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.
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 about 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.
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, 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.
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