Buying PH stocks: how to invest in stock market

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How can you you invest in the stock market?

It was in 2018 when I bought my first ever stock from the Philippine Stock Exchange. Here’s how that experience went and why I will continue to buy more in the future.

This is also a beginner’s guide to everyone who may want to start investing in companies that they like.

Background

Several years back, I wanted to learn more about investing. This was after I’ve invested in UITF and mutual fund.

I focused mainly on mutual funds. Not only that, I also wanted to own direct stocks of companies. I was told that it’s not going to be easy. I started seeking out financial seminars on stock trading.

Good thing the Securities Exchange Commission and a stock broker located locally were offering them free of charge. I attended several of them, including the paid ones. And it’s been a wild ride since.

Investing in stock market for beginners

A stock is a proof or evidence of your interest, ownership, or participation in a business.

It indicates that you’ve invested in a company and in turn you get to enjoy the rights as a stockholder such as getting invited to the annual meeting, earning dividends, or voting the board of directors that would manage the everyday operations of the enterprise.

Owning a stock means that you are part of the business’ growth story. You gain when it grows and lose when it stalls.

The number of stocks you can own depends on the amount you invested, the company’s worth, and number of owners. Imagine that an entire company is a pie owned by many people called stockholders, and that each is entitled to a slice that represents their investment.

A stock represents a slice of the corporate pie.

If the corporate pie (worth) is worth P1 million pesos and there are 100,000 owners (stockholders), then each slice (stock) is worth P10 (P1 million ÷ 100K).

And if you owned say 1,000 stocks, then your investment is P10,000 (1,000 x P10). It can also be said that you own 1% of the company (P10K ÷ P10 million). This is what is called your part-ownership, which is also formally known as equity.

Top 10 best stocks in the Philippines

So how much can you earn?

That might be the next thing that you’d ask. And you’re in luck. We have checked the one-year return of all stocks being traded on the market, and in 2020 these are the top 10 companies that were the best performing.

Some notes to bear in mind.

  • Ticker is the stock symbol as it appears on the exchange.
  • Stock return % measures the change in the price between the last trading days of 2019 and 2020.
  • Total ROI or return on investment includes price change and the total dividends issued for one year.
  • The figures are all past data. Historical performance does not guarantee future returns.
  • Are there any losing stocks? Yes. For the full list, you can read best Philippine stocks with highest gains.
COMPANY NAMETickerStock Return %TOTAL ROI
AC Energy CorporationACEN268.88%269.37%
Premiere Horizon Alliance CorporationPHA205.56%205.56%
Apollo Global Capital, Inc.APL204.76%204.76%
MRC Allied, Inc.MRC199.49%199.49%
NiHAO Mineral Resources International, Inc.NI196.08%196.08%
DITO CME Holdings Corp.DITO188.36%188.36%
Benguet CorporationBC174.34%174.34%
Atlas Consolidated Mining and Development CorporationAT158.40%158.40%
MerryMart Consumer Corp.MM109.49%109.49%
COL Financial Group, Inc.COL84.98%105.57%

As you can see, all of the companies above gave triple-digit ROI to shareholders. In fact, if you’ve invested in the number 1 stock on the list for ₱100,000 on the last trading day in 2019, that capital would be worth  ₱364,945 by the end of 2020.

Types of stock in the Philippines

There are two types of stocks that are available in the Philippines: common stocks and preferred shares.

1. Common stock

A common stock is a stock that represents equity. It gives you the right to share in the profits, get dividends, and the ability to vote. Most of the shares that are available for trade in the exchange are common stocks.

As of today, there are a little less than 300 companies whose common stocks being traded on the exchange.

2. Preferred shares

Owners of preferred stock are prioritized to receive dividends. When the company goes bankrupt, their claim on the assets comes first before common stocks (of course, after all the debts are paid).

However, they mostly don’t have any voting rights. There are very few preferred stocks available in the market. They are also traded very infrequently.

For a more in-depth discussion, see the article on investing in preferred shares.

Blue chip stocks

Now, there are companies of established profitability and stable earnings through the years. These companies are called blue chip stocks, which is borrowed from poker chips of the highest value.

In the Philippines, we have the 30 top companies that are considered blue chip. They are part of the Philippine Stock Exchange index or simply stock index.

You can buy individual stocks directly so you can enjoy blue chip dividends. Or an easy way, you may also invest in index funds.

Blue chip stocks

Stock exchange

The stock exchange is a marketplace where stocks can be bought or sold. In our country, the Philippine Stock Exchange is the the only stock exchange. But not all corporations can be part of the exchange.

Going public. When a private company wants its stocks to be part of the exchange, it is called initial public offering or IPO. Why would companies need to go public? Companies need capital in order to sustain or expand operations. They can actually raise capital by borrowing or by issuing shares to private investors, called venture capitalists.

However, they may reach a point where they’d need more capital than what lending institutions or venture capitalists can provide. By going public, they can raise more as they let more investors to be part of the company without having to increase their debt obligations.

Also, by inviting the investing public to trade its shares, early investors can cash in on their investments.

Underwrite. The company chooses underwriters, which are investment companies, who would buy the shares and then sell them to the public hopefully with a profit.

Initial public offering (IPO). Once the SEC gives the green light, then the company debuts on the stock exchange in an initial public offering. It is the first day that the company is listed on the exchange and its shares traded.

Why buy stocks?

What are the advantages of owning stocks?

Increasing returns

Historically, the returns of the stock market have been increasing. One way to know this is through the stock index, which is a collection of the top 30 companies in the Philippines that are called blue chip stocks.

According to the historical performance of the stock index, it’s been growing at a compounding rate of at least 11% for the past 10 years. See below actual chart.

The stock index performance since 1988.

So even when there are dips in the past, especially during time of economic slowdown, the general trend is going up. Of course, past data does not guarantee future returns.

Long-term investing

The stock market is ideal for long-term investing. As you can see from the chart, the longer that you invest, the more opportunity that you can earn.

That’s because long-term investing can actually make up for volatility and market corrections. The effects of global recession in 2008 for example actually was a springboard for years of recovery that followed.

Earn dividends

Investors can receive dividends. Dividends are part of the company’s earnings that they decide to pay out to all their shareholders.

It’s really up to the board of directors how much dividend to give away or whether they pay one at all. That’s because earnings may be reinvested back to the business, whereas dividends are subject to tax of 10%.

It’s also up to the directors if they pay out in cash or in the form of stocks. If it’s in cash, you may determine the yield which tells you how much is the dividend compared to its price.

You can read Blue chip stocks with the highest dividends. For a more complete list, you can also read Philippine companies with highest dividends.

To be part of company’s growth story

When you acquire shares of companies, you become part of its growth story. If its business expands and gains profits, you can be part of its increased valuation as it is going to be priced higher.

What’s more, corporations such as banks (BPI, BDO, Metrobank, Security Bank), telecommunications (PLDT, Globe), retail (SM, Ayala, Puregold), and real estate companies (DMCI, Ayala Land) are household names. And it’s great to be one of its shareholders.

Influence on company’s direction

People who own shares actually have voting rights. Their rights depend on their equity; the larger the investment, the larger the equity and the more weight their votes count.

With voting rights, even investors who own small equity may form minority blocs to influence the company’s direction. You may have a voice on decisions such as choice of directors, acquisitions, and other big-ticket items.

What are the risks in owning stocks?

As an investor, everything is not all peachy all the time. There are risks involved when you start trading in the stock market.

Liquidity

The only way you can buy stocks is when someone else is willing to sell them. The converse is true, you can only sell when someone else is willing to buy. On top of that, you and the seller/buyer would need to agree on a price that you’re both comfortable walking away with.

This is situation is called liquidity. It’s a measure of how easy it is to buy or sell stocks. Some may not have difficulty at all, but very unpopular stocks may have challenges in being traded.

Non-guaranteed returns

The returns, that is the increase or decrease of stock prices, are not guaranteed. This is what’s called volatility. There’s no telling which way the price goes.

Jollibee Foods Corporation stock volatility.

Non-guaranteed dividends

If you’re hoping to earn from dividends, they may not be guaranteed when you hold common stocks unlike, say, Pag-ibig MP2. Preferred stocks may even face unpredictable yield from time to time even when these are prioritized upon distribution of dividends.

Concentration risk

If you only hold one stock, you might run into insurmountable losses. This risk can be mitigated by diversifying, i.e. purchasing shares of companies belonging to different industry, business, or market.

Inflation

Because of unmet expectations, the entire worth of your investments might be eroded due to inflation. That is, the value of your portfolio may rise to meet or exceed the general price increase of goods and services.

How to buy stocks

So how do you buy stocks?

If you think that you’re willing to take the risks, and understand the dynamics of supply and demand on the stock exchange, and have already chosen shares of companies to acquire, then purchasing the stocks can be very easy.

I’m going to share my own experience, and this is no way an endorsement. I am also not paid to feature a specific company. Freely choose any broker

1. Get a stock broker

A stock broker is a company that receives your buy and sell instructions, and execute them on your behalf. Needless to say, as an individual investor, you are not allowed to acquire stocks directly from the stock exchange.

A more detailed discussion and the list of brokerage firms are on List of stock brokers in the Philippines. Or you may want to go online so here is an article on the best online stock brokers in the country.

In my case, I chose to open with UTrade by Unicapital Securities, Inc. The reason was that they offered free financial seminar that I was lucky to attend, and they had a branch near where I’m at.

Again, freely choose any firms you like especially those stock brokers that allow you to open account online.

2. Prepare required documents.

Check with your chosen broker on the files that you need. They will require that you submit a photocopy of at least one government-issued valid identification card and tax identification number.

For foreigners trading in the domestic equities, a valid passport needs to be presented. An Alien Certification Registration (ACR) or Work Permit from the Department of Labor and Employment (DOLE) will also be required from foreigners working in the country.

3. Deposit your investment

Check with your broker how much is the minimum initial deposit. Some may allow you to start an account for as low as ₱1,000.

And there are also varied instructions on how and where you can deposit. Others allow you deposit in a bank, and you just need to send the slip through email to your broker. Others have online arrangement with banks, payment centers, and online fund transfer transactions.

4. Log-in to the trading platform

Once you have a broker, you would be given login credentials to access the trading platform. It is where you actually see the shares that you can acquire.

Utrade trading platform

Now, don’t get intimidated by what you see. You will eventually learn how to navigate around this.

5. Determine minimum board lot.

It is also important to remember that there is a minimum board lot set by PSE. The board lot requires a purchase of the least number of shares depending on the price.

So for Jollibee whose price falls between 200 and 499.9, then you are required to buy at least 10 shares.

PSE minimum board lot.

6. Indicate the stock ticker, price, and number of shares.

Depending on the platform that you’re using, you should have a way to order new shares. In this case, there is an order pad.

Order pad for buying new stocks.

Here’s the breakdown of this order pad.

  • Stock. The company whose shares you want to purchase. In this example, we’re buying JFC or Jollibee Foods Corporation.
  • Action. The instruction you want your broker to do, which is to buy.
  • Order type. We selected up to the limit.
  • Qtyx1. The number of shares you’re acquiring. In this example, we’re buying 50 shares.
  • Price. This is “bid” price for each shares.
  • Validity. There are four choices you can select. Day means you wait for any sellers for the entire trading day to agree to your “bid” price. FAK means fill and kill; the broker must execute the trade or cancel when it’s not fulfilled. GTC means good ’till cancelled, so there is no expiry date unless you cancel the trade. GTD means good ’till date, where you establish the the expiry of the trade.

In our example, the minimum number of shares for Jollibee, whose price is at about 220 pesos, is 10 shares. (This is only an example using the price in the past, so actual present value differs.)

7. Pay the order

As you can see on the picture, the due amount is ₱11,230 with transaction fee of ₱33.12 for a total of P11,263.12. The breakdown of these fees is explained below.

Cost of trading

When you do trade, you would be required to pay some charges. These charges would be computed by your broker.

There are several charges, fees, and taxes associated with either buying or selling stocks.

Fees, charges, and taxes when trading stocks in the Philippines.

For more information, you can read Cost of stock trading: fees, taxes in Philippines.

The next question then is, what stocks to buy?

That is a rather easy question to answer. There are about 270 actively-traded companies in the exchange. You can see the complete company list on the PSE.

You may also view the best stocks with highest gains or largest companies in the Philippnies.

The only times that this list is modified is when companies decide to take their business back to become a private entity. Or they may be removed from the listing due to some SEC or PSE rulings, such as failure to submit quarterly or annual reports accurately and in a timely manner.

However, the tough question that can be asked is what stocks to purchase that can give the most gains? Some people go by buying well-known brands, such as retail giants and utility companies.

And there are others who like to make decisions based on these two:

  • Fundamental analysis
  • Technical analysis

Fundamental analysis: the value of stocks

In fundamental analysis, the price of a stock is compared with the value of the business. It tries to answer whether the current price that investors are paying for a stock makes sense with the nature of its business, its profitability, etc.

This strategy takes advantage of the fact that investors sometimes are excited about the prospect of a company that the demand for its stock is high and its price goes up.

And at times the opposite is true. Investors may have missed looking into a really good business of a company that its price is low because of weak demand.

People who use fundamental analysis try to look for stocks that are undervalued; meaning, its price is low compared to what the business is worth. This is called value investing.

There are tools and methods available that can help investors know this. Of course, one can use the price-to-earnings ratio, shareholder’s equity, etc. It also requires reading financial statements, checking the historical data on cash flow and past cash dividends, etc.

Technical analysis: the price momentum of a stock

On the other hand, technical analysis is about timing the market. What people do is to look at trends on the price, and this is done through a graph of its movement through time either within the trading day (called intraday), weeks, or months.

As you can see in the image below, the price does not move in a straight line. When it trends downward, it does not go down in a neat slope. Instead, it goes through a series of ups and downs.

And surely, when it goes high, it does not do so in a neat slope either. It experiences ups and downs along the way.

Investors who use technical analysis would try to predict that a stock price is about to soar, so they anticipate such trend by buying low. When the price does go up, they then can choose to sell and they can gain in the process.

Indicators and signals are used to see which way the price moves. These can include average price for the past few weeks, the volume of trading, etc.

Frequently asked questions

1. How much initial capital can I start?

It really depends on you and the initial requirement set by the broker.

2. What is the recommended amount when buying stocks?

It’s a good practice to buy stocks with at least ₱8,000 (₱20 ÷ 0.25%). That’s because there’s a ₱20 minimum broker’s fee or 0.25%, whichever is higher. Less than 8k, and you’re paying more fees in relation to the amount you invested.

See the illustration below. For more information, check a discussion on minimum board lot.

Php 8,000 is the recommended capital in buying shares from the Philippine stock market.

3. What is the stock trading schedule in the Philippines?

What time of day can I buy stocks?

You can actually trade on the exchange on weekdays. Trading hours is between 9:30am to 12:00 noon, and then it resumes in the afternoon from 1:30pm to 3:30pm. The market is closed on weekends and holidays.

However due to the coronavirus pandemic, the Philippine Stock Exchange has shortened the trading hours. Here’s the new schedule starting June 1, 2020. This is in effect until further notice.

TimeActivityDetails
8:45 A.M.National anthemSinging of the anthem. 
9:00 A.M. to 9:15 A.M.Pre-openAlthough orders are not currently being matched, trading participants can open or cancel or change orders. 
9:15 A.M. to 9:30 A.M.Pre-open no-cancelNew orders can be created. Any cancellation or change is not allowed. 
9:30 A.M.OpeningOpen prices of equities are computed. Trading participants can no longer open, cancel or change orders.
9:30 A.M. to 12:00 N.N.TradingTrading commences. Orders are matched.
12:00 N.N. to 1:30 P.M.RecessAll trading is stopped. 
1:30 P.M.TradingTrading resumes. 
3:15 P.M. to 3:18 P.M. Pre-close auctionTrading participants can no longer open, cancel or change orders.
3:18 P.M. to 3:20 P.M. Pre-close no-cancelNew orders can be created. Any cancellation or change is not allowed. 
3:20 P.M. to 3:30 P.M.Run-offLimit orders can be created by trading participants or market orders. However, matching them are facilitated exclusively at the closing prices for both orders.
3:30 P.M.Market closeAll trading is stopped. 

4. I still want to learn more. Are there any seminars I can attend?

Yes. The Philippine Stock Exchange offers regular seminars free of charge for anyone who wants to learn more about stock investing. You may check the PSE Facebook page for schedules.

You may also want to inquire at any brokerage companies. They also offer free seminars.

Some of them offer paid sessions on technical analysis (which gives you idea on the price momentum of a stock in order to maximize gains through careful entry and exit price points) and fundamental analysis (which teaches you how to appraise the value of a business and if its current share price is over/undervalued).

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30 thoughts on “Buying PH stocks: how to invest in stock market”

  1. gd am PL, due to current Pandemic Covid 19, it is a good time to buy stocks as prices/shares were low?…

    1. Hi, zaldy. Apologies. The page avoids recommending company stocks. Please consider learning fundamental and technical analysis before starting to trade in the stock market.

  2. hi! Is it fine that Ill buy 500k to 1M worth of shares @1 peso per share? would a broker allow that?

  3. Hello. I don’t know much about the stock market and stock exchange. My grandma is constantly asking for a favor to check the stock that she bought roughly 24 years ago. What exactly do I have to do.. she wants to know how much the stock have grown. And also, what can we do about the stock that she bought? Can we get it?

    1. Hi, Tina. Reach out to the brokerage company that facilitated the transaction, and prepare any stock certificates issued if she still has them.

  4. Hi. my hubby and i are interested to trading. Can you recommend brokerage companies for us to check ?

  5. Hi,

    We bought a number of Meralco stocks some 15 years ago from a friend who has already migrated to Canada. The stock certificates were endorsed/signed, but we were unable to transfer them to our name. How do we go about transferring the stock to our name? Thanks.

    Rick

    1. Hi Rick. Consider reaching out to any stock brokers, although it looks like what you’re asking isn’t easy to do because stock certificates must be under the name of people who are redeeming them.

  6. Good day! What are the points to consider in disposing your investment share from a non-publicly listed company? Thank you.

  7. I am interested to learn about trading and investment but the websites I tried to apply before are forex trading, fidelity and vanguard but sadly they accept investment in US companies and require minium capital of thousand bucks. I just want to ask if their is a reliable website and apps for trading and investing here in the Philippines.

    -Angel

  8. Hi, your blog is very informative. I would just like to clarify; should I wish to buy a stock, I need to place an order first, right? How long does it normally take to have someone accept my bid price? I mean, the market is only open from 9am-1pm.

    1. Hi. It all depends whether there are sellers at the moment of your purchase that are willing to sell their shares at the price you want. So it can be fulfilled immediately, a few hours later, or not at all.

  9. Hello! Great information here.

    I would like to know if once I purchase stocks, and hold them, would I be paying taxes in the Philippines for the dividends I receive?

    Also, do I have to pay taxes for just holding a stock of a company, if this company isn’t paying out dividends?

    Finally, do online brokers send out documents such as certificates of stocks in the mail? I want to know because I am not currently in the Philippines.

    1. Hi Ed. Good questions.
      1. Yes, dividends are subject to 10% tax. Brokers would deduct the tax before the amount will be deposited to your account.
      2. No.
      3. If you’re dealing with an online stock broker, all proofs of ownership are electronic. An option to have a stock certificate issued is available, although that comes at a cost. Reach out to your broker if you’d like to receive one.

  10. Hi!
    Can I ask to buy a share of stocks to the underwriter before it going out for IPO? If yes ,how?

  11. hi pl. i have a substantial shares of stock in a company as of march this year before it was suspended until today. i have nobody to inquire if the suspension can still be lifted. is there a chance for me to recoup my investment. that money is my hard earned thru my retirement funds. can you help pls.? thanks

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