How to Invest in the Philippine Market for Newbies

Why only less than 1% of Filipino invest in Stock Market?

“It’s not the investment that is risky… It’s the investor”

– From “Who Took my Money?”

by Robert Kiyosaki

History shows that investing in quality stocks can help you grow your
money in time. Through compounding interest, one can retire a millionaire even
if you only have 500 to 1,000 a month to invest.

Despite the opportunity to grow money through investing, the Philippines

Stocks Exchange Commission (PSEC) reported that very few Pinoys invest
stocks. Many Filipinos were never taught how to invest and grow money. Many
of us were raised and trained to be a competent employee. We are only taught to
work in exchange of money; but, only a few have the idea that money can also
work for us. While 99% of Americans do have mutual funds and equity
investment, a whopping 0.5% of Filipinos grow their money on stocks.

Expert financial advisers explained that there are different reasons why
many Pinoys don’t want to put their money in stocks: culture, fear, ignorance.

First, Filipino had a rich culture. But, it is so rich that many forgot to save
for their retirement. This is why you see OFW families spend luxuriously on
gadgets, travels, and other unnecessary expenses. This is why people ask money
from Bombay just to celebrate fiestas, birthdays, christening, and all other
occasions. But, when retirement comes, statistics said that out of 100 Filipinos
aged 65, 45 are dependent on their family for support, 30 are dependent on
charity, 22 cannot retire and only 2 are financially independent.

Second, many Pinoys are afraid to put their money. The safest place they
knew aside from a piggy bank is to put their money in banks. Banks are great,
but, the interest of our money in banks is always below the inflation rate.
 Third, Pinoys do not have enough financial literacy. They play hide and
seek with financial advisers. Most skip the business or financial page of
newspapers and jump on showbiz news. Many can also read a thick novel book
but cannot spend a minute to read financial books. They can go and spend
money on movies, but never on financial seminars. Investing in the stock
market requires some studying before anyone places money on it. This is why;
many are crippled by fear of losing money in stocks. They just don’t know how
and do not bother to know how.

If you are reading this book, I congratulate you. My goal is to help you
open the door for a better financial path. This book is for Pinoys who wanted to
turn their finances around. My aim is to teach you in the simplest way, the
basics of the stock market. If you are new to the stock market or never read a
book about it, I suggest that you read the book cover-to-cover for three times or
more before investing. If you are already reading books and attending seminars,
you can just browse and enjoy the additional information that you can get.

My goal is that, after reading this E-book, you can start growing your
money and enjoy the profits soon!

- Michael Uy
Getting Started-LEARNING THE BASICS

What is Stock Market?

The stock market is a place where you can buy and sell shares of stock of
a publicly listed company. But before we tackle that, let us first define what
stocks are. Stock is also known as shares or equity. When you hear the word
shares, a share of stocks, equity, or stocks- it simply represents ownership of a
company. To make you understand it more, let us tackle it this way:

For example, Ben wanted to start a cotton candy business. He needs 1000
pesos capital but, he only had 500 pesos. So, he asked Jay to be his partner and
share 500. This means Jay own 50% share of Ben’s cotton candy business.
After a year of running the business, the cotton candy company earned 50,000
pesos. Since Jay owned 50% share, he gained 25,000 pesos from the profit.

Big companies allowed small investors (like you and me), to own a little
portion of their stocks. They will let you earn like how Jay earned by owning a
“share” on Ben’s cotton candy business.

What is stock market then?

First, it is a PLACE. You can visit a place called the Philippine Stock
Exchange or (PSE). One office is located in Ortigas and the other one in Makati.

Second, it is a BUY and SELL Market. Stock Market is a place to buy

and sell “company ownership” or “stocks”. There are selected and licensed
Trading Participants or Brokers who can directly buy and sell shares. Individual
investors need to transact with Brokers to invest in stocks.

Third, it is a choice of PUBLICLY- LISTED COMPANY. Companies

who wanted to join the PSE public listing must first pass the standards. There
are giant companies who offer its shares to the public to finance corporation
expansion. You can see these companies to PSE’s Public Listings.
Why invest in stock market?

Only 15% of people in the stock market make money from stocks- 85% loses it.
So, why you should bother to learn how to invest money through stock market
investing? There are many reasons why:

1. Make your money work for you

Your money doesn’t need a day off. It doesn’t get sick, nor complain.
You can make your money work day and night for you. But, it will only happen
if you know how. Money can be your enemy or your best friend. How money
behaves depends on your ability to handle it. Even if there are certain risks of
losing your money’s value in stocks; it is still considered as one of the best
instruments to profit passively.

For example, if you invested in funds like UITF or a mutual fund, your
average yield will be 10% or more. This is higher than when you just save
money in the bank or hold your money through time deposits. This is true
especially if you are looking for long term investments. Even if the stock market
crashes within the next 10 years; you can still gain the generous interest of your
money through this machine.

2. Fight inflation rate

“ Nungpanahonni Marcos, yungpiso, makakabilina ng bigas, ulam, at me

dessert pa! Ngayon, walanangmararatingangpiso!”

Do you wonder why money’s value shrinks every year? There is an

invisible villain unknown to many Filipinos. This culprit is called “Inflation
Rate”. Inflation pertains to a general increase of prices year after year. Dry
goods, gasoline, electric bill, water bill, tuition fee, transportation- nothing, and
no one is exempted.

Parents from 60s and 70s often said that they can survive the day with 1
peso. But today, we can barely survive with 100 pesos for one day.

In the next 10 to 20 years, things will happen the same way. The things
that peso can buy will decrease. Your 1,000 pesos today might only equivalent
to 100 pesos in the near future.
 Inflation will eat you alive. But, not when you know how to prepare for
it. The stock market is a great tool to grow your money more than the inflation
rate. Economic experts said that the average inflation rate is between 3 to 6%
per annum. This means that Bank interest of 1 to 3% is not a great tool to use.
When you invest your money in stocks for 10 years or more; your money can
yield up to 10% per annum or more. Not bad isn’t it?

3. It outperforms all other asset class

There many other ways to make your money grow. You can start a
business; invest in real estate and other assets. The problem here is that you
need a huge amount of money to start in real estate and it takes time to have a
profitable business. In the long run, investing in stocks can outperform all other
assets. You don’t need to pay for employees or caretaker month by month. And,
you are sure that your money machine works for you day and night.

How to make money from stock market?

As we mentioned earlier, investing in stocks is like owning a portion of a

company and corporation. Because you lend money in these companies, there
are two ways on how it will pay you:

1. Capital Appreciation (Buy Low and Sell High)

As the term implies, one of the ways to make money in stocks is to buy
shares in a lower price and sell it when the price is higher. For example, say you
purchase equity for 10 pesos. The company pays a dividend of a 1 peso per
share each year. This year, the company’s income grows and they are now
trading at 15 pesos per share. Since you invested 10 pesos, your capital
appreciation in the investment is 5 pesos or 50%.

2. Dividends

Earning from dividends is what the company will give you as their
investor. For example, a company declared that shareholders were to receive 1
peso per share, and you have 2, 345 shares; your earning will be 2, 345 too.
Making Money-Action Steps to Take

Making real money in the stocks (in a safe and sure way) is a boring process.
Yes, it is too simple and too boring. These are the practical steps that you can
follow:

1. Protect yourself first.

Investing money in stocks is like planting a seed today- you don’t expect
it to give you fruits instantly. You have to give it ample time to grow, bloom
flowers before you enjoy the fruits. The kind of money that you should put in
the stock market is money that you won’t be needing today, next month, next
year, or even 5 to 10 years from now.

The worst enemy in investing is when the circumstances forced you to

use your money that you invested in stocks. You should only put the money that
you are willing to forget in the next 10 years. In order to prevent this problem,
it is advisable to have an emergency fund and health insurance.

Emergency funds are funds that you will only use for “emergency”. To
compute for your ideal emergency fund, you can use this formula:

Emergency Fund (EF) = Monthly Budget (MB) x 3

For example, if you need at least 10,000 pesos a month to buy foods and
pay all your bills, you should have at least 30,000 pesos worth of emergency
fund. You can tap this money when you suddenly lose your job. But, beware:
Purchasing buy 1 take 1 branded cloth is not an emergency. 50% sale iPhone is
not an emergency too.

Health insurance is also a basic necessity if you want to protect your

stock market investment. One of the most common causes of withdrawing
money in stocks is when you or one of your family members gets sick. It is
advisable to have a health insurance aside from the Government’s health
insurance offer.

2. Save 10% (or more) of your income every month

One of the simple tricks that you can do to develop your saving habit is to
set aside at least 10% of your income for investment. Whether you have debts
or your income is not enough; you need to always “pay yourself” first. If you’re
earning 10,000 net a month, you should save at least 1,000 a month. This
amount is enough to invest in a mutual fund every month. If you will follow this
habit in 10 or more years, it will give you happy retirement days.

3. Do your research

For the record, 95% of the people who creates/join businesses don't have
the complete knowledge of the industry they are entering. Many Filipinos lose
their money on “quick money schemes.”

Never invest your money on things that you don’t understand. Don’t be
shy to ask. Be extra careful when investing your hard earned money to any
investment (even the stock market). You have the responsibility to do your
research. Read books about stocks, attend financial seminars, seek for mentors,
and ask for help from trusted financial advisors.

Your money is your responsibility. Earning money through stocks

requires basic financial literacy. This is also one of the advantages when you
plan to grow your money in the stock market. It will force you to learn not only
of investing; you will be enlightened in proper money management and how to
spend wisely.

4. Look for stock broker

After doing liberal reading and research; you are now ready to do your first
investment. There are three basic ways on how you can put your money in
stocks:

a. Through a Mutual Fund (Equity Funds)

For first time investors, opening a mutual fund is the easiest to start. You
only need a minimum of 5,000 pesos to open a mutual fund account.

A Mutual Fund is an investment where money is pooled from many

investors. The collected funds will be handled by a professional fund manager.
It is very convenient, and your task is to save month by month just like what
you are doing in the bank.

Check the lists of various Mutual Fund Companies here:

http://www.pifa.com.ph/factsfignavps.asp
b. Online Broker

Another convenient way to make money through stocks is by using your

internet. If you do have a stable internet connection and a personal computer; it
will be very easy for you to buy and sell stocks and even manage your stock
portfolio. Because you don’t have to pay a live financial broker, you can also
start with P5, 000. You can download the forms from the broker’s website, fill
up the forms, and follow the website’s instructions. You can also use online
banking to fund your portfolio.

Check the lists of online brokers here:

http://www.pse.com.ph/stockMarket/tradingParticipants.html?tab=2

Source: Philippine Stock Exchange Website

www.pse.com.ph

c. Live Broker

If you want to get personal financial advice and you know that you have a
liberal budget to start investing, you might want to work with a live broker. A
licensed stock broker can give you professional investment guides depending on
your personal goals. There are people who invest their money to prepare for
wedding celebration, enjoy a cruise, travel, or prepare for their children’s
education. A live broker can make a plan, according to your timeline and risk
tolerance.

You can also assign some brokers to manage your portfolio for you. But,
this service may cost you an additional service fee.

Click here to get a full list of available brokers. (hyperlinked)

http://www.pse.com.ph/stockMarket/tradingParticipants.html?tab=0

Click here to get the rankings of brokers. (hyperlinked)

http://www.pse.com.ph/stockMarket/tradingParticipants.html?tab=1

Source: Philippine Stock Exchange Website

www.pse.com.
5. What are the requirements to open an account?

The things that you may need will depend on the company and brokers that you
wanted to work with. As for example, here are some of the requirements to open
an account with COL Financials:

For FILIPINO CITIZENS:

Photocopy of one (1) valid government issued ID

Photo and signature must be clear

Billing Statement - Recent, no later than 3 months past

For RESIDENT FOREIGN CITIZENS:

Photocopy of one (1) valid government issued ID

Photo and signature must be clear

Alien Certificate of Registration (ACR)

or Work Permit from DOLE

Billing Statement - Recent, no later than 3 months past

For NON-RESIDENT FOREIGN CITIZENS:

Authentication of a photocopy of one (1) valid passport

Photo and signature must be clear

Proof of Income

Billing Statement - Recent, no later than 3 months past

For IN-TRUST-FOR (ITF) ACCOUNTS:

Photocopy of one (1) valid government issued ID of the parent

Photo and signature must be clear

Birth Certificate of the minor applicant

Duly-signed ITF Supplementary Agreement

Billing Statement - Recent, no later than 3 months past

Note:

There are also downloadable forms that you need to fill up and send together
with the requirements to their office.

To fund your account, you will need to have a bank account on recommended
banks.

See more details here:

https://www.colfinancial.com/ape/Final2/home/open_an_account.asp

6. Choose your investment plan

Before choosing an investment plan, there are several things that you
should consider. First, you must be clear about your GOAL. Why are you
investing your money? Is it for your retirement? Do you want to buy a car? Are
you getting married three years from now?

Next, you should decide for HOW LONG are you planning to invest your
money. Or, should we say, WHEN do you plan to use this money. Once you
have a clear money goal and specific time frame, it will be easier for you to
choose your investment plan:

Buy and Hold (Passive Strategy)

A Buy and Hold approach is a stock market investment plan that is great
for long term investors. In this strategy, the investor will buy shares and holds it
for a long period of time (5 to 10 years or more). He will just let the money
remain on stocks regardless of the fluctuations in the market.
This investment is great if you have a bigger budget of 50,000 pesos or more.
Instead of putting it on time deposits, you can invest it on the stock market and
enjoy higher yield.

Market Timing (Active Strategy)

The active strategy is also known as stock trading. Unlike the passive
strategy, market timing needs more time and technical skills. If one is new in
the stocks, this strategy is not recommended. But, if you need a vehicle which
can double your money value in a week; this approach is maybe for you. I said,
“maybe” because many people have lost money in market trading. This is
painful but true.

People who use these tactics are called traders rather than investors. They
are to watch the ups and downs of the market. They can double or triple the
money in a very short period of time; they can also lose it in a snap. This is the
reason why others perceive stock market investment as gambling.

There are two types of trading:

Technical Analysis

If you love history, then you might love using this strategy too. As old
cliché said: history repeats itself; so is in this strategy. In technical analysis, the
trader uses a technique to estimate the future value of a stock by reviewing
historical price charts and patterns.

The major assumption of technical analysis says that by studying the

stock price alone, you can determine the future value of a particular stock.

It may look simple, but in reality, it is not. You need more than reading books
or reading free articles. If you wanted to explore more of using technical
analysis; I suggest that you invest on a formal training or seminar.

COL financial offers a two-session seminar where each session going for at
least 4 hours.
Fundamental Analysis

In contrast with technical analysis, the fundamental analysis does not

only focus on the history and present amount of stocks. It estimates the possible
stock value by looking onunderlying factors that can affect a company’s
business and its future prospects.

Using this approach is more specific and needs a lot of training and skills
upgrading.

These are some of the sample questions that you are to ask:

- Which region is growing?

- Which countries in this region have the highest potential for growth?

- What industries in this country can have growth?

- What are the leading companies in this industry?

Again, don’t have to feel overwhelmed upon reading this. You don’t have
to learn how to trade before you start investing. There are other approaches that
don’t require you to be too technical.

Peso- Cost Averaging

Peso cost averaging is almost similar to Buy and Hold strategy. But,
unlike the latter strategy, it requires more discipline. In this approach, you are to
invest fixed amount of money in giant companies at fixed intervals regardless of
its price.

This strategy is great for minimum earners or investors who don’t have a
big amount of cash but with huge discipline. This strategy is very safe, simple
and effective. This is perfect for beginners too.
What should I buy?

Investing in the stock market needs more reading and studying. I suggest you to
visit these two references:

COL Financial

Website: www.colfinancial.com

COL Financial is formerly known as Citiseconline. The website allows you to

take a quick glimpse about stock market investing. There are available
investment guide choices. You can also check their products and services,
advisory services, and frequently asked questions. COL Financials do have free
live seminars, downloadable forms, and other reading materials to help you
decide and learn.

Truly Rich Club

Website: www.trulyrichclub.com.ph/about

The Truly Rich Club (TRC) is a membership site that teaches Pinoys how
to have an abundant life. It will not only make you rich financially, but it also
teaches people to cultivate each and every area of life. The TRC will guide you
step by step on how to be rich and have a fruitful retirement too. Upon visiting
the website, you can enjoy watching Bro. Bo Sanchez video. It will explain
more what the club is all about and how it might change your life too.
Lessons Learned: My Stock Market Journey

Before I wrote this book; I also dream to achieve financial freedom. I

started trading in the stock market on 2008 (during the Global Crisis time).
Those days, the stock market is on a great crash which makes it a very traumatic
experience for me. Until today, I can’t imagine how I endure the financial as
well as emotional and psychological effect of investing. The awful feeling of
investing my hard-earned money today and burning it tomorrow is
unforgettable. But, because of these losses, I realized that I need to equip myself
with knowledge. I am guilty, I skip the learning part. I thought that the stock
market is just about money and intuition. It cost me thousands of peso before I
figure out one thing: I need to study first. I tried to visit different websites and
read some books. I felt overwhelmed with different financial jargons; I do want
to give up.

One day, I as browsing some books and stumble upon with Bo Sanchez
“The Turtle Always Wins”. I felt like it was intentionally written for me. I will
never forget when the author mentioned “Hot Tips from his Uncle” on page 54.
I felt like: “Is Bo talking to me? This is me! This is really me!” Back those days,
I can earn 20%-50% within the day but lose it all in a bad trade. Back then, I’m
so arrogant because I’m telling myself always that I can get it back. I average
down and average down and average down until to the point that I put ALL my
money into it. I’m still stuck with that company. It’s way too deep to cut loss. I
think I’ll just give it to my children as inheritance maybe by that time the
company would be earning.

So I thank God for using Bo Sanchez to speak to me and make me realize

that there is a SAFE & SURE WAY of reaching my Financial Freedom through
The Truly Rich Club website. It really is a big help for me and now I am not
worried of my Stock Position anymore because I’m buying Giant Companies
which Bo Sanchez recommends.