Stock Investing

Imagine the stock market like a big market in a city where people buy and sell pieces of companies instead of vegetables or clothes. These pieces are called "stocks" or "shares." When you buy a stock, it's like buying a small part of that company, just like when you own a piece of land. The stock exchange is a physical or electronic marketplace where buyers and sellers come together to trade these ownership shares.

How do stocks generate income?

Capital Appreciation

Increase over time

If the stock's market price rises from the price at which you purchased it, you can sell the stock at a higher price and make a profit.

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Dividends

Share in profits

Some companies distribute a portion of their profits to shareholders in the form of dividends. Dividends are typically paid out on a regular basis, such as quarterly or annually

Rain Money

List of licensed brokers

In the Philippines, you need to go through a licensed stockbroker (or become one) to buy and sell stocks on the PSE

AAA Equities

aaaequities

Col Financial

colfinancial

Interactive Brokers

interactive brokers

Supports conditional orders. Conditional orders allow you to execute strategies like cutting losses and buying on breakout automatically. They set a trigger on when your Limit Order is sent to the exchange based on the stock’s Last Traded Price. If a stock falls below a certain point, sell! If it rises above a resistance level, buy!

One of the classics. Dependable. Lacks features.

For investing in foreign markets.

Top 5 things to look for in a stock trading platform

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Deposit Money

Evaluate how easy and secure it is to deposit funds into the trading account. Look for various deposit methods, such as bank transfers, credit/debit cards, and electronic wallets, to suit your preferences.

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Trade and See the Execution

A user-friendly platform with real-time execution data is essential for informed trading decisions.

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Check fees

Scrutinize the fee structure, including trading commissions, spreads, and any hidden charges. Be cautious of disparities between the advertised fees on the website and the actual fees charged during transactions.

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Withdrawal

Examine the process and time it takes to withdraw funds from your trading account. A reliable broker should offer efficient withdrawal methods and transparency regarding any withdrawal fees.

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Additional Features

Assess the broker's supplementary tools and features, such as automatic stop-loss and breakout orders. A mobile app can provide convenience for monitoring and trading on the go, enhancing your overall trading experience.

Pros and Cons of Stock Investments

Pros

  • Potential for High Returns: Historically, stocks have provided some of the highest long-term returns among investment options. Over time, well-performing stocks can generate substantial wealth.
  • Liquidity: Stocks are generally considered highly liquid investments, meaning you can buy and sell them relatively quickly. This liquidity makes it easier to access your investment funds when needed.
  • Diversification: Investing in stocks allows you to diversify your portfolio across different industries, sectors, and geographic regions. This can help reduce the risk associated with having all your money in a single investment.
  • Ownership and Voting Rights: When you buy stocks, you become a partial owner of the company. This might grant you voting rights in company decisions, depending on the type of stock you own.
  • Dividend Income: Some stocks pay dividends to shareholders. This can provide a consistent income stream in addition to any potential capital gains from stock price appreciation.

Cons

  • Volatility: Prices can go up and down unpredictably, so it can be a bit of a rollercoaster ride for your investments.
  • Risk of Loss: When you invest in stocks, there's always a chance you might lose some or even all of your money. It's not a sure thing like putting your money in a savings account; there's a degree of risk involved.
  • Market Uncertainty: The stock market is influenced by a multitude of factors like economic events, political changes, and investor sentiment. Because of this, it's often uncertain and hard to predict exactly how it will perform in the future.
  • Time and Research: Successful stock investing usually requires time and effort. You need to do research on the companies you're investing in and be patient because it can take years to see substantial returns.
  • Emotional Decision Making: Emotions like fear and greed can lead to impulsive decisions when it comes to investing. It's essential to keep your emotions in check and make rational choices based on your investment strategy.
  • No Guaranteed Returns: Unlike a guaranteed savings account, the stock market doesn't promise consistent returns. While it has the potential for growth, there's no assurance that you'll always make money from your investments.
  • Complexity: Investing in stocks can be complex. You need to understand financial statements, market trends, and economic indicators to make informed decisions. It's not as simple as just buying and selling stocks; it requires some financial know-how.

Techniques for picking stocks

Fundamental Analysis

  • It is generally used for long-term investment decisions. Investors who use fundamental analysis are interested in the underlying value of an asset and are willing to hold it for an extended period, expecting its market price to eventually align with its intrinsic value.
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  • Focuses on evaluating the intrinsic value of an asset.
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  • Evaluating if a stock is overvalued or undervalued involves analyzing the company's:
    • Financial statements
    • Management quality
    • Industry trends
    • Competitive positioning
    • Other macroeconomic factors

Technical Analysis

  • Technical analysis is often used for short- to medium-term trading. Traders using technical analysis are more concerned with exploiting short-term price movements and trends rather than the long-term intrinsic value of the asset.
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  • Focuses on studying historical price and volume data of an asset to identify patterns, trends, and signals
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  • Uses data to predict future price movements.