Taking a leap at the stock market
* For as low as P1,000 you can already own shares of stocks
With the rising living costs nowadays, Ilonggos face the challenge of finding ways to give their loved ones a comfortable life and things that they can truly call their own like a house, a car and most importantly, financial security up to retirement age.
Au Hugo, stock broker and abundance workshop facilitator, once told participants of the “True Self, True Wealth” seminar she conducted, that apart from their jobs, they should have an extra source of income. It could be another part-time job or an investment wherein one need not work extra hours but still ensures that his/her money grows.
The latter can be addressed by a high-risk and high-yield personal finance tool – the stock market.
According to the Philippine Stock Exchange, a stock “represents a claim on the company’s assets and earnings.”
This company, considered as the primary market, issues shares and sell them to the investing public.
Then, investors, which form the secondary market, buy and sell shares of stocks that were issued by the primary market. In Iloilo, these are Regina Capital and Summit Securities, Inc.
“For as low as P1,000 you can already own shares of stocks,” said Hugo, a broker of Regina Capital based in Iloilo City.
Sure, there are other investments like jewelry, real estate, paintings, precious metals, T-bills, corporate bonds and investment funds, among others, these either fall short in two considerations: ease in buying and disposing them and high yield.
Hugo explained that while stocks are high-risk investments, the return compensates for bearing that risk. “The higher the risk, the more you should receive for holding the investment, and the lower the risk, the less you should receive,” she presented.
She cited as an example DMC shares which were sold at P2.65 per share in 2009. An investor who paid P100,000 got himself 37,735 shares. At the end of three years, the cost per share increased to P41.30, making him richer at P1.588 million or 145 percent.
Contrast this to a savings deposit of P100,000 which by the end of three years, only earned P2,081 in interest or six percent.
“So, since I wanted to buy a house of my own and I’m not sure if I am able to pay for it out of my job salary several years from now, I should start building my finances through stocks,” said “Marie”, a media practitioner.
Apart from increased yield, an investor is also assured of dividends.
“There are companies, like banks that issue dividends. So, even if the share price increases or decreases, an investor is assured of a yearly dividend from the primary market,” said Hugo.
“There is also that issue of liquidity,” said Hugo. She said, unlike real estate, jewelry and paintings which will take you time to find buyers, stocks can be sold easily.
Tax for stocks is at 0.5 percent of the value whereas in real estate and deposit instruments, taxes are at 10 percent of sales price and 20 percent of interest income, respectively.
Take for example, you buy 10,000 shares of Petron at 5.50 per share at a purchase price of P55,000. The stock broker adds a 1.5 percent commission (P825.00), 12 percent VAT of the commission (P99.00), and SCCP of 0.015 percent of the purchase price (P8.25), the investor will pay P56,007.25.
If the investor wants to sell the said shares, the same percentages/amounts will be deducted, so he/she will receive P53,792.75.
Back to correcting the myth that stocks are only for the rich, there are stocks that cost as low as one peso with a minimum of 1,000 shares to be purchased.
“Marie”, for example, invested in 1,000 shares in Megaworld at P2.30 per share or total of P2,300 pesos comprising her savings of 10 percent of her monthly income.
That’s why Hugo encourages salary earners that once they get their pay, they should set aside a certain amount for their savings and invest the money to make it grow.
When you are ready to take the leap to a brighter financial future, the process starts with finding a stock broker, open an account with them, discuss which stocks to buy or sell, give orders to the broker, get the confirmation receipt, deliver or pay before the settlement date and receive the payment.
“Once you buy stocks, you can pay three days later,” Hugo said.
At Regina Capital, a new investor is asked to submit two valid IDs with photos, fill-up signature cards and the account opening form.
CERTIFICATE OF OWNERSHIP
Before, the PSE issued name certificates. But this was discouraged already because it took them time to process them. “Since prices of stocks change every second, the price that you wanted may be different on the day that the certificate is processed for selling,” said Hugo.
“Thus, we now practice scripless trading” because here, stocks are faster to dispose,” she added.
Once you are already a shareholder, remember to safeguard your investment. The PSE advises the following: “Ask for official receipt every time you buy. A buy and sell invoice should follow every transaction. Ask for a monthly statement of account.”*