Stock Market for Beginners in the Philippines: How to Start Investing

The Philippine Stock Exchange (PSE)’s 2022 Stock Market Investor Profile reports that there are 1,712,734 total stock market accounts in 2022, a 5.7% increase from 1,620,017 accounts in 2021. Moreover, the majority of total retail and online retail investors get an income of less than ₱500,000 per annum.^[1]

Clearly, more and more Filipinos are realizing the importance of investing early in the stock market. Interested? There's no better time to do it than today! 

But don't dive in without knowing the basics. Here’s a simple guide on how to invest in the stock market in the Philippines.

What are Stocks?

Stocks are shares of ownership of a company listed on the PSE. When you purchase stocks of a PSE-listed or publicly owned corporation, you become one of its shareholders or stockholders. 

It means you're a part-owner of that company and can join in its future growth and profits. But it also means you may lose some of your investment if the company performs poorly or suffers a loss.

What is the Stock Market?

The stock market is where stocks are bought and sold to investors. Companies that need to raise funds for business expansion sell a minority part of their ownership—also called stocks or shares—to the public.

In the Philippines, the PSE is the only corporation that runs the local stock market. Established in 1927 (then called the Manila Stock Exchange), the PSE is also one of the oldest stock exchanges in Asia.

Pros and Cons of Investing in Stocks in the Philippines

Stocks are among the best types of assets to invest in. Here are the three major reasons to start stock market investing:

👍 Capital Growth/Price Appreciation

Once you own a company's stock, you can make money through the increase in the market price of a stock. You buy the stock at a low price and then sell it when its price rises in the future.

For example, if you purchase 100 corporation shares at ₱10 per share and sell them a year later for ₱20 per share, you'll gain a 100% return on your investment (ROI) or ₱2,000 on the 100 shares.

Based on historical data, long-term stock investing offers higher yields (with the PSEi growth rate averaging at 10%+) than most types of investments. Unlike bonds, time deposits, and government securities, stock investments can beat the impact of inflation.

This makes stock market investing ideal for long-term financial goals such as retirement. The earlier you start, the higher the returns you'll get.

To illustrate, here's a table showing four types of stock market investors—some started early, while others began late—who invest the same amount every month (₱5,000) and how much they can earn when they hit retirement age.

*Assuming an annual growth rate of 8% per year

As you can see, starting early in your 20s allows you more time to grow your funds at a compounded rate in the stock market.

Read more: The Stock Market isn’t as Scary as You Think―Here’s Why

👍 Dividend Income

Most PSE-listed companies, especially the profitable ones, distribute a portion of their earnings to their shareholders by paying cash dividends or free additional stock shares. Stock market investors generally receive dividends up to four times yearly.

For example, if a company declares a cash dividend of ₱0.35 per share, a stockholder with 10,000 shares of that company will be paid ₱3,150 (₱0.35 x 10,000 minus 10% withholding tax). The investor can either withdraw or reinvest their cash dividend.

If a company declares a 30% stock dividend, a stockholder with 10,000 shares will receive an additional 3,000 shares. The investor can sell these shares after they're issued.

👍 Rights of Being a Company's Part-Owner

Stockholders of a corporation have the right to vote in the election of the Board of Directors in its annual stockholders’ meeting. Stockholders also receive a share of the company's remaining assets once it closes down.

But while there are plenty of reasons to invest in stocks, there are also some disadvantages you need to know about: 

👎 Higher Risk of Loss

The stock market or a stock’s past performance doesn’t guarantee future results, especially for short-term investments. But even long-term investments are susceptible to losses. 

Because the stock market is very volatile, it can be financially devastating when the stock market crashes or an economic crisis looms. Before you set your sights on how to earn in the stock market, it’s crucial to learn investing strategies and use helpful tools.  

👎 Lack of Control

While you have the power to decide how much you want to invest in stocks, you can’t dictate or influence a stock’s performance or determine if it will do well over time. 

👎 Liquidity Risk 

Should you decide to sell your shares when they’re not performing as well as you’d hoped, it can be hard to find buyers for your stock, especially during market crashes and panic selling. 

👎 Costs

When you purchase stocks, you typically pay fees and commissions that could take up a significant portion of your investment.  

Who Can Invest in Stocks?

All Filipinos and foreigners 18 years old and above can invest in the Philippine Stock Exchange.

Minors or children below 18 years old may participate in the stock market through an In Trust For (ITF) account, which should be opened for them by their parents or guardians. In this case, stock investing is ideal for building a child's college tuition fund.

How Much Money Do I Need to Invest in Stocks?

You’re probably wondering about the minimum amount to invest in the stock market in the Philippines. Fortunately, you don't need a big salary to invest in the stock market, as per the data in the abovementioned PSE Stock Market Investor Profile report.

You can start investing in stocks for as low as ₱5,000. Some stockbrokers don't require a minimum investment amount as long as you have enough money in your account to purchase stocks and pay the trading fees.

How to Invest in the Stock Market in the Philippines for Beginners

Can’t wait to get started but not sure how to invest in the Philippine stock exchange? Follow the tips and steps below: 

Step 1: Learn the Ins and Outs of Stock Market Investing

Stock market investment in the Philippines can be complicated for beginners. But as with any field, you can learn it. 

It takes a lot of research and patience to educate yourself on the stock market. Make sure to cover the following essential topics:  

• How the Philippine stock market works
• When to buy stocks
• How to choose the best stocks to buy
• Where to buy stocks in the Philippines
• The risks of stock investing and how to minimize and manage them
• How to properly diversify your portfolio of stocks
• Trading and transaction fees (broker's commission, VAT, etc.)
• The board lot table specifying the minimum number of shares that can be bought or sold at a particular price range

To learn how to start investing in stocks in the Philippines, you can read online resources and attend seminars on the basics of stock market investing.

Here are some free learning resources on stock investing for beginners:

• PSE Academy^[2]
• COL Financial Free Webinars and Events^[3]
• FirstMetroSec's Stock Market 101 seminars^[4]
• Philstocks' WINvesting seminars^[5]
• Marvin Germo's Stock Tips Philippines blog^[6]

Read more: Learning Stocks Made Easier: Here’s How to Use Investagrams

Step 2: Plan Your Stock Investing Strategy

You can't start investing in the stock market without a strategy. Some are active traders who buy and sell stocks within a day, a week, or a month. Others are long-term investors who buy and hold stocks over a long period (either in a lump sum or periodic investments) and then sell them after reaching their target date or hitting their target ROI.

Read more: 5 Things You Should Know As a Day Trader in Stock Market

📌 Peso Cost Averaging Strategy

Peso cost averaging is the recommended strategy for beginners. It involves investing a fixed amount in profitable companies at regular intervals (monthly, quarterly, semi-annually, or annually) over a period (usually five to 10 years).

With peso cost averaging, you buy more shares of a stock when its price is low and fewer shares when the price is high. It keeps your average cost low and helps you reduce the risk while earning good returns.

📌 Blue Chip Stocks in the Philippines

Long-term investing in blue-chip stocks is also a great strategy because of their stable and high potential for profits, as they come from top-performing companies in the Philippines.

You can invest in the top 10 stock companies in the Philippines or any of these blue-chip stocks based on the PSE Index:

Read more: 5 Stock Trading Strategies for Aspiring Traders

Step 3: Choose Your Stockbroker

This step is crucial because you need help to buy and sell stocks. A stockbroker will execute those things for you.

📌 What is a Stockbroker?

A stockbroker or trading participant is an individual or company accredited by the Philippine Stock Exchange and Securities and Exchange Commission to place buy and sell orders on behalf of investors.

There are two types of stockbrokers: traditional and online. Traditional stockbrokers provide a licensed salesperson who takes orders via phone or email.

Online stockbrokers enable clients to make buy or sell placements through their web-based trading platform.

Beginners in stock trading can invest through online stockbrokers. Online trading platforms provide quick access to stock research reports, real-time stock market information, portfolio management, and order placement services.

📌 Best Online Stockbrokers for Beginners in the Philippines

Here are a few examples of the best online trading platforms authorized and licensed to trade stocks in the Philippines. They make stock investment in the Philippines for beginners easier and more affordable:

• BPI Trade^[7] (requires a BPI savings or checking account for the settlement account used solely for BPI Trade transactions)
• BA Securities Inc.
• COL Financial^[8]
• FirstMetroSec^[9]
• Philstocks^[10]
• iTrade by DA Market Securities
• JAKA Securities Corporation
• MSI Trade Online by Meridian Securities, Inc.

Check the PSE website for the complete list of online stockbrokers in the Philippines.

Stockbrokers like COL Financial and Philstocks offer a free seven-day trial account to access their online trading platform and give you a feel of how to invest in the stock market. Take advantage of such offers to experience how to buy stocks in the Philippines and determine which platform works best for you.

Step 4: Open an Online Trading Account

Once you've chosen a stockbroker, it's time to open an online trading account with the brokerage company.

You must submit a filled-out customer account information form, a photocopy of your valid IDs, and your tax identification number (TIN). Other brokers may require specimen signature cards and proof of billing.

After submitting the requirements, wait for the approval of your online trading account, which may take one to two working days.

Step 5: Fund Your Trading Account

As soon as your online account is approved, you can start funding it. Depending on your stockbroker, you can make an over-the-counter or online bill payment transaction through the broker's accredited banks. The amount is credited to your account within the day or the next banking day.

For instance, BPI Trade account holders can fund their online account via a fund transfer from their BPI deposit account via the BPI online banking facility.

Step 6: Buy Your First Stock

At this point, you should be ready to order stocks. The cheapest and most convenient way to purchase stocks is to use the online trading platform of your stockbroker. The instructions for placing a buy order are on the stockbroker's website.

You may contact your broker's customer service hotline to place a buy order when you don't have internet access.

Remember that trading days in the PSE are Mondays to Fridays (except for holidays), from 9:30 a.m. to 3:00 p.m. (with a break from 12 p.m. to 1:00 p.m.). You can place orders only around that schedule.

Within one or two working days after placing your order online, you'll receive an email message from your stockbroker confirming and showing your transaction details.

How to Invest in the Stock Market: FAQs

1. Do I need to have a physical certificate of stock ownership?

You may request an upliftment process (converting electronic shares into a physical stock certificate). The Philippine Depository Trust Corp. (PDTC), the PSE’s central depository, uses scripless trading, wherein its computerized book-entry system transfers securities ownership from one account to another. This eliminates the need for a physical exchange of scrip between buyers and sellers. 

2. As an investor, what are my obligations to my stockbroker?

Make sure to update your personal information, especially your contact numbers, email addresses, and residential or business address. Also, settle your buying transactions on the settlement date. 

3. What are a stockbroker’s obligations to its clients?

Your stockbroker should confirm your securities after trading hours and deliver buying or selling invoices on schedule (transaction day plus one day). 

Aside from this, they should provide clients with their statement of account every month and any information or correspondence about their investment. 

Final Thoughts

Stock investing for beginners is more accessible and affordable than before. Now that you know how to invest in the stock market in the Philippines, start early to maximize your gains from the stock market.

However, this type of investment requires a lot of time and patience in learning and updating yourself on the market trends. If you're too busy or need more confidence, there are alternatives. 

You can still invest in the Philippine stock market through mutual funds and/or variable universal life (VUL) insurance. When you invest through these instruments, a professional fund manager will make investment decisions for you, such as choosing the right stocks to buy or sell.

Sources:

• ^[1] PSE Stock Market Investor Profile 2022
• ^[2] PSE Academy 
• ^[3] COL Financial Free Webinars and Events 
• ^[4] FirstMetroSec's Stock Market 101 seminars
• ^[5] Philstocks' WINvesting seminars
• ^[6] Marvin Germo's Stock Tips Philippines blog
• ^[7] BPI Trade
• ^[8] COL Financial
• ^[9] First Metro Sec
• ^[10] Philstocks