How to Invest in Stocks in the Philippines - The Thrifty Pinay (2024)

How to Invest in Stocks in the Philippines

A handful of readers have asked if I’ve written any posts about how to invest in stocks in the Philippines. At that time, I haven’t yet. But since many have been asking for it and having noticed that Stocks are probably the most popular type of paper assets yet only a small percentage of Filipinos are educated about stocks, I was compelled to make a post and discuss this in great detail. Here is my straightforward, no-nonsense explanation to help you understand how stocks really work.

How to Invest in Stocks in the Philippines

To help you understand Stocks more, I decided to explain it through a story:

Allan, Ben, and Cath own a milk tea shop. Their company is a private company. It is a private company because the owners are only limited to a small group of people. All businesses usually start as private. Then probably after a few years, when business is doing great, they might want to grow more branches and expand.

But Allan, Ben, and Cath have limited capital for their expansion. So all three of them decided to sell a part of the company to other people. They can do this by offering people to invest in their business. Once people start investing in their milk tea business, they will have the necessary funds to expand their business.

So they ask their friend Dan to buy a part of the business. So when they do receive money from Dan, they can use that to put up a new branch. Now when their business thrives and earns money, the original owners (Allan, Ben, and Cath) will no longer get all the profit for themselves because they have to share it with Dan.

Now Allan, Ben, and Cath want to put up a hundred more branches, meaning Dan’s money won’t be enough for the expansion. They need money from more investors. This is where their business, which is a private company, turns into a public company. By being a public company, they can now sell part ownership of the business to the public and anyone who wants to have part ownership can invest money by buying shares.

This is where the stock market comes in. The stock market is a place where you can buy shares of public companies and become a part owner of those businesses.

How to earn from the stock market in the Philippines

1. Earn through Dividends

The income you get from those public companies is called Dividends. A Dividend is a payment made by corporations to their shareholders, usually as a distribution of profits. As an owner of a company, you might share in the company’s profits in the form of:

• Cash Dividends- where payment to shareholders are made in cash
• Stock dividends-where more shares are given on top of what they own

To receive a dividend, you must own the stock by the ex-dividend date. If you dont buy shares before the ex-dividend date, you will not be included in the list of shareholders who will receive dividends. The company decides how much the dividend will be per share. The amount that will be deposited into your brokerage account is simply the number of shares you own multiplied by the dividend per share.

Shares owned X Div per share =Dividends

So if you own 10,000 shares and the dividend is P0.50, the company will deposit P5,000 on the payment date.

2. Earn through Capital Appreciation

Let’s say a share in Jollibee (JFC) is currently worth around P205. So, if you want to be a part owner of Jollibee, you need to pay P205 for every share you buy. But wait. The stock market has rules. Supposing that you need to buy 10 shares of JFC before you can be a part owner. This means you need to spend P2,050 before you become a part owner.

Can you still follow me? Yes? Good job! Now let’s say you bought 1,000 shares of JFC. Then Jollibee announced that they are planning for an expansion. Once Jollibee accomplishes that goal, they will be earning more than ever-which means that the dividend you might get for being a part owner will potentially become bigger!

So now, you are in a good position of earning. Because people have heard the news of the expansion, and knowing that Jollibee is a reputable company, they would want to buy shares of Jollibee too. You can decide to just sell your shares and forego receiving dividends in the future-in exchange for selling it at a higher price. Let’s say you’d want to sell them at P208 per share.

What do you do now that you want to sell your shares? You go to the stock market (your chosen brokerage platform) and sort of announce it there. You announce that you are selling it for P208 per share. Supposing me, The Thrifty Pinay, would still like to buy JFC shares for also P208 per share. The stock market will automatically match the buyer (me) and the seller (you) and will process the transaction for us.

Do take note (in my experience though) in the trading platform, you don’t get to choose which specific investor you can buy from or sell to.

How much is your gain from selling your shares?

=P208 -P205
= P3 x 1,000Shares
=P3,000 Profit
This is called CAPITAL APPRECIATION.

The thing here is that you need ample time for the stock to gain more value (appreciation). It can be as fast as a couple of seconds or maybe minutes, hours or days, weeks, months, or maybe more.

Basically, the formula above used to calculate the profit you earn. But in an actual stock trade, you will find that there are other deductions such as tax and broker commissions.

What are blue chip stocks in the Philippines?

Blue-chip stocks are stocks of large companies which are known for its reputation to operate profitably both in good times and bad times. In the Philippines, blue-chip companies include Jollibee Food Corp, Ayala Corp and many more.

Here’s a list of the best Blue-Chip stocks in the Philippines. If you want to have a more in-depth understanding of how to buy and sell the best blue chip stocks, head on to Bodegapik‘s article through this link.

Why invest in the stock market in the Philippines?

Here are 3 reasons:

• Investing in stocks hasproven to be one of the wisest decision anyone could do.
• History has proven how investing in quality stocks over a period of 10 to 20 years can provide greater returns than letting your money sit in a bank.
• It gives you a chance to beat inflation and achieve financial goals on or before reaching your retirement.

What are the risks involved when investing in stocks in the Philippines?

Just like any other type of investment, there ate still risks in investing in stocks despite history showing that it has extraordinary returns.

• Investing in stocks has no guaranteed return. Always remember that there is still no guarantee on how the stock market will perform in the future. No one can foresee whether the stocks will go high or whether the company you invested with will still be open after 5 to or 10 years from now
• All your money can get wiped out. That’s if , if you don’t have a plan and you don’t study the market. The market is so volatile, share prices can go up or down in a matter of seconds. Some factors may be due to the economy. Sometimes when investors feel the company will do good, they buy more shares thus making the share price go up. If a lot of investors sell their shares, share price can go down.

How do I buy stocks in the Philippines?

Ready to get your feet wet in the world of stock investing? Here’s a rundown of what you will do to start investing:

1. Choose your broker. COL Financialis one of the leading and recommended brokerage firm in the country. You can never go wrong with COL.

• Philstocksis another platform available for those who want to invest in the stock market. This was the first platform I used and their service is ok.

• BPI Tradeis BPI’s own broker platform. If you are already a BPI user then this application is easier for you.

Moreover, click on the link to see a list of all Accredited Philippine Stock Exchange brokersare paid to trade stocks on your behalf

2. Next, open a trading account.Just follow the account opening instructions and submit the needed requirements. You will receive an email confirmation once your account application is done.

3. Fund your account.You can invest for as low as P5,000 but of course,it depends on your brokerage platform. This initial investment can already be used to buy your first stocks.

What strategies can I use when investing in stocks in the Philippines?

For beginning investors who don’t have the time or expertise to carefully study the stock market, then Peso Cost Averaging (PCA) is a good solution. PCA is one very simple but an effective strategy to minimize your risk in your investments. We’ve written a post about PCA here so you might want to see if it suits your investing philosophy.

• Related Posts:

Stock Market Investing Tips

• Whatever strategy you want in the stock market, whether it be trading every day or long term investing, one of the best advice I can give you is to not enter the market without doing your due diligence. Research and study first before you invest your hard-earned money.

• Another advice is to be emotionally stableand prepare plans to protect our capital. There are investors who panic at the sight of their stocks going down in value leading them to incur losses because they sold their stocks too early.

• Since the stock market is not for the faint of heart, you should only invest the amount you are willing to give up. Set up a fund that is dedicated only for investing. So whenever your investments go down in value-or worst-turns to zero, you won’t find yourself dipping into your savings especially your Emergency Fund.

Final thoughts

With Stock investing, you have the responsibility of studying the market. Do your due diligence first and have a deep understanding, and reseach before you dive in. In case you’ve already tried stock investing and you feel that it’s not quite your forte then try Index Funds and UITFs which are also related to stocks. I’ve written a post about it below and I’ve shared my experiences there.

If you lack time to analyze the stock market and keep track of the market trends yet you desire for higher returns compared to time deposits and savings account, then UITFs and Mutual Funds are what you need. Here’s my blog post about it:

How to Invest in Stocks in the Philippines

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