8 Simple (But Important) Things to Remember about Stock Market
- What is a stock market?
A stock market is a place where you could buy stocks and sell your shares over a period of time. It’s like a marketplace or “palengke” where you could see a vendor and buyer of certain commodities. In the Philippines, there is only one stock market called as Philippine Stock Exchange (PSE), same as New York Stock Exchange in the US or London Stock Exchange in UK.
To illustrate my point, let’s take PLDT as our example. It is apparently one of the leading telecommunications and digital services company in the Philippines owned by Mr. Manny Pangilinan. He is a business tycoon and currently the Chief Executive Officer (CEO) of the company. But would you believe that he is not a sole owner of PLDT?
Can you guess how many people own the company? Two? Three? Ten? Hundred? Right. Thousands of people are shareholders not just Mr. Manny Pangilinan. When you buy 1 share, it means you end up owning a small part of the business as shareholder.
- Why do companies sell stocks?
To expand the business, company needs money in order to build more plants and factories, install more satellites and phones, and hire new staff in the company. It is a common practice for any companies like PLDT to sell stocks or shares. We call it equity financing which means issuing stocks to anyone who is interested to buy.
- How to earn in stocks?
When PLDT lose the business, you will lose as an investor. However, as shareholder, you are entitled to receive profits including thousands of other shareholders when PLDT earns over a period of time. But the question is how to earn from stock market investing? There are two ways how to earn from stocks: price appreciation and dividends.
- What is price appreciation
Price appreciation is increasing the value of share over period of time as company grows and expands its business. You are earning from stock market if you are a shareholder and sell your PLDT stocks at a higher price—higher than previously bought. Let say the current price of one stock of PLDT is 1,400 pesos.
When you sell it at 1,600 pesos, you will gain 200 pesos profit.
- What is dividend?
Dividend on the other hand is the distribution of earnings to each shareholder either in cash or in forms of stocks. The company distributes its shares either quarterly, semi-annually, or annually. The amount of your dividend depends the number of stocks you own in the company. You need to be knowledgeable and invest time to learn when to buy and sell stocks and what companies you have to buy.
- Why do you need a stock broker?
You need not to have a big amount of money. What matter is you need to have knowledge and a little time to manage your portfolio. To open an account, you will need a license stock broker to facilitate transaction. For an OFW like you, online broker is much convenient than traditional broker as you can log-in anywhere and you don’t have to call a traditional broker if you want to buy and sell stocks. With online broker, you can buy and sell stock through online platform available as long as the market is open.
- How to open an account?
You will also need to fill-out application form. You will also need government valid IDs such as passport, drivers license, and TIN number. If you are an OFW, you can first scan all the documents and send to your broker via email if there is any correction. The broker will then give you a go signal to send hard copies of all your documents when every page has been checked. Upon approval of your application, you will receive your subscriber number in order to begin funding your account.
- How much money you will need?
You don’t need to have a big capital to start investing with stock market. In a nutshell, many brokerage firms required just a small amount of money, like five thousand pesos as initial funding. It’s good to start investing using a small amount of money until you get familiarized with the system.
Stock market is indeed a good investment instrument for many OFWs like you while taking advantage of your good earnings overseas. Being an investor for two years, I must say anyone can invest in the stock market as long as you’re willing to learn.
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