Building wealth with stocks a basic guide to investing in the philippine stock market download

Investors purchase those shares, which allows the company to raise money to grow its business. Investors can then buy and sell these stocks among themselves. This difference is called the bid-ask spread. For a trade to occur, a buyer needs to increase his price or a seller needs to decrease hers.

This all may sound complicated, but computer algorithms generally do most price-setting calculations. These days, the stock market works electronically, through the internet and online stockbrokers. Each trade happens on a stock-by-stock basis, but overall stock prices often move in tandem because of news, political events, economic reports and other factors. The point of the stock market is to provide a place where anyone can buy and sell fractional ownership in a publicly traded company.

And the buying and selling decisions of those investors determine the value of those companies. The market lets buyers and sellers negotiate prices. This negotiation process maximizes fairness for both parties by providing both the highest possible selling price and the lowest possible buying price at a given time. Each exchange tracks the supply and demand of stocks listed there.

Supply and demand help determine the price for each security, or the levels at which stock market participants — investors and traders — are willing to buy or sell. Price discovery plays an important role in determining how new information affects the value of a company. But investors might want to prepare for the possibility of regulators blocking the deal.

What is the stock market doing today? Stock market data may be delayed up to 20 minutes, and is intended solely for informational purposes, not for trading purposes. What is stock market volatility? Investing in the stock market does come with risks, but with the right investment strategies, it can be done safely with minimal risk of long-term losses.

Day trading, which requires rapidly buying and selling stocks based on price swings, is extremely risky. Conversely, investing in the stock market for the long-term has proven to be an excellent way to build wealth over time. However, rarely will the market provide that return on a year-to-year basis. Some years the stock market could end down significantly, others up tremendously.

These large swings are due to market volatility, or periods when stock prices rise and fall unexpectedly. The key to investing safely is to stay invested — through the ups and the downs — in low-cost index funds that track the whole market, so that your returns might mirror the historical average. Nothing in this material should be construed as a recommendation to buy or sell a particular digital asset.

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Before, if someone asked you mag invest ka, the first thing that comes to mind is real estate. Philippine stock market investing is only for the rich and famous -- that is back in the stone age. You'll need the capital to invest in the Philippine Stock Exchange market.

You would also need to be smart as it needs technical analysis. That's not how it works now. You don't need a large amount of money. You just need to start. With the surge of online stock brokers, variable universal life insurance VUL , stock trading is made easy. Stock market Philippines for beginners: Do not fret, start investing now.

Who says opening a stocks trading account is easy? Whoever said that, he's right. Remember what I said before? There is now a surge of different investment opportunities. First thing you need to do is open a bank account. That too is made easier as some banks are now offering an online application, no need to visit the branch to fill up a form.

If you're interested to know more about the stock market and about investing, chances are, you already own a bank account. In my case, I actually used my old payroll account when I set up my profile with Philstocks. You wouldn't need to set up a brand new account anyway.

If what's stopping you from setting a stock exchange account is that you will need to wait for hours, my experience was different. It was swift. A common misconception with us, Filipinos is that investments require a huge capital.

I thought so, too when I started researching about the stock market. You don't need to have a great lump sum when you are just starting out. You can open an account with a 5, If you're still not confident with your trading skills, try managing that initial amount. Then, slowly build your funds once you start learning more about stock market investment. It can be tempting to purchase blue chip stocks when you're starting but with a little capital, it would be best to buy shares from smaller companies.

Stock market Philippines for beginners: I'm busy and I can't follow the market trend daily If you are just like me, who is working a 9 to 5 shift, not super confident investing stocks due to schedule, worry no more. You can still invest in stocks by just opening a trading account with your trusted banks. I have one with BPI, my grandfather also has one with the same bank.

What about P,? How about P1,,? Based on equity, if you buy the company at P, , you risk losing P, if the company becomes unprofitable and liquidates. If you buy it at P,, you risk losing P, If you buy it at P1,,, you risk losing P, It will also take a longer time to make a return on investment. In the second example it increased to 5 years.

In the third example, it will take you 10 years. Now what does this tells us? If you overpay for the business, your returns diminishes, risk of losing money becomes higher and it will take you a longer time to gain back your initial investment. In conclusion, the price you pay for the business determines how much money you are willing to make, the amount of risk you are willing to take and the time it will take to get back your initial investment. Stock Price vs. In order to solve this problem, she decided to split her company into , small pieces.

These , shares are what we call Shares Outstanding. Mina values her business at P, We call this the Market Price. This means that if you buy one share of her business, it will cost you P5. The best way to understand this is to look at that one share as a miniature sized business.

As you can see from here, the market price is directly proportional to one share of stock. If you own the whole business, you own all the P, earnings and P70, worth of equity. This is the fundamental concept of why buying a stock is the same as buying a business.

In , Ayala Land Inc. ALI is trading at P The recent EPS is P1. MEG is trading at P5. You only need to pay P We now decide that our money is best invested in MEG. How to Find the Intrinsic Value? Based on historical data, MEG averaged at around We also need to find out the latest EPS in the four most recent quarters.

I found this to be You can also use the 5- yr. What we want is to find out what the stock is worth today, not five years from now. To do that, we need to use a Discount Rate. What is a Discount Rate? This interest is what we call the Discount Rate. Right now, the return is at 2. Now what if we use a higher discount rate? I want to point out that when computing for the intrinsic value, the value will depend on how much money you want to earn every year.

Using a Margin of Safety Finding the intrinsic value is not an exact science. Sometimes, we can commit errors along the way. In the previous example the growth rate used is In the example above, we can arrive at a conservative growth rate of At a price of P5. Her business has earnings of P1 per share and a book value of P0. If she decides to not pay herself a dividend and instead reinvest all that money back into the business buy new equipment, buy a larger stand, buy her own land , her book value will increase to P1.

So after a year, she decided to reinvest all of her earnings back into the business. So what does this mean as a value investor? A business that shows poor returns means that the business is doing a bad job of reinvesting their capital. In order to use this method of valuation, we need to gather all the data needed.

We need the following data below; 1. Average ROE 2. Average Dividend Payout Ratio 3. Recent book value per share 4. The Dividend Payout Ratio for the last 5 years is The recent book value is 3. The 5-yr. From that value, we derive the EPS by multiplying 3. We continue to do this calculation up to the 10th year. On the 10th year, the earnings are now at P1. We then also take the sum of all the dividends paid which is P1. Based on ROE valuation, we can now buy the stock.

It is also called the Liquidation Value. If the stock is trading at a price lower than the NCAV per share, it is considered undervalued. No proprietor or majority holder would think of selling what he owned at so ridiculously low a figure. With shares outstanding of 2. SGI traded between P1. Our owner- earnings equation does not yield the deceptively precise figures provided by GAAP, since c must be a guess - and one sometimes very difficult to make.

Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes All of these points up the absurdity of the 'cash flow' numbers that are often set forth in Wall Street reports. These numbers routinely include a plus b - but do not subtract c. Net Income — found at the bottom of the Income Statement. Capital Expenditures - take the average of the last 3 to 5 years. We then arrive at Owner Earnings. After applying DCF analysis, the next thing to do is to add the tangible book value of the business.

Divide that with the shares outstanding and you get the per share intrinsic value. The calculated Owner Earnings equates to negative P1. To do so, we get the average for at least a 3-yr. In and , Owner Earnings calculated equates to P1. Thus, we get an average of P1. The concept is simple — a company that makes a lot of excess cash on its invested capital can expand, buy back shares, pay debt or acquire other businesses. I recommend that you read the book as it is well explained there.

In a nutshell, you basically calculate the present value of the future Owner Earnings. You then add the tangible Book Value to the figure to arrive at the value of the business. The equity is P Adding the two, we get to value the business at P Sell a product or a service that is a basic necessity. Is in an industry with very little competition. Sell a unique product that doesn't change much. Provides a unique service that's difficult to replicate. Are a low-cost buyer and seller of products the public constantly needs.

Spends very little or none at all on Research and Development. High return on equity 2. High return on invested capital 3. Increasing historical earnings 4. Little to no debt except for financial companies 5. Competitive product or service 6. No organized labor groups 7. Product or service increase along with inflation 8. Low operational costs 9. Business buys back its shares Retained earnings are used efficiently thus adding value to the business and therefore increases the market value.

Buffett said that a business with a DCA is a cash cow. Now, if you find an interesting company that you think has a DCA, then use valuation methods I taught in this book to identify the best price to buy the stock. I recommend these services because I personally use them in my stock investing decisions and I find them useful and rewarding.

The first resource where I get a lot of financial advice in stocks, entrepreneurship and proper mind setting is the Truly Rich Club Bro. Bo Sanchez. The second resource I use is PinoyInvestor. This is where I get a lot of buy and sell recommendations through stock reports. The Truly Rich Club of Bro. All you have to do is follow the recommendations in the SAM Stocks Table and the Stock Alerts inside the club and let compounding do the rest!

You can take advantage of this strategy by joining the Truly Rich Club now. You can learn more about it by clicking the link below. This is what PinoyInvestor is all about. I encourage you to try and become a FREE member to get access to the free stock reports.

The reports contain a lot of information such as buy and sell recommendations which are very important to effectively maximize possible gains. You can learn more about PinoyInvestor by clicking the link below. If you need help in signing up with these websites, you may send me an email at admin investingengineer. These methods require a lot of different assumptions and therefore, are not perfect.

But knowing these kinds of calculations will give you trust and confidence in making investment decisions. Thank you for the time reading this e-book. If you like it, please share it to people who you think will benefit from it. Value Investing is an investment strategy where stocks are selected that trade for less than their intrinsic values. Value investors actively seek stocks they believe the market has undervalued. Investors who use this strategy believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company's long-term fundamentals, giving an opportunity to profit when the price is deflated.

Revenue is the amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income. The Cost of Revenue is the total cost of manufacturing and delivering a product or service. Cost of revenue information is found in a company's income statement, and is designed to represent the direct costs associated with the goods and services the company provides.

This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appear on the income statement and can be deducted from revenue to calculate a company's gross margin. An Operating Expense is an expense a business incurs through its normal business operations.

Often abbreviated as OPEX, operating expenses include rent, equipment, inventory costs, marketing, payroll, insurance and funds allocated toward research and development. One of the typical responsibilities that management must contend with is determining how low operating expenses can be reduced without significantly affecting a firm's ability to compete with its competitors. Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Operating Income is an accounting figure that measures the amount of profit realized from a business's operations, after deducting operating expenses such as cost of goods sold COGS , wages and depreciation. Operating income takes a company's gross income, which is equivalent to revenue minus COGS, and subtracts all operating expenses and depreciation.

A business's operating expenses are costs incurred from operating activities and include items such as office supplies, heat and electricity. Net Income NI is a company's total earnings or profit ; net income is calculated by taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses.

Net income also refers to an individual's income after taking taxes and deductions into account. An Income Statement is a financial statement that reports a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.

It also shows the net profit or loss incurred over a specific accounting period. A Dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property. Retained Earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt. It is recorded under shareholders' equity on the balance sheet.

A Balance Sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. An Asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Assets are reported on a company's balance sheet, and they are bought or created to increase the value of a firm or benefit the firm's operations.

An asset can be thought of as something that in the future can generate cash flow, reduce expenses, improve sales, regardless of whether it's a company's manufacturing equipment or a patent on a particular technology. A Liability is a company's financial debt or obligations that arise during the course of its business operations.

Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues and accrued expenses. Equity is the value of an asset less the value of all liabilities on that asset. A Stock is a share in the ownership of a company.

Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing. The Market Price is the current price at which an asset or service can be bought or sold. Economic theory contends that the market price converges at a point where the forces of supply and demand meet.

Earnings per Share EPS is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. The book value of equity per share is one factor that investors can use to determine whether a stock price is undervalued. If a business can increase its BVPS, investors may view the stock as more valuable, and the stock price increases.

The Future Value FV is the value of a current asset at a specified date in the future based on an assumed rate of growth over time. The Intrinsic Value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.