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By Likha C. Cuevas-Miel, Reporter
Editor’s note: Part one covered some
lessons in investments, like how a beginner must have an objective
and that being a stock-market player requires hours of study.
Last of two parts
In his book, Irving Ackerman says the
relationship between a broker and his client is confidential and the
broker will not reveal the sale and purchases that his client makes.
“It is extremely important that the investor
chooses the stockbroker suitable to his needs,” he wrote. “Some
investors can be served best by large brokers who can supply
facilities such as margin lines. Other investors are better off with
smaller brokers who can give them more personalized service.”
How much to invest?
Conrado Bate, president and chief executive
officer of CitisecOnline, said the amount that can be invested in
the stock market depends on the amount of money you are willing to
risk. Whether it’s P5,000 or P10 million, he advises against
putting all of one’s money in stocks, because there are high risks
involved. “It should be the amount that you want to use to enhance
your returns, so that your money will work for you,” he added.
There are two types of investors: the passive
and the active. The passive investor is the one who doesn’t want
to watch the market daily. He just wants to invest for the long
term. The active investor watches the market daily and takes
advantage of the swings of the market.
The passive investor can build a fund for his or
her child’s education through the stock market. Bate said the
passive investor can just buy stock in companies that he thinks will
do well for the next 20 years, like banks, utility companies and
blue chips. These are companies that are well-capitalized, have big
pool of capital and are preferred by institutional investors.
“What you do is peso averaging, meaning you
just put a certain amount of money on a specific company on a
regular basis for a long period of time. Like every month I would
set aside P5,000 and I would buy PLDT. Every month you would be
doing that and invest something you can dispose of that would not
constrain your budget,” Bate said.
This is what a father did for his child, all
grown up now and is in government service and has a family of her
own. When the child was born, the father opened an account with a
broker and put up a fund and bought San Miguel shares. When the
child reached 18, Bate said, her father gave her the shares and
said, “This is for your college education. Sell some whenever you
need money.”
The passive investor can also invest in the
stock market through a mutual fund, which can also go up and down
with the market. So even if it is professionally managed, an
investor can make or lose money.
Active investor
The active investor, on the other hand, wants to
know what’s going on in the market everyday. He takes advantage of
the price movements, buying when the market goes down and shares are
cheap and selling when prices are up.
“Investing in the stock market is not just a
short-term arrangement,” Bate said. “It’s for the long-term.
The stock market will always give you opportunities to make money.
So if you manage your risks you will always be able to take
advantage of the opportunities. Today the markets are bad, but if
you look at the other side of it, you can take this opportunity.”
On buying and selling
Many people, however, are not taking advantage
of the volatility in the market “because they are burned,” the
CitisecOnline president said.
“You can’t think clearly because of
emotional factors, and you don’t know it’s already the bottom;
and you buy instead at the top, when the price is high—that is
when you make a mistake,” Bate explained. “You have to be well
informed. It’s not about seeing the bottom, but seeing great
values in every situation. You see companies that are giving you
values of 5 percent versus what you’re getting from your bank
savings of 2 [percent] to less than 1 percent,” he said.
Ackerman writes that when the market is still
rising and the investor feels that he or she would like to sell,
then he or she can sell “at once” instead of waiting until the
very last minute. “The time to sell is when the stock is still
moving upward and there are many buyers ready to absorb the
offerings,” he added.
Usually, investors forget that everybody is also
waiting for the market to peak, but what happens is that
“everybody gets nervous at the same time and then a selling deluge
begins,” Ackerman said. Then, the price of the stock spirals
downward, he added.
OFWs and the stock market
The Philippine Stock Exchange has been
advocating the participation of the overseas Filipinos, who could
help broaden the number of players in the market and at the same
time help deepen the capital markets.
Bate said some brokerage firms are tying up with
banks so that offshore investors can make deposits to their accounts
with brokers.
Online trading has also made investing in the
local bourse possible even if the Filipino investor is in Dubai or
California as long as he or she has Internet access.
He said there is high interest among OFWs in
investing in the market, “but the hard part is they are not
knowledgeable. It’s too expensive for us to go there and educate
them because you cannot get that in one sitting. You have to be
regularly immersed in it to understand the dynamics of the market
and over time feel comfortable.”
For the meantime, the overseas Filipinos will
have to do with the tools available to them like online advice from
the brokerage firms, news reports, analyses and books.
It will be very hard for the overseas Filipinos
because they cannot be mentored like those in the Philippines.
However, if they can trade in the Philippine stock market online
successfully, he or she can trade anywhere in the world, since that
means he or she can read the market and make own decisions based on
his or her own analysis.
“Markets are all the same,” Bate said.
“The only difference is that the Philippines is the most difficult
to trade in because it is very illiquid. When you want to sell the
slippage is big compared with other markets that are so huge and has
so many players unlike here where there not too many buyers.”
Bate said people who are discouraged by the
amount of work needed to learn about the market should not invest in
it or else they will lose.
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