Do you want to be a part-owner of the country’s top corporations, such as Ayala, PLDT, San Miguel and SM Investments? Don’t you know that you don’t need to become a billionaire or a millionaire to have a slice of ownership of these listed companies in the Philippines? You don’t need to become an Ayala to own shares of stocks of Ayala Corporation or a Sy to become a co-owner of SM corporations. A corporation is a separate legal entity distinct from its owners or shareholders. A stock corporation is a company which ownership is expressed by shares of stock that are transferable or assignable, subject to certain conditions. Further, listed corporations or publicly traded companies, like Ayala and SM corporations, are companies that offer its shares of stocks for sale to the general public through a stock exchange. The following are steps and guidelines on how to buy and invest in shares of stock of listed companies in the Philippines.
1. Know and understand stock investing. Before you start buying and investing on shares of corporate stocks, you should first have an understanding of what it is. You also need to answer some important questions about stock exchange and other related matters. The following are some basic things you need to know about stock investing:
What are stocks? Stocks are shares of ownership in a corporation. When you buy stocks of a publicly listed company, you become a stockholder or shareholder of that company. In other words, you become a part-owner of the company. As an owner, you participate in that company’s growth and future profits. On the contrary, you may also lose if the company suffers a loss or performs below market expectations.
What is the stock market? A stock market is a place where stocks are bought and sold. The Philippine stock market is the place where people can invest in “publicly listed” companies in the Philippines Stock Exchange (PSE).
Who are called stockholders or stock investors? Investors in stocks or stockholders are those who own shares of stock of a publicly listed company, at least until the time that they decide to sell an transfer them to new owners. Stockholders or shareholders are given certificate of stock ownership corresponding to the shares they owned.
What are publicly listed companies? A company becomes publicly listed when its shares are traded in the Philippine Stock Exchange. To become a publicly listed company, a company must meet the stringent listing and reportorial requirement of the PSE to safeguard the investor’s interest and secure transparency.
How will your money grow in the stock market? There are two ways to make your money grow in the stock market. These are (1) through an increase in stock price or capital appreciation and (2) through dividends declared by the company where you have invested in. Capital appreciation is an increase in the market price of your stock. It is the difference between the amount you paid at the time you buy shares and the current market price of the stock. Dividends are paid out to shareholders, representing earnings of the company that is not going to be reinvested in their business. Dividends can be in the form of cash or stock dividends.
2. Choose your Stockbroker or Trading Participant (TP). A Stockbroker or Trading Participant acts as an agent/broker between buyer and seller of stocks in the stock market. A Trading Participant is licensed by the Securities and Exchange Commission (SEC) and is a member of the PSE, authorized to execute orders for purchases or sales of stocks. Your choice of stockbroker should depend on the type of service you will require and who will best suit your needs. Stockbrokers can be classified into traditional or online (via Internet). Traditional brokers are those who assign a licensed salesman to handle your account and take your orders via a written instruction or through a phone call. On the other hand, online brokers are those whose main interface with their customer is through the internet. Clients execute their orders and access market information directly online or via the Internet. You can obtain a complete list of accredited stockbrokers of the Philippine Stock Exchange either by visiting www.pse.com.ph or contacting the PSE at (632) 688-7600.
3. Open a stockbrokerage account. Opening an account with a stockbroker is similar to the process in opening a bank account. You will be required to fill out a form called Customer Account Information (CAIF) and submit the following documents, namely: Two (2) valid IDs, Specimen signature cards, and proof of billing. Stockbrokers may also ask to provide an initial cash deposit in order to start investing in the stock market. Filipinos abroad may conveniently open a stockbrokerage account with an online stockbroker or apply directly to any overseas branches of Philippine banks that are affiliated to any of the active stockbrokerages in the PSE.
4. Search for companies to invest in. You can check all the publicly listed companies in the Philippines by going to the “Listed Companies” section of PSE website (see No.2), which you can click on the sidebar under “Other Links”. There you can browse the listed companies according to alphabetical order, symbol or industry sector (e.g., banks, construction, information technology, media, mining and telecommunications). You can also check a company’s corporate information and financial data (e.g., financial position, financial performance, cash flow, etc.,) by getting and analyzing its annual financial reports or audited financial statements.
5. Place your order through your brokerage. You can place an order to buy or sell a stock by making a telephone call (or sending a text message) to your stockbroker or directly online via the Internet. All buying and selling orders are subject to a minimum number of shares as prescribed by the board lot table instituted by the PSE. Prices in the stock market may fluctuate according to the set intervals based on the price level of the shares. Once your order has been carried out, your stockbroker will give you a confirmation invoice showing the details of your transaction.
6. Monitor and manage your investments in the stock market. Watch your investments and always be informed with the significant information about your investments, such as stock price movements, corporate news and updates (eg., change in management), and other relevant market information. The PSE website is a great source and reference of important information about the stock market and the specific stocks or companies that you invest in. You can also get the following information from the PSE website: PSE news, corporate disclosures, market information (i.e., stock quotes, gainers/losers, active stocks, dividends/rights), the PSE Index Chart, listed company update, Initial Public Offerings (IPO) news, PSE regulations, Trading Participant News, mutual funds, currency rates, and other PSE publications.
Reference: The Philippine Stock Exchange