What you need to know before investing in the Stock Market?

       What comes in your mind when you hear the words "trader ako sa stock market"? The usual reaction that you will get are "wow big time", "mayamanin" but most of the time you'll get a clueless face. 

What is a Stock Market? 

       A Stock Market can be described as simple as a "Mercado or Palengke" as what the name implies. The only difference is that in "Palengkes" traders or tinderas sell goods such as fish, vegetables, fruits and other items that we use in our daily lives while in Stock Market, traders sell their shares of a company to potential investors or other traders.

Philippine Stock Exchange Trading Floor

     Is it a scam? A resounding NO! Kikita ba ako or malulugi dito? A big YES and YES. Participating in the stock market can either make you or break you. Yes, the stock market is a harsh world where the risk of losing your hard-earned money is high but the reward is also exponentially high. It all depends on your perspective, is it a glass half-full or half-empty. There are different strategies employed by participants in the exchange to mitigate the risk of losing money. Let's talk about that in my other post.

     To prove that this is not a scam, you can check its physical buildings where we can find the trading floors which are located at the Philippine Stock Exchange Centre, Ortigas Center in Pasig and at the PSE Plaza Ayala Triangle, Ayala Tower One in the Makati Central Business District. This is where all transactions are executed. One other thing, the Philippine Stock Exchange is regulated by SEC or the Security Exchange Commission.

     Now that we know the basics of what a stock market is, let's define the following terms that we will encounter when we will participate in the stock market.

     1. BROKER - comes from the Old French brocheor meaning "wine retailer". Does this mean that they sell wines? 

     NO, that maybe true in the old days but today's broker is simply the third-person facilitator between a buyer and a seller, an AGENT in other word. To put it simple, we need them in order for us to buy or sell the shares of a certain stock. By facilitating the buy and sell transactions they get commissions or what we call fess or charges. Different brokers have different fees or charges imposed to their clients but overall their fees do not differ much. Let's talk deeper about the different brokers available in the Philippines in the future. 

     
       Check my other post on my review of Online Stock Brokers in the Philippines.
      

     2. STOCK - This is how Investopedia.com defines it: a stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. Kapag meron kang stock ng isang company then you are a part owner of that company. Stock prices can go UP or DOWN and this is how traders/investors gain or lose money. The stock price action is governed by the Law of Supply and Demand. When buyers of a stock outweighs its sellers then the stock price will go UP. The opposite goes for a DOWN stock price.

     3. SHARES - is simply a unit that represents your ownership of a certain company. If you have shares of a stock then you are called "shareholder" (Wow, ang sosyal pakinggan. Bigtime). If you bought 10 or 100 shares of SM then you can brag to your friends that you are one of the owners of SM. (Bad idea though, they might think that you are Henry Sy's distant relative and magpapalibre sila sayo ng kung ano-ano :) )

     4. PORTFOLIO - is a list of assets you own, it could be stocks, bonds or other types of securities such as mutual funds.

Portfolio with Three Stocks on it 

     5. STOCK CODE- is a combination of characters representing a company participating in the stock market or a public owned company. It is also called ticker symbol or stock symbols. Example, Ayala Land Incorporated's stock code is ALI, Jollibees's stock code is JFC. Using these codes simplifies things in monitoring the prices of a particular company. You can check the complete list of listed companies in the PSE on their website, check the link below: 

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

    6. BOARD LOT - this is the minimum number of shares (lot size) you can buy or sell on a certain stock. If you want to buy more than the minimum, you need to buy it in multiples of the board lot. The board lot varies depending on its price and this is set by the stock exchange, which in our case, the PSE. You can check the Board Lot Table below for reference.

"As Always, Happy Investing and Stay Curious"