Summary
Highlights
Stocks represent a share or 'equity' in a company, granting shareholders the right to vote in meetings, receive dividends, and sell their shares. The world's first publicly traded company was the Dutch East India Company, whose shares were traded on the Amsterdam Stock Exchange. The Philippine Stock Exchange (PSE) was created in 1992 through the merger of the Manila Stock Exchange (founded 1927) and the Makati Stock Exchange (founded 1963). The PSE operates from 9:30 a.m. to 3:30 p.m. on weekdays and has indices like the PSE Composite Index (PSEi) for top 30 blue-chip companies and the PSE All Shares Index for all traded stocks.
Mathematics is crucial in stock trading for buying, selling, tracking prices, and computing dividends. When buying shares, 'buy gross' is the number of shares multiplied by the price per share. Additional charges like commission, VAT, SCCP fees, and transaction fees are added to form the 'buy net'. Similarly, when selling, 'sell gross' is the number of shares multiplied by the price per share, from which commission, VAT, SCCP fees, transaction fees, and a 0.6% sales tax are deducted to determine the 'sell net'. Online trading platforms automate these calculations.
Tracking share prices involves concepts like percent change, open, high, low, and close prices. Stock market quotes display current prices and their percentage change from the previous day's close. Japanese candlesticks visually represent open, high, low, and close prices, indicating if a stock closed higher (green) or lower (red) than its opening price. Technical analysts study these patterns to predict future price movements.
Dividends are a share of company profits paid to shareholders. A 'gross dividend' is calculated by multiplying dividend per share by the number of shares. A 10% withholding tax is typically deducted from this amount. The P/E (Price/Earnings) ratio indicates how much an investor pays for one peso of a company's earnings, with a P/E ratio under 15 often suggested as a good rule of thumb by investors like Benjamin Graham. EPS (Earnings Per Share) measures a company's profitability; a higher EPS is generally better.
Investing also requires understanding psychology and current events. 'Herd mentality' describes investors mimicking others, while 'bullish' investors expect stocks to rise and 'bearish' investors expect them to fall. Market sentiment is influenced by politics, pandemics, and other events. Popular online trading platforms in the Philippines include FirstMetroSec, BPI Trade, BDO Nomura, and COL Financial. For practice without real money, Investagrams offers virtual trading.
Bonds are another way for corporations to raise funds without selling ownership. When you buy a bond, you are essentially lending money to the issuer and receive interest payments in return. Bonds represent debt, making you a creditor, whereas stocks represent equity, making you a part-owner of the company.