THE PSEi (The Philippine Stock Exchange Index)

What is it?
-An index of OUR STOCK MARKET
-PSEi is composed of the 30 largest and most active common stocks listed at
the exchange based on their free float-adjusted market capitalization.
You can view the PSEI here : http://www.pse.com.ph/stockMarket/marketInfomarketActivity.html?tab=1&indexName=PSEi

What is the stock market?

A venue wherein firms get capital from the public to finance their
operations/expansion (An equity market) .
Firms sell ownership to those who buy the stock (the SHAREHOLDER)
When you buy a stock you become PART OWNER of the firm

What is the difference between a bond and a stock?

BOND
IOU of the Firm (you are a creditor)
Pays you interest
In case of bankruptcy, you get paid
first
Long term maturities

STOCK
You own part of the company
Pays you dividends (discretion of the
board)
You get paid last (if you get paid at
all)
Highly liquid

What do I need to know before I start trading stocks?

a. How to analyze the stocks and the economy
b. How to trade
c. THE SCAMS and all other bullshit in the market

I. How do I analyze stocks?

a. Fundamental Analysis
b. Technical Analysis
Two "conflicting" views, but I suggest you use them side by side
c. Econometric Forecasting

Fundamental Analysis
analyzing the fundamentals of the firm
- the balance sheet
- the income statement
- the cash flow statement
You obtain these materials from the company website of the PSE website.

THE BALANCE SHEET (What should I look at?)

- The financial statement that contains a company's assets, liabilities, and
equity
Remember A = L + OE?

THE INCOME STATEMENT

-The financial statement that shows the income and expenses (operating and
non-operating) of the company

Computing the financial ratios

These numbers are useless unless you compare it with the industry average.
(NATIONAL/ INTERNATIONAL)

You can also compute the percentages of the sources of revenue and
expenses
It is also important to compute Y-o-Y changes of debt, capital, expenditures,
and net income

TECHNICAL ANALYSIS (Refer the book of JOHN MURPHY)

- predicting future stock movements based on past market trends
-Trend analysis
Famous technical analysis methods
The Elliot wave theory

The Fibonacci Numbers

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144
The Simple Moving Average/ Exponential Moving Average
The Moving Average Convergence-Divergence (MACD)

c. Econometric Forecasting
Use of math and statistics, and application of both financial and economic
theory to try and forecast the behavior of financial instruments
Sample Model:
q

j=1

i=1

j [|z t j|E|z t j|] + j z t j + i ln ( 2ti ti1)

q

ln ( t t 1)= i +
2

j=1

ANALYZING THE ECONOMY

Getting the National Accounts and other economic indicators:
http://www.nscb.gov.ph
Important Indicators

GDP - Gross domestic product

GNP- Gross national product
These two accounts reflect the income of the economy
CPI- Headline and Core
PPI
Measure the changes in the price of goods and services in the economy
( why is it important? )
Imports- goods we buy from other nations
Exports- goods we sell to other nations
Interest Rates-price of money
Foreign Exchange Rate- price of a currency relative to another currency

II. How do we trade?

We earn profits from stocks in 2 ways
a. Capital Appreciation
b. Dividends
We trade through a broker
- Online
- Brokerage Firm
Online Stock brokers ( the ones that I have tried)
www.colfinancial.com
www.firstmetrosec.com.ph

www.bpitrade.com
You need at least 10,000 php to start an account
Take into account transaction costs:
FOR BUYING AND SELLING:
FEE
Commission

AMOUNT
.25%

REMARKS
Of the Gross Trade
Amount
Of Commission
Of the Gross Trade
Amount

Value Add Tax (VAT)

12%
Philippine Stock
.005%
Exchange Transaction Fee
(PSE Trans Fee)
Securities Clearing
.01%
Of Gross Trade Amount
Corporation of the
Philippines Fee (SCCP)
ADDITIONAL FEE FOR SELLING
Sales Tax
No. of Shares x Price x .005

EXAMPLE
Buying - Total fees for buying 20,000 shares of ALI at Php5.00/share
FEE
Commission
VAT
PSE Trans Fee
SCCP

COMPUTATION
(20,000 x P5.00) x .25%
P250 x 12%
(20,000 x P5.00) x .005%
(20,000 x P5.00) x .01%

AMOUNT
P250.00
P30.00
P5.00
P10.00
P295.00

Total
Selling - Total fees for selling 20,000 shares of ALI at Php5.20/share
FEE
Commission
VAT
PSE Trans Fee
SCCP
Sales Tax

COMPUTATION
(20,000 x P5.20) x .25%
P260 x 12%
(20,000 x P5.20) x .005%
(20,000 x P5.20) x .01%
20,000 x P5.20 x .005

AMOUNT
P260.00
P31.20
P5.20
P10.40
P520

P826.80
Total

III. The scams and all other bullshit

a. AMAN FUTURES GROUP - 12 Billion peso pyramid scheme
b. High-Yield Investment programs- Through the internet
c. Performance Investment Products Corp. (PIPC)-" guaranteed return of 1015 percent every maturity period of eight weeks, or an average annual
return of 12 percent a year. With $40,000 and a 12-percent return after
eight weeks, you could earn $5,000. Has offices in Singapore, China, Japan,
and India.
In Plan A, you got 60 percent while the company got 40 percent. If a trader
made $1,000 for you in the eight-week period, your net interest would be
$600, while $400 went to the office. Your $40,000 was still intact. With Plan
B, you got 80 percent while the organization got 20 percent. But the risk was
that the capital was no longer guaranteed. If the trader lost, you shared in
his losses. At the end of an eight-week period, you could have $39,000
instead of your $40,000 because your trader lost $1,000. "
Source: Inquirer Business

LESSON: A FOOL AND HIS MONEY ARE EASILY PARTED

DON'T LISTED TO A GUY WHOSE JOB IS TO MAKE YOU MONEY