Stock Market Investing for Beginners: How To Invest and Everything Else You Need To Know
When in Manila, there are three things you need to learn in order to make the most out of your money. First is how to beat inflation, second is the knowledge passed on by the gurus of investing, and finally, the guts and the mindset to take on the role. Luckily for you, we’ve got the two steps covered. Well, at least the first half of it.
Biz Whiz Business Training and Consultancy recently conducted a free module on Stock Market Investing for Beginners last October 26, 2013 instructed by Mr. Ryan Ulysses Cruz. From the basics of investing to maximizing your income, you’d be asking yourself…
Let’s get to it.
First stop: how to beat inflation. For starters, inflation (according to Google) refers to the rise and fall of the purchasing value of money. In layman’s term, it’s how you know how much you can buy with your 20 pesos, and yes, Cornetto no longer fits the bill if you’ll buy it in a sari-sari store. Sorry, guys.
To beat inflation, you have to earn more than the inflation rate which is 3.5%. Safe to say, our savings account and time deposit interest don’t make the cut. And that’s where investing comes in.
According to Sir Ryan, the very reason why most people get burned in investing is because they gamble their stakes without really studying stock marketing investing for beginners.
He says that in order to be a successful investor, you have to learn from those who became successful in it; and likewise, invest in your education. Be patient.
Read books. Attend seminars. Ask. Therefore, what are the need-to-knows in investing?
1. Stocks are your units of ownership in a particular company. In short, this is your share if the company is going downhill or conquering an empire with flying colors.
2. IPO, the one you see in the newspapers everyday, is called the Initial Public Offering. Meaning, these are the companies you can invest in. Make sure you know where your money is going; talk to your broker about the Prospectus.
3. Dividends are the cash or stock returns you get from your investment. If this was a job, then dividends would be your salary. Cash dividends are well, CASH. Stock dividends, on the other hand, are the percentage of the stocks you own. Hence, if you have 100 shares in a company and given 35% stock dividends, you now own 135 shares.
4. There are two types of stocks- Preferred and Common. Let’s make this easier. Imagine this scenario in your head.
If you’re willing to jump off a cliff and take risks, Common stocks are perfect for you. Now, if you’re the opposite, might as well go for Preferred stocks to keep your head sane. Also, keep in mind that 90% of stocks listed in Philippine Stock Exchange (PSE) are Common stocks. So, choose wisely!
5. There are two classes of stocks, the A and the B. Basically, what you need to remember is that Class A stocks are exclusively for Filipinos while the Class B stocks are open for foreign investors and are more volatile because of it.
6. Lastly, there are six jargons commonly used when referring or typecasting stocks.
- Blue Chips stocks are considered the most stable, profitable and with relatively lower risk.
- Income stocks are purely dividends without much volatility, in short, COLD HARD CASH (and stocks).
- Growth stocks are for hard-core risk takers who are willing to invest in starting companies and don’t expect any pay-out some time soon.
- Defensive stocks offer stable and constant earnings regardless of the economy’s current situation.
- Cyclical stocks are dependent on the rise and fall of the economy.
- Speculative stocks are purely based on estimation. Best example would be mining corporations, now you see them, now you don’t.
Phew! That was long. Now, how do you make money out of stocks? There’s the stocks and cash dividends.
Or you can sell your shares (This is called Capital gains).
Find a good reason in selling your stocks though. Make sure you’re earning more than what you initially paid for.
Now if you’re already planning to invest, you might be asking yourself how much is the required minimum investment? Well, it varies from company to company. For example, if your company is selling their stocks at 0.0099 cents, then you would need to buy one million minimum shares which equates to Php 9,900; while if you decide to get a company stocks selling at 49.95 pesos, then you will only need to buy 100 shares which is roughly equivalent to four thousand pesos. See the difference?
Then there’s the broker’s fee, vat and 12% tax to add up in the equation, but after that, you’re all good.
It’s a lot of math. We know!
But hey, that actually concludes our Need-To-Knows in investing! That wasn’t so hard, was it? Now, it’s time for the How-Tos! It’s not gonna be as long as the Need-To-Knows, so you can relax now.