How Money Grows in the Stock Market

People are investing in the stock market with the goal of making their money grow but how does our money grow in the stock market?

It’s been two years since I started investing/trading in the stock market and so far, I have earned through the following:

a.       Capital appreciation - this happens when the price of stocks I bought appreciates.  For example, I have bought 1000 shares of ALI (Ayala Land, Inc.) stocks at a price of 15 pesos per share and after some time the price appreciates to 16 pesos per share.  At that instant my capital increased by more or less 6% and depending on my plan, I may opt to sell my shares so I can already secure my 6% profit or I may wait for the stock to appreciate more for a bigger profit.

b.      Cash Dividend - This is the money given back to the investor as his/her share of distributed profits declared by the company.  As per my experience, most companies where I invest declare cash dividend twice a year.  For example, I have 30 shares of TEL (PLDT) stocks then they declared a cash dividend of 78 pesos per share.  That means I will be getting 2,340 pesos dividend less 10% tax, I will get a net dividend of 2,106 pesos.

c.       Stock Dividend – This is the additional stocks given by the company to its shareholders.  This is usually declared in percent.  For example, If I have 4000 shares of EDC (Energy Development Corporation) stocks and then they declared a 25% stock dividend, I will be having an additional 1000 shares of EDC stocks which I can sell right after the stocks were credited to my account.

d.      Stock Rights Offering – This is a special offering of companies to its existing shareholders wherein the offered share price is lower than its current market price.  This is usually declared in ratio and shareholders are given a timeframe to accept the offer or not.  Yes, a shareholder can opt not to accept the offer but if you have the cash to buy the offered shares, it is much better to accept the offer.  This is seldom offered by companies so it’s an opportunity to grab.  I have experienced this opportunity last year when BPI (Bank of the Philippine Islands) offered a 1:10.555 stock offering.  I have an existing 2200 shares so I was offered 208 (2200/10.555) shares at a price of 32.50.  At that time, BPI trades at 51 pesos/share so it’s just like buying the 208 shares at 36% discount which I sold immediately giving me a more or less 50% profit.

There’s really a lot of opportunity to grow your money in the stock market.  It’s high risk, yes, but you can develop your strategy to counter the risks.

Happy investing/trading everyone.

Why I Started Investing in the Stock Market

 Last 2009 as an effect of the global economic crisis, the bank's interest rate on deposit accounts was reduced tremendously that my little savings deposited on my time deposit account earned a very minimal interest.  Starting from 5% annual interest, it dropped to as low as 2.5% annual interest.  A 20% withholding tax is still to be deducted from the meager earnings I get from my savings.

This situation pushed me to start reading books from financial experts.  I bought books written by Mr. Robert Kiyosaki and Mr. Colayco and registered to Bro. Bo's Truly Rich Club.  Having read the insights of these financial experts, my financial outlook in life changed.  I now understand the value of investing.

There are different investment vehicle available in the market but what really caught my attention is the stock market.  Before, my perception about stock market is that, only the rich with large amount of capital can invest in this market and that it's a very complicated and difficult thing to learn.  But when I started reading articles from Truly Rich Club regarding the stock market, little by little I was enlightened. 

Of course, I did not immediately plunged into investing in the stock market, I did a lot of readings first not only from Bro. Bo's Truly Rich Club but also from other sources.  I visited Philippine Stock Exchange website and monitored the stock's movement of companies I'm interested in.  I also visited CitiSecOnline website, the online stockbroker Bro. Bo recommends and I attended the free seminars they hosted.  In other words, I did a research on stock market's ins and outs (at least the basic ones) before I opened an account at Citisec.

Now, it's more than two years since I started investing/trading in the Philippines Stock market and I'm really happy that I did.  It's high risk, yes, but you can always develop strategies to counter the risks.

What is a Stock Market

  Some of my friends and officemates learned that I am investing/trading in the stock market.   Others are eager to know and learn about it and so a lot of questions are being raised.   So I thought of blogging the information I learned so every time they ask questions, I will just refer them to this blog.  This may also help others out there who are interested to know more about this market.  

Before anything else, let us start by knowing what a stock market is.  Stock market just like any market is just a place where buying and selling takes place but instead of goods, shares of companies or otherwise known as stocks are being bought and sold here.  Once you have bought a certain share of stocks of a listed company, you are considered a stockholder of the company.

There are three major participants in a stock market, the companies, the stock exchange and the investors. 

The companies enlist in the stock market so they can source out needed funds for their expansion or debt reduction.

The stock exchange is the intermediary center where companies and potential investors are brought together.   The stock exchange has member stock brokers who are the ones that handle the transactions of investors who want to buy or sell a share from a listed company.  In the Philippines, there is only one stock exchange and that is the Philippines Stock Exchange (PSE).  There are plenty of stock brokers listed in the Philippines Stock Exchange, there are conventional ones and there are the on-line stock brokers.  In order to participate in the stock market, an investor should tap the services of a stock broker.  In my case, I tapped the services of an on-line stock broker and that is the Citiseconline.  For a complete list of stockbrokers or trading participants, you can check the PSE website.

The investors are the people who want to invest their money on companies they feel will be doing well.  This is where, we, the ordinary people belong once we decided to buy shares of companies listed in the stock exchange.

That's all for now and I hope you learn something from this post.

Thank you for passing by and God bless everyone.