A peek at investing in the Philippines by Leonard Pua

A peek at investing in the Philippines

Here in the Philippines, the majority of the population invest their money on deposit. As according to the survey of the Bangko Sentral ng Pilipinas (BSP) consumer finance survey. Only a small percentage of households had investments in stocks, mutual funds and/or fixed-income securities. While according to Money Summit and Wealth Expo, less than one percent of the Philippine households in Metro Manila owns stocks, mutual funds, bonds and or government securities.

Some of the reasons on why most of the Filipinos do not invest are the following. First, Filipinos are risk averse. They would rather put their savings in banks than in another instrument for fear that they might lose their savings. Second, they do not have the proper know how on how to invest. This article would give an idea on how mutual funds and stock markets work.

Mutual Funds/UITF

A mutual fund, according to investopia,  “An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors.”[1] While a UITF (Unit Investment Trust Fund) is an open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trusted entity and made available by participation.[2]

In layman’s term, Mutual fund and UITF will invest your savings or money in different financial instruments catering to your financial needs and appetite. They will invest your money in bonds, stocks, money market securities. Mutual funds are usually offered by a licensed mutual fund agent and are regulated by the SEC (Securities and Exchange Commission), while UITF is offered by Banks and is regulated by the PSE (Philippine Stock Exchange).

Stock Investing

            Meanwhile, according to Investopedia, 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. There are two main types of Stocks. Firstly, a common stock which entitles the owner to vote at shareholders’ meetings and to receive dividends. Secondly, Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.[3]

A person would need to open up an account with a stockbroker in order to participate in the Philippines Stock Market.

Learning the basics

                There are two main kinds of approach in stock market investing. The first would be those who use Technical analysis for short term traders and Fundamental analysis for long term holders.

People who use the technical analysis rely on the day to day or even every second movement of the stocks prices. This movement indicates whether they should buy or sell a stock. They use charts and tools such as candlesticks pattern, MACD, RSI indicators to generate patterns that give forecast on the movement of the stocks.

On the other hand, fundamental analysis involves looking at the company in general. Preferably their financial statements. They look at the company’s capabilities and uses ratio’s such as Financial Ratio’s, liabilities, revenues, earnings, growth rate, dividends, competitors, outputs, earnings per share, price/earnings ratio and others. Fundamental Analysis also looks at the company’s management and how they handle the company, what their future plans are. Those who use fundamental analysis even goes outside the company and looks at the economic perspective of not only the country but worldwide. For example, in mining companies, they look at the supply, demand, and prices of commodities and even into a future forecast of the said commodities.

All about the choosing what type of investor you are

                At the end of the day, what matters is that you have the choice of looking at what kind of investment and trading style best suits you. Find your niche, learn and develop your trading style.       

[1] http://www.investopedia.com/terms/m/mutualfund.asp

[2] http://www.uitf.com.ph/faqs.php#gsc.tab=0

[3] http://www.investopedia.com/terms/s/stock.asp

Learning the basics

                There are two main kinds of approach in stock market investing. The first would be those who use Technical analysis which is usually for short term traders and Fundamental analysis which are is usually used by long term holders.

People who use the technical analysis rely on the day to day or even every second movement of the stocks prices. This movement indicates whether they should buy or sell a stock. They use charts and tools such as candlesticks pattern, MACD, RSI indicators to generate patterns that give forecast on the movement of the stocks.

On the other hand, fundamental analysis involves looking at the company in general. Preferably their financial statements. They look at the company’s capabilities and uses ratio’s such as Financial Ratio’s, liabilities, revenues, earnings, growth rate, dividends, competitors, outputs, earnings per share, price/earnings ratio and others. Fundamental Analysis also looks at the company’s management and how they handle the company, what their future plans are. Those who use fundamental analysis even goes outside the company and looks at the economic perspective of not only the country but worldwide. For example, in mining companies, they look at the supply, demand, and prices of commodities and even into the future forecast of the said commodities.

All about the choosing what type of investor you are

                At the end of the day, what matters is that you have the choice of looking at what kind of investment and trading style best suits you. Find your niche, learn and develop your trading style. 

   

About the Author:    

Leonard Pua is a Lawyer and Stockbroker , he is also a Gamer and Aspiring blogger. He also wants to be a professor. The art of writing is his way of release from daily stress caused by going to Law school and trading in the stock market.

He aims to build his own foundation that will cater to upholding Human Rights, not only in the Philippines but worldwide.

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