The Philippine Stock Market: What You  Need to Know

Are you someone willing to know the ins and outs of the stock market?

If yes, you should be willing to explore the in-depth and basic learnings about the stock market. Sometimes, people are afraid to fail without considering the learning process. 

Don’t be afraid because we are here to help you understand better how stocks work in the Philippines.

In this article, you will learn important things about the Philippine stock market. You will achieve your financial goals with your willingness and dedication.

What is a Stock Market?

The basic explanation about the stock market is the right to get involved in a business. Owning a stock means having a share of ownership in a company. 

So if you wish to have a stake in a company, you need to buy shares.

The share of stock is the unit. Buying more shares will make the part of your ownership grow. It is like buying a house in a subdivision to be part of their growing community.

How does the Philippine Stock Market work?

The Philippine stock market is where companies like to buy and sell shares. A group acting as a leader in the transaction is the Philippine Stock Exchange (PSE). Individual people and institutions can choose a variety of investments under PSE guidance. 

The Philippine stock market explains how companies go public for funds. Dividends and capital gains help investors earn from stocks.

The investors will take part with the help of stockbrokers to secure their earnings. Holding many stocks can reduce the risk of volatility.

May kasabihan din na huwag mong ilalagay ang lahat ng itlog sa isang lalagyan.

If you are a person who is afraid to lose all his money, then you should know to spread it out. Buy many shares from different companies. Put your money in different stocks so that you will prevent it from losing all at once. 

The Philippine Stock Exchange teaches the public about investing in the stock market. They will help people to know when the right time is to buy, the possible investment risks, and more.  You can check a trusted website of a broker to start your investing journey. Follow the account opening instructions, and you are good to go.

Having a good mindset and avoiding information overload is important. Investors should have a plan, due diligence, and background information about the company. It will help them in preparation for entering the Philippine stock market.

Current Situation of the Philippines in Terms of Stocks

“Consider this: from January 2010 to January 2022, the stock market rose in value by almost 150%, or an annual return of 12.44%. That means if you invested P100,000 in January 2010, you would have nearly P250,000 after 12 years, essentially just by waiting. Keep in mind too that this includes the huge swings caused by the pandemic. Without that, you might have earned even more.”

– LANCE SPENCER YU

As of January 2022, the Philippine stock market has been in an acceptable condition. Some factors like political climate, economic indicators, and global events affected the condition.   

It’s important to note that stock market performance is subject to change. Various factors can influence it, like the pandemic.

Researching and seeking professional advice before making investment decisions is always wise. 

The Philippine Stock Market plays a significant role in the global financial market. Despite its size, it has shown resilience. The Philippines managed to attract foreign investors due to its strong economic fundamentals. 

Our country’s GDP growth and young demographic profile promote investment destinations. It attracts more investors due to its stability. 

But, the stock market is not immune to global economic trends. It happened in the decline of the Philippine stock market by 0.2 percent in 2021. COVID-19 brought uncertainties and fears of a global economic slowdown.  

The Philippine Stock Exchange (PSE) is aware of the evolving global financial market. It has been taking steps to keep up with the developments, such as offering new products and services. 

The PSE is also increasing its efforts to educate Filipinos on the stock market. They started investing through webinars and partnerships with academic institutions. 

Drastic changes happened after the pandemic. Nowadays, people have become more open to different types of money searches. It includes entering the stock market. 

Many Filipinos today are creating content online. Their goal is to provide information on how to start investing in stocks.

Advantages of the Stock Market

1. Potential for high returns: Stock market investment can provide high returns. It aims to generate revenue over the long term.
2. Liquidity: Stocks are liquid. The disposal will easily happen. Meaning buying and selling is not an issue. 
3. Diversification: Investing in the stock market allows investors to diversify their portfolios. It means spreading risks to many stocks.
4. Ownership: Owning stock in a company gives investors a stake in the company’s success.
5. Professional management: Many investors invest in mutual funds. The reason is that professionals with expertise in the stock market manage the funds.
6. Tax benefits: Certain investments in the stock market may offer tax benefits. It includes lowering the capital gains tax rates.
7. Inflation protection: Historically, stocks have hedged against inflation. Stocks aim to help investors maintain purchasing power over time.

Five Tips for Beginners Before Entering the Stock Market:

1. Do your research. Before investing in any stock, do your research. You must understand the company’s background, financial standing, and growth potential.
2. You can start small. Invest only some of your money at a time. Begin with a small amount. Then, gradually increase as you gain more knowledge and experience.
3. Diversify your portfolio. Minimize your risk by spreading your investments. Put it across different companies and industries.
4. Monitor your investments. Keep track of your stocks. Make sure to review your portfolio to make necessary adjustments regularly.
5. Have a long-term mindset. The volatile stock market has historically bounced back from downturns. Invest for the long term, and don’t panic during short-term fluctuations.

As a newbie to the stock market, preparation and awareness are important. You can’t start as soon as you want because you might find it difficult. 

In fact, walang nagsisimulang madali ang lahat. It is also important to only put in money you are willing to lose at any time. 

Like a gamble, the stock market is only sometimes a win-win situation.

Keep in mind that there is a possibility for uncertainties and risks. 

Entering the world of the stock market takes careful study, perseverance, and dedication. Every step you take is essential. You should think about things thoroughly.

Requirements for Beginners in the Stock Market:

As a beginner in the Philippine stock market, there are a few requirements that you need to fulfill. 

• Firstly, you must open a stock trading account with an accredited stockbroker. It will need to fill out a Customer Account Information Form. Followed by submitting your identification papers for verification.

• Secondly, you need to have enough funds to invest in stocks. Some stockbrokers don’t require a minimum investment amount. While others require an initial deposit of at least PHP 5,000 to activate your trading account. 

It’s important to note that investing in the stock market requires a proper mindset. Also, a long-term perspective.  

• Lastly, beginners should educate themselves on the basics of stock market investing. Such as the risks involved, buying and selling stocks, and analyzing companies. The Philippine Stock Exchange has resources. It involves the Investor’s Primer to help beginners get started.

Kinds of Investments under the Philippine Stock Market

Investors looking for less risky investments can consider preferred shares. They can also look into real estate investment trusts (REITs). 

Preferred shares and REITS can provide regular dividends. They are less volatile than common stocks. 

REITS offer higher returns than traditional bank deposits and bonds. They have dividends taxed at a lower rate of 10%.  

Yet, potential risks remain. Possible results are delay in dividends or lower REIT dividends. The reason is due to higher vacancy rates or lower rents. 

Manage risks by investing in preferred shares and REITs. They should come from growing industries or those managed by profitable companies. Real estate investments are often seen on the internet today. 

Marami ang nagiging interesado. REITs are popular with most people through their good annual dividend yield. The list includes the following: 

• Ayala REIT
• Megaworld REIT
• Filinvest REIT
• Citicore REIT
• Double Dragon REIT

Investors looking for higher returns can invest in an affordable mutual fund. They can also consider unit investment trust funds (UITFs) that offer diversification.  

UITFs examples include index funds and equity funds. Or funds for investments outside the local market.  

Final Thoughts on Philippine Stock Market

Investors can gain from stocks through dividends and capital gains. They must engage a stockbroker to take part. Investing in many stocks can help mitigate risk. 

Despite the stock market’s susceptibility to external factors, it has shown resilience. It also attracted foreign investors due to its strong economic fundamentals.  Suppose you’re considering investing in the stock market. 

In that case, there are several advantages to remember. It involves the following:

• High potential returns, 
• Liquidity, 
• Diversification, 
• Ownership, 
• Professional management, 
• Tax benefits, and 
• Protection against inflation. 

As a future investor, it is wise to research and seek professional advice. Before making investment decisions, allow help from experts.  For more information, you can also check Paano Yumaman sa Stock Market. It talks about starting your stock market journey. It covers a more in-depth discussion of the Philippine stock market.