The topic of the stock market or ‘stocks’ usually gets brought up when people talk about investing. But realistically speaking, it’s not (yet) for everyone.
Assuming you’ve already done all the necessary research, learning, and studying, you’ll now need to understand that there are 3 easy ways to actually get this done, each with its own pros and cons.
By way of managed funds
Managed or pooled funds are a great way for beginners to get into stocks, because each of these has an expert, professional and dedicated fund manager who takes care of making the decisions and research for investors. These are usually seen as Unit Investment Trust Funds (UITFs) and mutual funds.
Of course, not every managed fund has stocks in its portfolio, so make sure to read the Key Information and Investment Disclosure Statement (KIIDS) to see their respective underlying investment outlets where it puts its money.
Among the different types of managed funds, equity and index funds will probably fit newbies’ needs best. The former invests mainly in stocks, while the latter matches a financial index (in the Philippines, this is the PSEi, which an index of the top 30 publicly listed local companies) famously referred to as ‘Blue Chip’ stocks.
Aside from the professional management, another advantage of managed funds is affordability. They let you invest in many reputable companies across various industries with a good track record for much less than it would cost to buy direct individual shares (even if you buy the minimum according to the board lot).
Investing in a UITF or mutual fund is fairly straightforward because many companies now allow people to do it online. After choosing a fund that fits your needs, just make an account through the company’s website or app and you’ll be guided through the rest of the process. Note though that you will be required to accomplish an Investor Suitability Test to gauge your profile and to ultimately help you fine-tune your choices based on the results of your test.
The minimum investment amount usually ranges from P1,000 or P5,000 to P25,000, depending on the fund provider.
By way of Exchange-Traded Funds
Exchange Traded Funds (ETFs) are similar to managed funds, but you can buy its shares through a stock brokerage instead of directly from the fund because it’s like a mutual fund listed in the stock exchange. There are different types of ETFs, so you should choose one that focuses on stocks.
In the Philippines, there is only one ETF currently available. This is the First Metro Philippine Equity Exchange Traded Fund (FMETF), an index fund that follows the PSEi in order to match its performance.
To invest in FMETF, you just need to have an active stock brokerage account. This can be opened online pretty easily. Then, link a bank account that will be used for funding and settlement, put money in your brokerage account, and choose how many FMETF shares you want to buy.
By way of direct stocks
Once you’ve gained the necessary knowledge, experience (and confidence), start making the decisions on how to manage your stocks yourself by buying individual shares of stocks. Remember though, choosing which stocks to buy and invest in isn’t a process you should rush through.
You’ll be investing your hard-earned money, which means you’ll need to do your research on the company and its shares to see if they could meet your needs (for example, the dividends history if you’re looking for income generation) as well as its growth potential, increasing the value of the stocks you own.
You’ll also need to decide on the right price for you to buy. Done properly, this will require you to do some analysis of the company’s financials, historical price movement and future prospects.
If this is the way you choose to get into stocks, you’ll need to open an account at a stock brokerage. You’ll be able to purchase shares after you link a bank account and fund your brokerage account.
Most top-tier stock brokerage firms provide their clients with periodic research reports and recommendations to help their clients make informed decisions as to which stocks to buy, which stocks to sell, which stocks to hold on to, and the ideal entry and exit prices.