Philippine Stocks Fundamental and Technical Analysis
Based on my experience over the years, stock investing is a risky business, but not as scary as what most people would think. If you can manage risks with safe and time-tested investment strategies, then you can take advantage of and ride out the stock market volatility, hence securing investment profits.
I started stock investing in 1997 with the guidance of my grandpa. In 1997 to 2000, stock market is a roller coaster ride as crisis loomed. On the 2nd of July 1997, Asian financial crisis, affected mostly in Southeast Asia like Thailand, Hong Kong, Philippines, South Korea and Indonesia. Added the burdens of the Asian mini crash on the 27th of October 1997, where Global stock market crash that was caused by an economic crisis in Asia. On 17th of August 1998, Russian financial crisis, the Russian government devalues the ruble, defaults on domestic debt, and declares a moratorium on payment to foreign creditors. On 10th of March 2000, Dotcom bubble, the collapse of a technology bubble in United States of America. These stock market crashes given me an opportunity to heavily invested into blue chips stocks which I liquidated in 2014 that makes my 100K to a whopping 104M.
To help you start with stock investing, I have prepared below a list of my stock investing observations and practical discussions in order to succeeded your conquest to financial freedom.
Market Timing. Time is your best ally when it comes to investing, so making sure that you start as soon as possible is of utmost importance for you. If you are looking for an investment with high returns and low initial capital, then putting your money in the stock market may be right move for you. Many people have made millions buying and selling stocks. However, many people as well have lost money due to both ignorance. To minimize the risk of loss, a person must have knowledge on how to invest in the stock market wisely.
You must first understand how the stock market works. The stock market is where shares of ownership of different companies are bought and sold. Since you become a part owner, you participate in the company’s earnings or losses. So while there is a greater chance of high returns, there are also risks. However, history has shown that over the long term, the profits in stock investments are better than fixed income instruments like time deposits or government securities.
There are two ways you can earn money on your stock investments. One way is through the appreciation of your stock’s price. The other is through dividends declared by the company. At this point in time, however, few companies give substantial cash dividends and so most investors rely on the appreciation of the stock, treating dividends as just a bonus.
Many experts recommend putting not more than twenty-five-percent of your savings to be safe. If you are near retiring, then you must be very conservative and not put in more than ten-percent of your available resources. Do not risk what you cannot afford to lose.
The Philippine Stock Exchange’s (PSE) overall performance in the past few years has consistently been soaring higher and higher. There are volatile stocks with the potential to go higher but it also has the potential to go south or even delisted (Calata Corporation is the best recent example).
Determine your risk profile. Your investing profile is based on several factors, which include your investment horizon and your risk tolerance. Determining your risk profile will greatly depend on your willingness to take the risk for a promising ROI. And, this may change over time, especially if your financial objectives change. Initially, what you need to understand is how much you are willing to risk at moment for an unguaranteed ROI.
Allocate funds, but don’t go all out. While trading stocks is one investment that could potentially give you high returns, the returns are not guaranteed. Invest only if you have regular cash flow from either your salary as an employee and/or your revenue from your business to support your basic needs. The trick is to not put all of your money in a single investment. Make sure you don’t use your emergency funds and savings, because at the end of the day investment returns are not guaranteed.
As the saying goes, never put your eggs in one basket. Diversify the way you keep your savings and funds and not just put them all in your stock investment. So that when the need calls for you to have some money on hand, you don’t end up selling your share for a least favorable price.
Learning is a non-stop process. Choosing the right stocks to purchase is crucial to successful investing. Read up and do your research. Check your favorite newspaper’s business section and see which industries are currently doing well and pull up their annual financial reports. Don’t fall for “hot stock tips” from people who might not know any better, and stay away from penny or speculative stocks to avoid “gambling” with your money. As I always said, Investing in stock market is synonymous to betting in a highly profiled gambling and like any game, there is always a sure winner and loser.
For starters, some of the most stable investments would be blue chip stocks. These are stocks from well-established and financially-sound companies who have seen success in the market for many years. However, while blue chips stocks will always be relevant in every portfolio, they shouldn’t be your entire portfolio because it’s important for you to diversify your investment with mid-caps and small-caps stocks as well. Diversifying your investments will give you a safety net even if a specific industry or company is not doing so well.
Control your emotions. The guiding principle behind investing in the stock market is simple: buy low, sell high – but so many people get it so wrong because they let their emotions influence their investment decisions. It’s certainly alarming if the market is bearish, and the default response of most investors is to sell off their stock holdings to “cut their losses.” It’s instinctive, but it may not be the best thing to do. The decision to buy or sell should be made with more research and forethoughts, rather than selling at the first sign of price dropping. If you are holding stocks from reputable and profitable companies, the fluctuations in price could be temporary. Rather than giving into fear or hearsay, do your own analysis by looking at the historical performance and also the bigger picture before making your judgement. Buying a particular stock because everyone else is buying it does not bode well for your investment portfolio either. Don’t fall for the herd mentality. Always go back to fundamental analysis in picking a stocks to invest-in and let technical analysis your guide in entry and exit points prior making any investment decisions.
Monitor your stocks. Inactions can cost as much money as wrong decisions when it comes to investment. Sell the stocks that are underperforming. The best thing about long-term investment is that you don’t have to monitor your stocks daily or weekly — though periodical monitoring will be a good practice. However, if the stock exchange’s performance makes it to the news, you should make an exception. If you’ve noticed that a particular stock has been less than stellar for some time, then you may want to sell it off the next time the market is doing well. You can use the funds that you get from it to buy more stocks of high-performing companies the next time the market goes down to robust your portfolio.
Do it now. It’s a false pretense that stocks trading is only for the affluent. The PSE is an opportunity that every Filipino can leverage on, and it does not require you to have a huge chunk of cash in order to get started. You can start small with just ₱5,000 to buy you a good number of shares/ stocks. Once you get past all the learning curves of the trade and start earning even a just little, surely you’ll be wanting to invest more and more.
DISCLAIMER: I am not a Financial Advisor. Expressed in this blog is my personal opinion only and should not be construed as a recommendation, an offer, or solicitation for the subscription, purchase, or sale of any kind of securities.
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