Stock Market Philippines: Top Investing Strategies and Tips
Why Should You Invest In The Philippine Stock Market?
Investing in the stock market may seem like a risky move, however, if done correctly is a fantastic opportunity to create lots of ongoing passive income and profit.
Taking your time, paying attention to detail and investing wisely can help you live a more comfortable lifestyle, or if you’re really good at it set you up for life!
How exactly should you go about investing in the Philippine stock exchange (also known as PSE)? This post will address stock market approaches, how to choose companies to invest in and various different approaches to investing in the stock market.
Remember that investing in the stock market has its own share of risks. Just like any form of making money, you must be fully committed and willing to do your research to gain valuable profits.
Approaches to investing in the PSE
It is equally important with your first investment as with your one hundredth to pay attention to detail. Avoid simple mistakes such as entering wrong numbers, investing in the wrong companies and not researching these companies in-depth beforehand.
Before you start investing it is recommended that you devise a plan. Look into your finances and see how much money you can comfortably afford to invest per month, set this money aside and invest it wisely. This can be done by investing in the same company or into many different companies throughout your investing career.
The more you invest, the better you will get. It will take time to learn the market and analyse companies and businesses which are high in value with low share prices, however, initially taking the time to evaluate these companies throughout will create a habit which will stick throughout your entire investment portfolio.
Investing vs. Trading
Most people who invest in stocks are not really investors, but ‘traders’. Trading in the stock market takes large chunks of time. Keeping a close eye on your invested stocks will ensure no sudden crash occurs with your money lost. If you do not have the time required to monitor stocks then simply put, trading is not for you.
Consider investing your money in less time constraining ideas such as long term investing. Frankly, this is what the best investors in the world do, people like Warren Buffett and Peter Lynch. They don’t trade, they invest for the long term!
Setting yourself financial goals will allow you to sell your stocks in a reasonable time to maximise profit. For example, setting a goal of investing x amount of money each month with a turnover of x amount of money the same month will allow you to evaluate your situation.
This will provide an overview for when you should sell a stock, buy a new stock or hold onto a specific stock in order to maximise your profits with minimal effort.
Portfolio Diversification
Another worthwhile approach to investing in the Philippine stock market is to include a diverse range of investments within your portfolio.
This means investing in a mix of different companies, not placing all of your money on a single investment.
If for some bizarre reason your one investment is too crash you will lose a large portion of your money, whereas if you invest in a wide variety of different companies you will get a feel for the market whilst (what works, what doesn’t) and also reduce your risk of losing money.
Investing When The Market Is Down
One approach to investing which is often overlooked is investing when the market is down. Investing when the market down allows you to purchase stocks for a much cheaper price. This essentially allows you to own a portion of a specific company/business for considerably less.
Make full use of this, after all, what falls must come back up. If that doesn’t’ convince you them maybe the cheap price of the stocks will. This approach is especially beneficial for long-term investment.
For example, purchasing a cheap stock current day may result in it being 10x worth the money in 5 years time. If you are able to set aside further income to investing whilst the market is down on stocks like this then you are looking at big profits over long periods of time.
Investing in the right Philippine companies
With more than 200 public companies available on the Philippine stock market it may seem an overwhelming experience when starting out. It is worth noting that the majority of these companies you will not want to invest in.
You are looking for potential under-dog companies or safe companies/businesses which are going to increase in profit, without a doubt. Strategies on how to scout these companies out and make the most of these opportunities will be covered below.
Philippine Stock Market Investing Strategies
With many different investment strategies available it can often be confusing finding a place to start. We will discuss some of the most trusted and popular strategies to maximise profits from whatever investment you make, whether it is as little as 5,168 PHP or upwards of 55,168 PHP. Let’s get into it.
Fundamental analysis
Fundamental analysis is a popular investment strategy used in order to analyse these companies available and check the worth of the business, both in value and in stock prices. Consisting of 5 components known as value, growth, income, GARP (growth at a reasonable price) and quality, fundamental is a fantastic strategy for beginners to maximise profits and be confident with their first investment.
Value
Understanding value can often be a difficult concept to grasp. This component is essentially concerned with finding out and understanding the prices of the companies stock.
It is recommended before investing in any stock that you familiarise yourself with the market with whatever platform you may be using. This will allow you to gain a sense of monetary value in terms of the Philippine stock market whilst also preventing any simple errors which could have been avoided.
The aim of value is to purchase stocks for a cheap price and to have the opportunity to sell them on for more. For example, if you sold the stock tomorrow would you either make a profit on the stock or take no loss. If the answer is no then consider investing in a different stock.
Take this mindset into all of your investments in order to ensure you are investing in steady and up and coming companies, protecting your finances and optimising your profits.
Growth
Whilst looking for companies and businesses alike to invest in, analysing growth is essential. Look for patterns of growth, consistent increases in share prices, company expansion and further investors in shares.
If possible, view analytics to see how the company is performing/has performed over the past few years, look for a consistent pattern of growth with little to no decline in sales or stock price.
Investing in a company which is consistently growing is a promising investment. A long term investment which yields small amounts each year will eventually reach increased profits over the number of years in which you have are a stakeholder in the stocks.
Consider investing in the right companies long-term to see the best value for your money, with increased income year by year.
GARP (Growth at a reasonable price)
GARP combines both value and growth. Look for solid companies which are growth prospects with shares which do not match the intrinsic value of the company.
This basically means picking up shares in a growing company which are worth much less than the actual core value of the company. This will result in a minimum of doubled profits in the future, with the potential for more if you manage to scope out a good prospect company.
A common GARP approach is to purchase stocks when the price to earnings ratio is lower than the rate at which earnings per share can grow in the future.
This is best used with companies which show consistent and slow growth, allowing for profits to be maximised over the course of years to come.
These slow companies may currently have big earnings, however, have slow turnover, therefore, resulting in potential buyers not investing. If you have the patience and the money this is a worthwhile investment strategy.
Quality
Look for high-quality businesses which are selling for reasonable prices. One way in which to analyse this is to look at the valuation of the company and the overall intrinsic value of the business. Through looking through past statistics and information ask yourselves these questions:
- What is the potential of the company?
- What do previous analytics and growth patterns show?
- Is the investment worth it?
Asking yourself these questions sets yourself up for a sensible and quality investment. Consider these questions before purchasing any stock.
Screen-based investing
Screen-based investing is a popular approach due to its ease of use. Screen-based investing is concerned with using computers and programmes to conduct quantitative analysis.
Through this process, computers create quantitative criteria in which companies must reach to be considered for potential investment.
Alongside this, a popular feature of screen-based investing is the option to look at multiple factors of a company/business. For example, looking at stock value over elongated periods of time to see if the company has the potential for growth.
A popular approach to investing is through initial use of screen-based investment followed by fundamental analysis. This allows initial identification of potential future company prospects through quantitative analysis then human interaction to utilise the 5 components aforementioned.
Using this strategy has also been shown to remove the emotional process from investing. This is due to the computer doing all of the work, therefore, allowing for greater investments to be made with little attachment.
Investing in well-established popular companies (also known as blue chips)
A popular approach to new investors is often to invest in quality well-established companies with a proven track record. This is a sure way to minimise losses and basically guarantee a profit. This can be useful if you have a lot of money to invest in stocks.
Think of it as a savings account with higher interest than your bank. Due to the very low risk of the stocks crashing, you can rest assured that your money is safe whilst making additional money on the side.
One of the downsides to this approach over methods such as fundamental analysis and screen-based investing is the lack of profit in comparison to these methods.
Taking higher-risks into future prospects more often than not (if everything goes right) will result in considerably higher profits than investing in a safe stock.
Quantitative analysis – buying the numbers
Similar to screen-based investing, quantitative analysis is concerned primarily with numbers whilst disregarding the business. If you find yourself constantly talking about numbers when it comes to investing, then more often than not you will be using a quantitative approach.
With quantitative analysis focusing just on the numbers, companies are often sold if prices are seen to dip in the market. A common rule of thumb is often to buy stocks low and sell stocks when they start to fall.
Since quantitative analysis disregards any underlying meaning for the business it presents an opportunity for quick turnover and often does not mean investing in a stock for extended periods of time.
Many investors claim that finding the right numbers will always lead to profits. After all, you can’t argue with numbers.
Another benefit of this strategy is also a lack of emotional investment. This is due to primarily dealing with numbers and not becoming heavily invested with the business side.
This is useful for developing a thick skin for when it comes to buying and selling stocks consistently promoting maximal profit to be gained.
A Final Thought
Investing in the stock market has its own share of risks and dangers. It is important to learn the market, take your time and pay attention to detail in order to fully enjoy and maximise your investment experience.
Fully research all of your potential investments, use a variety of strategies to obtain the most valuable data on your potential investment.
This will allow you to build up a portfolio of the company, showing weaknesses, strengths, profits and past history in terms of spikes and dips in the market, ultimately allowing you to decide whether this is a worthwhile investment.
To learn more about about investing in Pinoy stocks for ongoing passive income, check out my free 5-part Stock Investing email series.