Stocks are certificates of ownership in a listed company—one that raises capital by selling its shares (the parts into which its capital stock is divided) to the public through trading in the stock market. When you buy a company’s shares, you get a claim on its assets and earnings—a piece of the company, if you like—in exchange for investing your money in it. There are several ways to invest in the stock market: by buying common stocks, preferred stocks, warrants, or bonds. You make money through capital gains (when the price of the shares you have bought increases, and you sell the shares for profit) or through dividends (company earnings that are divided among stockholders including yourself).
Stocks are good investment vehicles because of their liquidity. You can easily convert them into cash whenever you like compared with real estate, for instance, which take time to liquidate or turn into cash, says Dennis Lee, a stock trader with Triton Securities Inc. Also, putting your money in a savings account earns you minimal interest, but you could make 20 or 30 percent profit from stocks particularly in a bullish or rising stock market.
To start trading in stocks, hire any of the 150 authorized stockbrokers here by consulting the telephone directory or the website of the Philippine Stock Exchange. (www.pse.org.ph). Then check out the brokerage firm’s track record by clicking on information about the company or viewing an online file of its annual reports. Stockbrokers like Triton normally ask potential investors to fill out a form and then to submit it with two I.D. pictures and documents to prove that they have money to invest. The stockbroker normally will assign a stock trader to transact business in your behalf, and have analysts who prepare reports and recommendations on which shares are good to buy.
A listed company is usually allowed to sell shares at a minimum board lot—the minimum number of shares an investor may buy. A listed company’s shares of stock may be valued at P1,000 each, for instance; but if there’s a company rule saying an investor should buy at least five shares initially, then you pay P5,000 for the five shares plus the taxes, documentary stamps, and fees that go with scripless trading—a way of transferring ownership of shares of stock without money changing hands physically. Scripless trading also allows you to hold on to your stock certificates or deposit them with the stockbroker’s account at the Philippine Central Depository.