Welcome fellow stock traders - investors.
I'm Joven from Philippines
and also known as trader202 as my username on various stock trading and business forums.
This site contains all the basic and
easy-to-understand stock trading and investing online and principally intended to the individuals interested and first time investor. The main objective of this site
is to orient people about the stock market and to guide them
on how investing in stock can further secure one's financial future by becoming a
successful trader-investor at Philippine Stock Exchange.
Stocks have been known as a good an investment vehicle. Better than any other fixed income investment; bank savings, time deposits, government securities and bonds. It has lots of historical data proving that it
is very profitable (once you get the hang of it). Buy at a low price
and sell at a high price is the common strategy of traders.
But it's been highly recommend that you will take the initiative to learn and practice the discipline, to understand the principles. It's time to get started on the road to financial freedom.
Let’s compare it to the usual investments Filipinos make and their interest rate:
* Savings Account – about 1% per annum
* Time Deposit – about 3% per annum
* Stock Trading – can be 3% on a day, 10% on a week, or even 100% in a year (it varies)
Isn’t that great! However before you celebrate, keep in mind that higher gains always mean higher risk. The difference between Savings Accounts / Time Deposits and Stock Trading is that the latter can lose you money. That is why you have to calculate your risk, and diversify your investments.
Sources: Growth graph from Philippines Stock Exchange and PSE Youtube Vedios
WHY WE NEED TO INVEST?
Here are the main reasons why we need to invest. To can (1) beat current inflation and (2) achieve financial targets or goals; buying a new automobile or car, house and lot, college education, and to (3) your own retirement plan. Retirement? -yup! we better start thinking about our retirement now.
These are 3 reasons why we need to plan our retirement.
1. According to the National Statistics Office (NSO), 1997-2007 Census, Philippines’ average annual inflation rate for the past 10 years is estimated at about 6%. To illustrate further, the purchasing power has gone down from Php1,000.00 in 1996 to Php558.12 in 2007. Because of this we must make sure that our income, savings and investments grow by at least 6% every year. Otherwise, we will be reducing our purchasing power.
2. Filipinos live on average up to 70 years old. Some Filipinos start to think about retirement at age 28 but does not have the drive or means to prepare for it.
3. SSS/GSIS – is it NOT enough to sustain our retirement needs!
You can choose from many investing options. You can invest in stocks, mutual funds, or bonds. On this trend, I preferred on stocks; business and retirement vehicles.
WHAT IS STOCK EXCHANGE?
An organized place or simply a market of traders or investor, buying and selling company securities; common stocks, preferred stocks, warrants and bonds. Stock exchanges have specific addresses or locations where the trades completed. For the company stocks will be traded at these exchanges, it must be listed, and to be listed, the company must satisfy certain requirements. But not all stocks are bought and sold at a specific site. Such stocks are referred to as unlisted. Many of these stocks are traded over the counter—that is, by telephone or by computer (online).
The PHILIPPINE STOCK EXCHANGE, Inc. (PSE) is an organization that provides and ensures a fair, efficient and transparent market for the traders in terms of buying and selling stocks. PSE was founded on March 1927, considered as an oldest exchange in Asia.
WHAT IS THE IMPORTANCE OF STOCK EXCHANGES?
More importantly, the stock exchange will encourage investment by providing safe place for traders or investors for buy and sell of company shares. This shares, enables corporations to obtain additional funds or capital to expand the businesses or to develop new product, some are use for marketing.
The investment bank acquires the initial issue of the new securities from the corporation at a negotiated price and then makes the securities available for its clients and other investors in an initial public offering (IPO). In this primary market, corporations receive the proceeds of security sales. After this initial offering the securities are bought and sold in the secondary market. The corporation is not usually involved in the trading of its stock in the secondary market. Stock market or exchange basically function as a secondary markets, by providing traders or individual investor the equal opportunity to trade financial instruments; the stock exchanges support the performance of the primary markets. This arrangement makes it easier for corporations to raise the funds that they need to build and expand their businesses.
Exchanges also support state-of-the-art technology and the business of brokering. This supports and helps the traders and investors to buy and sell stock securities faster and efficiently. Of course, being able to sell a security in the secondary market increases the relative safety of investing because investors can unload a stock that may be on the decline or that faces an uncertain future.
WHY CORPORATIONS ISSUE STOCK?
Corporations issue stock in order to finance their business activities. This method of raising funds is only available to business firms organized as corporations; it is not available to sole proprietorship and partnerships. The corporation can use the proceeds of a stock offering in a variety of ways. Depending on the company purpose for funding, this might involve most probably on increasing research and development operations, purchasing new equipments or upgrading, purchasing new facilities or acquiring other companies shares.
An alternative to stock financing is debt financing or the sale of bonds, an interest-bearing loan. This alternative is also available to sole proprietorship and partnerships. With the issuance of a bond a company typically promises to make periodic interest payments to the lender or bondholder as well as pay back the amount of the bond when the term of the bond expires. Thus bonds are evidence of loans while stocks are evidence of ownership. Stocks and bonds are collectively known as securities.
Corporations sometimes split their stock in two or more, means the corporation replaces outstanding shares with new shares on some multiple bases, such as a two-for-one or three-for-one split. When a corporation splits its stock, it does not obtain any new funding. Splits usually occur when the market price of shares is deemed too high by corporate management. With a split the price of shares falls, making purchase by smaller investors more affordable. Keeping a stock relatively affordable for smaller investors makes it easier for a corporation to raise money with a follow-on stock offering.
WHAT IS STOCK TRADING?
Stocks are shares of ownership in companies. People who buy a company’s stock may receive dividends (a portion of any profits). Stockholders are entitled to any capital gains that arise through their trading activity—that is, to any gain obtained when the price at which the stock is sold is greater than the purchase price. But stockholders also face risks. One risk is that the firm may experience losses and not be able to continue the payment of dividends. Another risk involves capital losses when the stockholder sells shares at a price below the purchase price.
A company can list its stock on only one major stock exchange. However, options on its stock may be traded on another exchange. Where a stock is traded depends on both the requirements of the exchange and the decision of the corporation.
Most security trading is accomplished through brokerage firms. Persons and organizations that wish to purchase securities will call upon the brokerage firm to execute their transaction. To actually conduct the transaction on the stock exchange, the brokerage firm must have a membership, called a seat, on the exchange. Stock exchanges limit the number of available seats, and the cost of a seat on an exchange is high.
Brokerage firms are willing to pay high prices for exchange seats because of the profit opportunities available from membership in an exchange. Profits can be generated from the fees charged for the execution of trades as well as from trading on the firm’s own account. There are, however, risks associated with brokerage firm activity.
WHAT DOES STOCKBROKERS MEANS?A stockbroker is an employee of a brokerage firm. The individual investor contacts his or her stockbroker and provides the stockbroker with the details of the transaction the investor wants to complete. Stockbrokers, however, are more than order takers or sales representatives for their firms; they frequently provide advice to the investor. They may have their own client list and call clients when they see transactions that will fit the client’s investment objectives. Stockbrokers almost always have certification from, or registration with, a state government agency or an exchange or both. For this reason they are sometimes referred to as registered representatives.
Institutional brokers specialize in bulk purchases of securities, including bonds, for institutional investors. Institutional investors include large investors such as banks, pension funds, and mutual funds.
WHY PEOPLE BUY STOCK?
Economic gain represents the primary motive for the purchase of stock. The gain or return from stock consists of two parts: dividends, the periodic payments made from profits, and appreciation, the capital gain realized from selling a stock for more than its purchase price.
An investor really has only two choices in acquiring the financial assets of a corporation—buying stocks or bonds. As a financial claim against a company, bonds take precedence over all types of stock. Thus, they are a safer investment than stocks, especially in times of deflation (a period when the prices of goods and services are generally falling). Stocks, however, are usually the better investment during periods of inflation because they represent ownership of assets that will probably rise in value as fast as or faster than prices in general. Because the dollar value of bonds is fixed, they cannot serve as a hedge or protection against inflation as do common stocks.
TYPES OF STOCKS
-Common and Preferred stocks are the usual stocks traded on the market.
Financial loss or gain can be greater with common stock than with preferred stock. Holders of common stock have residual equity in a corporation. This means they have the last claim on the earnings and assets of a company, and they may receive dividends only at the discretion of the company’s board of directors and after all other claims on profits have been satisfied.
For example, if the company is dissolved, stockholders share in what is left only after all other claims have been settled. Because dividends and equity do not have fixed dollar values, holders of common stock can reap greater benefits when a company is prosperous or lose more when a company is doing poorly than holders of preferred stocks.
Preferred stock holders take more priority compared holders of the common stock. They also entitled to receive a fixed dividend before any payments are made to common stockholders. Holders of preferred stock typically receive a share of the proceeds from the dissolution of a company before holders of non-preferred stock. Some stocks have both preferred dividends and preferred assets. Stock with first preference in the distribution of dividends or assets is called first preferred or, sometimes, preferred A; the next is called second preferred or preferred B, and so on.
WHAT IS STOCKHOLDER MEAN?
When a trader or investor bought share or stock of the company, you’re now considered as a stockholder or shareholder, a business owner and a part of the company, with a limited liability protection. Limited liability means that a stockholder is not personally liable for the debts of the corporation. The most a stockholder can lose his capital if the company fails to increase the share price amount compared to the shareholders originally paid for the stock. Consequently, the owner of shares can realize a profit or capital gain if the stock is sold at a price above what the owner originally paid for it.
Stockholders also receive periodic reports, usually quarterly, that provide information regarding the corporation’s business performance. Stocks generally are negotiable, which means stockholders have the right to assign or transfer their shares to another individual.
READY TO START STOCK TRADING ONLINE?
Trading single stock will give you an in depth knowledge on how stock trading works and that can be applied to other stocks later on. Simplicity is beautiful.
we were trained to trade, we used technical charts without knowing
which stock or commodity is being traded. There
is always another person opposite your trade and he thinks you are
wrong! Trading is about people. People with fears and hopes and greed.
In a nutshell, we trade people, not stocks! Learn to trade the charts.
If you can do that, you can trade anything.
Check now on the next page, [START HERE]. To know the procedures how to open an account, to buy and sell your stocks. All of the articles posted are sourced from the knowledge I've learned from my trading experience and ideas shared to me by my stockbrokers and friends from PSE, CitiSec Online, PhilStock Equity, RCBCSec, BPITrade.Categories:
Dividends / Rights
Latest posting of dividends and rights
Guides on investing & seminar schedules
Stock pick, current events and issues
Trader202: Tips & Tricks
My trading tips and recommended stocks
Remember that to be successful on this ventures, better to equip yourself with enough knowledge and right trading platform.