What if John Gokongwei will call you one day and ask you, “Be my partner.”? Or what if Henry Sy will come to you and say, “Let’s be partners.”? Or what if Jaime Zobel de Ayala, while you are having coffee, smiles at you and say, “Invest in my business. Be my partner.” Will you say yes?
If I’d be ask, I’d say YES. Because I know that they are business giants. And my investment in them will grow.
How about you? Will you say YES?
What if I say that this scenario is happening in the stock market, would you like to join in?
Experts declare that you can multiply your money in the stock market way much better than in the bank. But why are people not investing in the stock market? Why is it that less than one percent of the Philippines’ 90 million population are investing in the stock market? Why are people not partnering with the giants?
Perhaps, it is because of two reasons. They are either uninformed or misinformed.
The topic of investing is indeed a very large meat to swallow in one meal. And the subject on the stock market is also a big lemon to squeeze in one time.
In this article, we are going to take a small slice of investing and chop it into chewy bites as we begin to slowly understand it. Alongside, we are also going to take a slim slice of the lemon of stock market as we try to squeeze it and understand the basics.
Again, just a small slice of investing and slim slice of stock market. We are going to answer just three questions:
1. What are stocks?
2. How will you benefit from them?
3. How can you enter the stock market?
Let us drill down the questions:
1. What are stocks?
Let me answer this question by illustrating the three types of business ownership –
The first type is sole proprietorship. You know this already.
An example is that Mrs. Chang puts up a small stall of linen cloth in Divisoria. So she withdraws her money in the bank and put up a small retail shop. After a year of operation, she accounts her profits and then away some portion of it for her personal cash and reinvests the remaining one to add more products since her customers are growing in number.
But after five years, she wanted to expand. So she looks for a partner and found Mr. Chung. So Mr. Chung invested his cash to Mrs. Chang’s retail shop and they became business partners.
So the second type was born – partnership.
More customers came in so more profits poured in.
But after ten years of operating a profitable partnership business, they wanted to put up a building beside Divisoria so that aside from their own products, they can also accommodate small startup business owners in their building. Yes, they wanted to put up a mall.
They accounted all their assets as they planned for their mall to be put up. So now, they are ready. They have their business plan. They have their building plan. They have almost everything. They have a lot of cash to finance their new phase of business venture but one afternoon, while the sun is setting, their accountant came and said, “Mr. Chung, I’m sorry but you need more cash for this project to take off.” Because of this, Mr. Chung was saddened and while seating on the little porch of his house, he started singing, “I did my best but I guess my best wasn’t good enough…”
In a split second, as a little drop of tear is about to come out of Mr. Chung’s cute eyes, Mrs. Chang arrived and with a smile on her face, she suggested, “What if we put up a corporation? With a group of 5 to 15 persons, we can do it.”
The 3rd type – corporation.
A stock is the piece of ownership in a corporation. So if they say that you are a stockholder, you are an owner of a corporation. Since there are a lot of stockholders in a corporation, you are a part-owner of the corporation. So that is what a stock is.
To end the story or Mr. Chung and Mrs. Chang, yes they put up a corporation with their friends and cousins and business has been great for 10 more years. The end.
But wait, when will the stock market come into the picture? It’s good that there’s a sequel to the story.
There came a point in the corporation of Mr. Chung that they wanted to grow their business more. They wanted to build more malls and they also wanted to develop lands, and even build parks for the people. Of course, you know that they will need more funds for this.
Mr. Chung is wiser now. He did not cry. Rather he proposed to his co-owners that they will open their business to the public and invite others to invest in their business. Meaning, you and I can invest in their business and we can be part-owners with them.
This is where they need the stock market.
The stock market is where shares of stocks are offered for sale, where buying and selling of shares are made. If you want to buy a stock, you go to the stock market.
So they get listed or registered in the Philippine Stock Exchange and that we will now buys shares of stock and become part-owners with them.
But why should we help Mr. Chung? We don’t know him anyway?
What do you get if you buy a stock? How will you benefit from them?
Owning a stock of a good company means you will grow your money – in two ways:
At the annual stockholders meeting, the board declared that they will distributed a portion of their earnings to the stockholders. They say, “We will give P0.10 to every number of stock you have.” Meaning, if you have 1000 shares, you get P100.
Just like last April, Metrobank declared dividends. Today, EEI also declared dividends.
2. Capital Appreciation
Through time, the business grows. More malls are built, more profits are earned, more earnings are accumulated so the value of the entire business grows. It increases in value.
Last year, you bought a stock at P10, after five years, the market price is at P20. So if before you bough 1000 shares at P10, you now have a stock market investment valued at P20,000. So the value of your stock grows as the business grows. This is capital appreciation.
“OK, I’m good with that!” you say.
So let’s move to the last question: How will you enter the stock market?
You don’t simply enter. Note that the stock market is a special market. To be able to buy or sell, you will need a registered stock broker. They will do the buying and selling for you.
Let me give you five quick steps so you can be able to start partnering with the giants. And the good thing, this is applicable to online investing so it is even easier for you.
1. Choose a broker.
My broker is COL Financial, the largest online stock broker in the country. There are others like BPI Trade.
2. Open an account.
Opening an account is similar to opening a bank account. Just fill out their form, provide IDs, and if you cannot appear in their office, like at the COL Financial office in Ortigas, you can just have it picked up but you need to add a document which is the proof of billing.
3. Fund your account.
In registering an account, you will be needing a bank account. And to fund your account, you just have to go to a bank and pick up their bills payment form and pay like how you do for Meralco. You can also do payment or funding through online banking.
The starting amount is P5000. And that amount is still yours, you can use this entire amount for the first purchase of your stocks.
4. Buy your stocks.
5. Follow a strategy.
There’s a separate discussion on this (strategy).
So there you have it. With these 5 quick steps, you can begin partnering with the giants and benefit from their expertise, benefit from the growth of their business, benefit from the growth of the economy.
You can do it. Start taking charge of your financial life today.
Live your life, young mind!
PS: If you want to take your learning about investments to the next level, visit this page and read on: http://www.youngmindgroup.com/recommends.html