many financial analysts called the "honeymoon period" for the newly elected president, Pres. Rodrigo Duterte. At first I was curious as to how that would affect the market which was trading 

at 6084.28 -- its lowest point last January -- to a high of 7816.86 as of today (via Bloomberg.com) despite issues of Fed rate hikes and the unexpected Brexit referendum results which caused the British Pound to demonetize significant. Truly, the market has recovered  from its beginning-of-the-year slump.

In my opinion, the positive and warm acceptance of investors to the Duterte administration was really one of the major factors as to why despite globally economic uncertainties, the PSEi continued to rise especially if your compare it to other stock markets in the ASEAN Region. In a way, I think we are lucky that Brexit and other economic issues coincided with the first 100 days of the Duterte administration or else the market would have been in the red for quite a while now.

Looking at the President's main agenda, you could see a lot of growth potential for the companies as the President plans to decentralize, economic growth and focus expansion of business and industries in the Visayas and Mindanao which will be very benefited and boosted stock prices of a lot of companies operating in the said regions. Investor also welcome Pres. Duterte's plans to ease traffic congestion in Metro Manila which might bring light to more cash inflows to construction and infrastructure companies. There were also plans to lower electricity in other to help ease the life of ordinary Filipino citizens.

However, things are not looking quite good some sectors especially for the Mining industry as new Department of Environmental and Natural Resources (DENR) Secretary Ms. Gina Lopez urges responsible mining where she and her department has started the audit of mining companies in operation.

The PSEi might continue its rise this July but this depends on the outcomes of the implemented agenda of the new administration. We should also keep in mind that August is coming and analyst are forecast a dip in the market sometime during that month.

This is Jernica on her Monthly Market Review for June 2016.

Do you have any questions or suggestions on what I should talk about next? Comment them below! Also, I would love to hear your thoughts/ Hope you can follow me on twitter @TheInvestingPOV

'Til next week!

Cheers!

Disclaimer: The article is based on my personal opinions and experiences.