How to Invest in the Stock Market
Whenever the topic of investment is brought up, one of the very first things that pop up is the stock market.
Of course, it is always a good idea to find secondary income sources and ways to invest your money. However, when it comes to the stock market, most people are intimidated by what seems to be its relatively high risk, complexity, and how investing in it is perceived as “gambling” by most people.
The truth is investing in a company’s stock is gaining a percentage of ownership in a company, having more liquidity of funds as it’s not bound to conditions like in a bank, and being able to make money through dividends and capital appreciation.
2 Ways to Earn in the Stock Market
Capital appreciation is the increase in the market price of the stock over time through increase of its potential value and demand.
Meanwhile, dividends are issued by companies who are profiting, either in cash or in additional shares.
Basically, they are bonuses given to shareholders when things are doing really well.
Is stock market investing like gambling?
Stock investment is not a complete gamble because you have agency in choosing where to invest and participate in the company’s growth and success along the way.
When you own enough stock in a company, you even get a say in its business as a member of the board. Through this, the whole gist of things is simple enough—when that company does well, you also do well as a shareholder.
Is it really risky to invest in the stock market?
It is true that stock investment is the most volatile of all securities, but risk is an unavoidable part of any investment anyway.
The advantage you get from stock investment is that you can know exactly what you’re putting your money into.
You can research about the company and learn of how it is making money, as well as network with other investors to know more of which companies are either doing well or about to do well.
Is this a good investment?
While there is indeed higher risk compared to other investment instruments, stocks have proven throughout history to provide greater returns, thus making it a much better investment option for those looking to earn in the long run.
When you do things right, you can put together a portfolio with a good bunch of stocks that are fairly consistent, enough to be sure that they climb more than decline, which reduces the risk that people are so afraid of.
Becoming a Stock Market Investor
- Investment Capital
If you have at least P5,000, you can open an account just like with an ordinary savings account and start investing.
- Requirements to open a Stock Market account
You can apply for a trading account by filling in an application and presenting valid identification to a chosen broker.
You should bring two valid IDs with recent photos and specimen signatures, as well as proof of billing.
There may also be additional required documents and initial cash deposit, depending on the stock broker.
- Stock Market Brokers / Brokerage Companies
There are over a hundred licensed stock brokers who are accredited by the Philippine Stock Exchange.
Choose your broker by the type of service they offer which you need the most, either traditional or online. The former is through old-school channels such as written instructions and phone calls, while the latter is through the Internet.
The PSE website has a complete list of accredited stock brokers, and you may also inquire through phone at (632) 819-4100.
- Buying and Selling of Stocks
Once you have an account, you can start buying and selling by placing an order either online or with a phone call to your stock broker.
You can then keep track of your investments from your account, most conveniently through an online system.
Whether you opt for a more traditional way of doing things or the more modern online approach, you should be able to communicate regularly with your stock broker.
Some Tips for Stock Market Investors
The keys to success in investing in the stock market are being disciplined and making use of the right methodology.
Invest early and regularly for the long term, and you should also diversify your portfolio.
You must also have some self-awareness, understanding whether you are naturally conservative or more of a risk-taker so that your overall investment strategy reflects the kind of person you are.
Read the Stock Market Series:
- Stock Market for Beginners: What it is and How it works
- How to Choose a Stock Market Broker in the Philippines
- How much should you invest in the Stock Market?
- Stock Market Strategies: How to Analyze and Value Stocks
- Stock Market Strategies: How to Maximize your Profits and Minimize your Losses
- 5 Possible Risks in Investing in the Stock Market
- What you need to know about the Philippine Stock Exchange