Recently updated on: November 18, 2023
TL;DR - The stock market is where people can buy and sell shares of companies called stocks. You can earn from the stock market through capital appreciation or dividends. You can start investing with as little as P1,000.
The Philippine Stock Market has a lot to offer to anyone willing to learn. To help ordinary people know more about the market, here is a simple, yet comprehensive guide before plunging into the stock market world.
Note: This is a long post because I tried to include as many inquiries as I could. Please comment if I missed something or made a mistake so I can edit it.
Table of Contents
What Is a Stock?
A stock is a share of ownership to publicly-listed corporations like Jollibee, Meralco, PLDT, Robinsons, SM, and many more. So if you own a stock of Jollibee, you are considered part-owner of it.
What Is the Stock Market?
The stock market, also known as the stock exchange, is where people buy and sell stocks. In the Philippines, we have the Philippine Stock Exchange (PSE). Currently, there are around 300 publicly-listed companies on the PSE.
What is the PSEi?
The Philippine Stock Exchange Index (PSEi) comprises 30 companies from different industries in the stock market. They are usually re-evaluated once or twice a year. Here is the list of the current companies in the PSEi.
You probably saw it on the business news. The number is usually shown to determine the stock market performance. As of writing, the PSEi is at 6,499.68. Far from the all-time high of 9078.37 back in January 2018.
Here are the 30 current companies comprising the Philippine Stock Exchange Index (PSEi):
| Company | Ticker Symbol | Sector (Subsector) |
|---|---|---|
| Ayala Corporation | AC | Holding Firms |
| ACEN Corporation | ACEN | Industrial (Electricity, Energy, Power & Water) |
| Aboitiz Equity Ventures, Inc. | AEV | Holding Firms |
| Alliance Global Group, Inc | AGI | Holding Firms |
| Ayala Land, Inc. | ALI | Property |
| BDO Unibank, Inc. | BDO | Financials (Banks) |
| Bloomberry Resorts Corp. | BLOOM | Services (Casinos & Gaming) |
| Bank of the Philippine Islands | BPI | Financials (Banks) |
| Century Pacific Food, Inc. | CNPF | Industrial (Food, Beverage & Tobacco) |
| Converge ICT | CNVRG | Services (IT) |
| DMCI Holdings Inc. | DMC | Holding Firms |
| Emperador Inc. | EMI | Industrial (Food, Beverage & Tobacco) |
| Globe Telecom, Inc. | GLO | Services (Telecommunications) |
| GT Capital Holdings, Inc. | GTCAP | Holding Firms |
| International Container Terminal Services | ICT | Services (Transportation Services) |
| Jollibee Foods Corporation | JFC | Industrial (Food, Beverage & Tobacco) |
| JG Summit Holdings, Inc. | JGS | Holding Firms |
| LT Group, Inc. | LTG | Holding Firms |
| Metropolitan Bank and Trust Company | MBT | Financials (Banks) |
| Manila Electric Company | MER | Industrial (Electricity, Energy, Power & Water) |
| Monde Nissin Corporation | MONDE | Industrial (Food, Beverage & Tobacco) |
| Nickel Asia Corporation | NIKL | Mining and Oil |
| Puregold Price Club, Inc. | PGOLD | Services (Retail) |
| Semirara Mining and Power Corporation | SCC | Mining and Oil |
| SM Investments Corporation | SM | Holding Firms |
| San Miguel Corporation | SMC | Holding Firms |
| SM Prime Holdings | SMPH | Property |
| PLDT, Inc. | TEL | Services (Telecommunications) |
| Universal Robina Corporation | URC | Industrial (Food, Beverage & Tobacco) |
| Wilcon Depot, Inc. | WLCON | Services (Retail) |
PSEi Stocks (as of October 2023)
Why Should I Invest in the Stock Market?
The reason why you want to invest in the stock market holds absolute importance. You should be clear on your goal or the purpose of your investments and not just earn money. This is where the time horizon comes in.
There are three-time horizons when investing. Time horizon is the length of time you're willing to hold onto your investments. They are long-term, medium-term, and short-term.
- Long-term — you invest for more than ten years. Long-term goals include houses, a college education for your kids, or retirement. The stock market is an excellent place to invest for the long term.
- Short-term — you invest for less than two years. Short-term goals include travel, weddings, and cars. Savings and bond funds are better investment instruments for these.
- Medium-term — you invest between 2 to 10 years. You may have a combination of stocks and bond funds for medium-term goals.
How Do I Earn From the Stock Market?
There are two ways of earning in the stock market. They are capital or price appreciation and earning dividends.
Capital or price appreciation happens when the stock price of your own value increases. For example, if you bought 100 shares of Jollibee (JFC) for P100/share. Then two months later, it increased to P120/share. Then your P10,000 became P12,000. You gained P2,000.
The other way is through dividends. Dividends can be cash or additional shares paid by companies to shareholders after making a profit. Companies like GMA7 and PLDT regularly pay their shareholders dividends.
What Are the Risks of Stock Market Investing?
Remember that the higher the risk, the higher the reward, and vice versa. So you need to have an emergency fund first. And invest only the amount you are comfortable with not touching over a long time.
We also have recessions and market crashes every few decades, like the 2020 Coronavirus Recession and the 2008 Financial Crisis.
But if you are a long-term investor, these stock market crashes are an excellent time to buy more stocks.
Why Does the Stock Market Go Up and Down?
The stock market also follows the law of supply and demand. So here is an oversimplified explanation:
If more people want to buy a particular stock, the price goes up. If more people want to sell a particular stock, the price goes down.
But there are so many reasons for the market movement, like macro and microeconomics.
How Do I Start Investing in the Stock Market?
First, you need a stockbroker. They are accredited individuals or firms by the Philippine Stock Exchange (PSE) to buy and sell stocks on your behalf.
As of 2020, there are about 130 of them, 30 of whom are online stockbrokers. You can see the list here.
Individuals or retailers should choose an online broker since they offer a lower price when opening an account. Some banks also offer stock trading platforms like BDO Securities, BPI Trade, and Metrobank's' First Metro Sec.
How Much Do I Need To Start?
The amount needed to start varies between different brokerage firms. They can be as low as P1,000.
Here are some of the amount required to open a stock broker account in the Philippines to start investing in the Philippines Stock Exchange:
| STOCK BROKER | STARTING CAPITAL |
|---|---|
| AB Capital Securities, Inc. | None |
| BDO Securities | None |
| BPI Securities | None |
| First Metro Securities Brokerage Corporation | None |
| RCBC Securities | None |
| COL Financial | ₱1,000.00 |
| A & A Securities, Inc | ₱5,000.00 |
| First Metro Sec | ₱5,000.00 |
| Philstocks Financial Inc | ₱5,000.00 |
Do I Need Personal Appearance?
No. Online brokers usually offer online applications. Your initial payment can be paid via online transfer. The general requirements are government-issued IDs, a Tax Identification Number (TIN) if you're employed, and a filled-out form.
Also, most online brokers allow Filipinos abroad to invest in the PSE, so you don't have to worry if you're not in the Philippines when opening your trading account.
What Is the Trading Schedule on the PSE?
The market's current schedule is from Monday to Friday, from 9:30 AM to 3:00 PM. Here is the breakdown of the stock market schedule:
| Time | Phase |
|---|---|
| 9:00 AM | Pre-Open |
| 9:15 AM | Pre-Open No-Cancel |
| 9:30 AM | Opening Period – Continuous Trading |
| 12:00 PM | Market Recess |
| 1:00 PM | Continuous Trading |
| 2:45 PM | Pre-Close |
| 2:48 PM | Pre-Close No-Cancel |
| 2:50 PM | Closing Period – Run-off/Trading-at-Last |
| 3:00 PM | Market Close |
Okay, So Now I Have a Trading Account. What’s Next?
Congratulations on completing the first step. Now, you need to buy your first shares. Depending on the brokerage you selected, they usually have a how-to guide on buying and selling stocks.
As a rule of thumb, we have the 8K Rule. It says that when buying a stock, you need to spend at least P8,000 to minimize the effect of the brokerage fees and other taxes.
So if you have P5,000 on your account and plan on adding P1,000 every month, you will need to wait three more months before buying your first stock.
What Is a Board Lot?
A board lot is the minimum number of shares you can buy or sell per company for a specific price range. Here is the board lot table from PSE.
| Market Price (PHP) | Tick Size | Lot Size |
|---|---|---|
| 0.0001 to 0.0099 | 0.0001 | 1,000,000 |
| 0.0100 to 0.0490 | 0.001 | 100,000 |
| 0.0500 to 0.2490 | 0.001 | 10,000 |
| 0.2500 to 0.4950 | 0.005 | 10,000 |
| 0.5000 to 4.9900 | 0.01 | 1,000 |
| 5.0000 to 9.9900 | 0.01 | 100 |
| 10.0000 to 19.9800 | 0.02 | 100 |
| 20.0000 to 49.9500 | 0.05 | 100 |
| 50.0000 to 99.9500 | 0.05 | 10 |
| 100.0000 to 199.9000 | 0.1 | 10 |
| 200.0000 to 499.8000 | 0.2 | 10 |
| 500.0000 to 999.5000 | 0.5 | 10 |
| 1000.000 to 1999.000 | 1 | 5 |
| 2000.000 to 4999.000 | 2 | 5 |
| 5000.000 and UP | 5 | 5 |
What are Blue-Chip Stocks?
Blue-chip stocks are companies that have the highest market capitalization. Or they are the BIG reputable companies. Companies like Jollibee (JFC), Ayala Corporation (AC), PLDT (TEL), and BDO are some of the blue-chip stocks.
Depending on your goal, you can buy blue-chip stocks. They are the companies that have a long track record of earnings.
Look at it this way, do you think companies like SM, Meralco, Jollibee, or Robinsons will close down in the next 10 or 20 years? Most likely not. But we can never tell what the future holds.
That is why you should diversify.
What Is Diversification?
Diversification is when you buy companies coming from different industries. This will help you avoid losses when specific industries are on a downtrend or not doing well. Always remember, do not put all your eggs in one basket. Diversify!
For example, you bought BDO, BPI, Metrobank (MBT), and Eastwest Bank (EW). Though you purchased four different companies, they all belong to the banking and finance industry. A sudden negative monetary policy can bring all your stocks down — at the same time.
What Does a Diversified Portfolio Look Like?
A well-diversified portfolio should include companies from different sectors.
For example:
- Jollibee — Consumer Sector
- BPI — Banking and Finance Sector
- MPI — Conglomerate
- Ayala Land (ALI) — Property Sector
These four companies came from four different sectors. So unless there is a recession, these four are not likely to go downtrend at the same time.
How To Indirectly Invest in the Stock Market
Yes, there is. There are mutual funds, Unit Investment Trust Fund (UITFs), and even Variable Universal Life Insurance (VULs), which a fund manager manages.
Like variable universal life (VULs), many insurance policies have a portion invested in the stock market by fund managers. However, because other people manage your money, you pay them certain fees for that service.
Investing directly in the stock market, on the other hand, will give you a higher earning potential. Also, remember that the purpose of insurance is different from investments.
What is Peso-Cost Averaging?
Peso-Cost Averaging (PCA) is a common investment strategy in the stock market. Every month or whenever you have P8,000, you buy a stock regardless of the price. The goal is to average the stock price.
Disclaimer: This is only for simplicity. We haven't factored in the board lot and fees.
Here is an example, let's say you plan on buying BPI for P8,000 every quarter:
| Quarter | Price per Share | Total Shares Bought |
|---|---|---|
| 1 | P80 per share | 100 shares |
| 2 | P70 per share | 110 shares |
| 3 | P90 per share | 90 shares |
| 4 | P100 per share | 80 shares |
| Total | 380 shares |
Over a year, you accumulated 380 shares of BPI and spent P32,000.
Assuming you didn't buy additional shares and the price per share the next quarter becomes P120. You will then have P45,600, which gained you P13,600.
However, the stock market is a roller coaster ride. It is volatile and has its ups and downs. So, assuming the price per share became P70 instead of P120. Your portfolio amount will then be P26,600 which is P5,400 lower than your initial investment.
So for longer-term investors, consistently investing is a way to ride the ups and downs of the market because, in the long-term, the market is in an uptrend.
I Am Losing Money in My Portfolio. Should I Sell It?
Technically, as long as you don't sell your shares, you are not yet losing money. It is what we call paper losses.
Depending on your goal and strategy, you can buy, hold, or sell, but for long-term investors, not selling is the most viable option.
However, if you're a short-term trader, you should have considered your stop loss point prior to your entry to the trade.
What Is Paper Loss?
A paper loss happens when your shares' current price is lower than what you paid. However, it will not be realized if you don't sell your shares.
Paper losses are a simulated amount of your portfolio if you ever sell your stocks. You only lose (or gain) money after you sell.
How Will I Know When To Sell?
There are two main schools of thought in the stock market, fundamental analysis and technical analysis.
The fundamental analysis uses company earnings, assets, debts, and other company information to determine the prospective price.
Technical analysis uses graphs, charts, and patterns to determine if a stock is on an uptrend (gaining), downtrend (losing), or sideways. Depending on which school of thought you are more inclined to will determine when you will sell.
Fundamentalist investors sell when the price of a stock reaches its fair value or the amount that researchers think is the right price for the stock.
On the other hand, technical investors sell stocks when they fall below their cut-off point or reach their sell price.
What Other Tools Do I Need To Learn?
You should try Investagrams. It is a one-stop-shop for tools in the stock market. They offer stock charts, stock calculators, and a virtual trading platform to try out the stock market.
The only thing they don't provide at the moment is an actual trading platform, but they are in the process of being one.
Final Thoughts:
A stock market is a great tool to earn, and learning about it will pay more in the long run, provided you apply what you learn. Many people study how the stock market works or the different investing and trading strategies. Unfortunately, they don't apply it.
Knowledge without action is useless, but knowledge with action is wisdom.
The stock market never loses. It reveals more about human nature and how greed, envy, anger, and other negative emotions can change a person.
Remember that money is neutral. It is only a tool. It can be bad or good, depending on how you use it. Don't love money (I Timothy 6:10).
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