Trading in the Stock Market

Trading in the stock market is just like buying and selling.  You buy stocks when the price is low and sell it when you already realize the profit you have targetted from it. There is no physical products involved, just the computer, internet connection and the broker's trading platform (this is applicable for on-line trading).

I'm not a professional stock trader who uses graphs and indicators to enter or exit a certain trade but I have developed my own strategy and so far, I'm earning decently from my trades although I don't earn daily but overall, at the end of the year, I am able to profit 30% to 40% of my capital.  Doesn't sound much for professional traders but for a simple mother who wants to augment the family's income, it's already a big thing for me ... payment for insurance premiums and other family expenditures which I don't need to get from my husband's pay check.

Aside from the earnings that I get from stock trading, I also enjoy exercising my skills on planning and decision making in making my trades, it just makes my mind working and I love it.

What is important in stock trading is that you have your plan and you have the fund so you can execute your plan but always remember this, trade only the extra money that you have ... not the money for your family's monthly budget, not the money for emergency purposes and most of all not the money that you have borrowed. 

What is Citiseconline's Easy Investment Program (EIP)?

Citiseconline’s EIP or Easy Investment Program was designed to help ordinary citizens to invest in the Philippines Stock Market the simple and convenient way.  The basic principle of this program is based on peso-cost averaging which is a time tested strategy to build personal wealth by investing a fixed amount of money in a good quality company in regular intervals over a period of time. 

This strategy works best for a long term investment and the good thing about this is that you don’t have to time the market.   The idea is that whenever the stock price of a certain good quality increases we purchase less shares and whenever the price decreases, we purchase more shares so we don't have to time the market just follow your your schedule on buying your shares.  In the long run, the average cost per share will be lesser than the actual price per share.

The following are the features of Citiseconline’s EIP:

a.       Recommends premium quality companies which are suitable for a long term investment.  How did they arrive with this list?  Citiseconline has a group of fundamental analysts who are expert in studying all these listed companies in the stock exchange.  They make a thorough study of a certain company before they recommend it to the list of premium quality stocks.  I don’t have the capability of studying these companies so I just rely on their recommendations.

b.      On-line monitoring of your EIP portfolio.  With Citiseconline you can always monitor your stock positions anytime, anywhere you are as long as you have an internet access.  Personally, I still make my own spreadsheet to monitor my stock positions, then I compare it with citiseconline’s report.  So far, I haven’t found any discrepancy yet aside from small centavo difference because of the rounding off system.

c.       Citiseconline EIP reminds clients of their scheduled EIP order.  When you register for Citiseconline EIP, you will be required to input how much you are going to invest in a certain quality company they recommend, for a regular interval (say weekly, monthly or quarterly) at a certain period of time.  Based from your input, they will remind you two days before your scheduled EIP purchase through e-mail.

Remember that Citiseconline’s EIP will not automatically buy your stocks for you.  You have to set your order at your scheduled date, just don’t forget to check your account for an available fund.

This program is still covered with the board lot rule so don’t expect that if you allot 5,000 pesos monthly for a certain company, you can buy a 5,000 pesos worth of shares.  The amount will vary depending on the prices of stocks at the time of your scheduled order so what I'm doing is that I fix my EIP order to the number of shares which is in accordance to the board lot rule and to my budget. 

I registered for an EIP order for ALI (Ayala Land, Inc.) every 15th of the month at a 5,000 pesos investment.  With this 5,000 budget, I can buy approximately 300 shares of ALI each month. For several months now, ALI's price fluctuates from 15 pesos to 17 pesos per share, sometimes I buy ALI shares for only 15 pesos per share (approximately 4,550 pesos for 300 shares) and there are also times when I buy it at 17 pesos per share (approximately 5,200 pesos for 300 shares). 

So for those of you who want to invest for a long term in the stock market the easy and convenient way, you can always try this Easy Investment Program of Citiseconline.  Please visit their website to know more about this program.

Board Lot and Odd Lot

Board lot is the minimum size a stock can be traded and it is controlled by the stock price.  If a stock has a board lot of 100 shares, that means that you can buy or sell that stock for a minimum of 100 shares and in the scale of 100 thereafter.  With this board lot, you can trade it at 100, 200, 300 and so on and so forth.

Odd lot on the other hand is a number of stock shares not wholly divisible by a minimum board lot.  For example the minimum board lot for EDC (Energy Development Corporation) is 100 shares.  If you have 150 shares then 50 shares is considered as odd lot.  

Now, you may be wondering, if stocks are traded by board lot then why is there such a thing as odd lot.  Well, this odd lot usually happens when a company declares a stock dividend or stock rights.  For example you have at present 300 shares of EDC then they declare a 25 % stock dividend, this means you will receive additional 75 shares.  The additional 75 shares is considered an odd lot since it is below the minimum board lot which is 100 shares.  

This odd lot shares can only be traded at Odd Lot Boards but are not easy to trade and are usually traded at a discounted price.

You may minimize getting this odd lot shares by buying additional shares whenever a company declares a stock dividend.  As for our example above, once you learned that EDC will give out a 25% stock dividend, you may buy additional 100 shares so you will get a total of 400 shares.  This 400 shares will give you an additional 100 shares dividend which is already equivalent to the minimum board lot.

I have an odd lot shares for BPI last year when they declared a stock offering.  I did not try to sell it so it’s just there in my account, anyway it still earns interest whenever the company declares a cash dividend so I’ll just leave it there.

Below is a table of board lot for Philippines Stock Market:

Stock Price Range		Board Lot
0.0001	0.0099	1,000,000
0.01	0.049	100,000
0.05	0.249	10,000
0.25	0.495	10,000
0.5	4.99	1,000
5	9.99	100
10	19.98	100
20	49.95	100
50	99.95	10
100	199.9	10
200	499.8	10
500	999.5	10
1000	1999	5
2000	4998	5
5000	Up	5

I hope you learned something from this post.

Happy investing everyone.

Crazy Week for the Stock Market

Wow, it’s been a crazy week for the stock market.  At the beginning of the week, all stocks were going down and my portfolio was down by almost 5%.  Wednesday came and the stock market rebounded but still it’s lower than what it was last week and my portfolio is still down by 3%.    

Anyway, I had been through this before.  The worst that I experienced was a 20% down on my portfolio and that happened first half of 2009 when the stock market was just starting to recover from the 2008 financial crisis.  I was only new to the Philippines Stock Market then but it didn’t scare me, my portfolio was made up of big companies so I was so confident that my investment will recover so I just hold on with all my investments, not selling anything.  True to my expectations, in a few weeks time, my portfolio was up.

This craziness that’s happening in the stock market today will also have its end and if you’re tough enough to hold on and even buy stocks of companies that are way down below their valued price, we are on the same side.  It’s bargain hunting week at the stock market.

Good luck everyone.

How to Withdraw Funds from Citiseconline

Withdrawing funds from Citiseconline is as easy as depositing fund for your account, just make sure that the fund you are withdrawing is a stand-by fund in your account for three days.

Ever since I opened my account at citiseconline, this is the first time that I tried to withdraw part of my funds from them.  I just want to make sure that withdrawing my funds from them don’t have a lot of hassle.  My officemate once asked me if it’s not hard to withdraw your money from citiseconline so I have to try so we will know.

To withdraw funds from your account, just fill-out the “Request for Withdrawal of Funds” form which can be downloaded from Citiseconline’s website and fax it to them (their fax and telephone numbers are written on the withdrawal form).  Make sure to call and verify if they have received the fax you sent.  If you have sent your request before eleven o’clock in the morning, they can process your request within the day and release the cleared fund the next day.

You have the option of receiving your withdrawn amount through check and pick it up at their office or you can request them to deposit it in your bank account.   Take note of the check 3-day clearing requirement if you request to deposit your fund at banks other than Bank of the Philippine Islands (BPI), Banco de Oro (BDO) and Metrobank.  Don’t worry, there’s no charge whatever means you opt your fund will be given to you.

In my case, I requested Citiseconline to deposit my withdrawn amount to my bank account and when I checked my account the following day after I faxed the request for withdrawal, the money was already credited on my account.  Isn’t it great?  Thank you Citiseconline. 

PLDT Announces Cash Dividend Distribution

Philippine Long Distance Company with a stock code TEL in the Philippine Stock Exchange announces the distribution of 78 pesos per share cash dividend to all its stockholders.  The Ex-Date is August 24, 2011 and it is payable on September 27, 2011.

The Ex-date is August 24 which means that we still have the chance until August 23 to buy PLDT stocks if we want to be entitled of the cash dividend.  As of today PLDT's stock price is 2410 pesos per share.  No wonder PLDT stocks price managed to increase despite the losses of other companies listed in the Philippine Stock Exchange.

Happy investing everyone.

Another Recession?

Another selling frenzy swept the Wall Street for the past weeks and yesterday the Dow Jones Industrial Average fell more than 500 points, the 9th steepest decline ever according to analysts.  See story here.

I don't really understand all this issues in the U.S. economy that gives fear to its investors and leads to the selling frenzy at the stock market but definitely all stock exchanges outside the U.S. will be affected. 

This will be a wait and see day for me at the Philippine Stock Market but there's nothing to worry, stock market always have it's highs and lows and as long as you don't panic and sell all your losing positions, rest assured that the market will always bounce back, higher than the previous high.  This is the reason why it is advisable that the money we put in the stock market are extra money that we won't need for our everyday and emergency funds.

Happy investing everyone.

Stock Trading Fees

Just like in any market there are fees a trader has to pay for every executed transaction in the stock market.  Whenever you buy or sell stocks, there are certain charges which are automatically deducted from your account such as stock broker’s commission, securities fees and taxes.

Stock broker’s commission varies so it is better to check with your stock broker how much they charge.

In my case, my stock broker is Citiseconline and they charge 0.25% of the gross trade amount for on-line transactions and 0.50% for a telephone transaction or a minimum of 20 pesos per transaction if the calculated commission is 20 pesos or below.

Below are the fees collected for every executed transaction (considering an on-line transaction with citiseconline as broker):

1.       Buying

    

a.       Stock broker’s commission                   =   0.25 % of the gross trade amount

b.      VAT on Stock broker’s commission     = 12 %

c.       PSE transaction Fee                             =   0.005 % of the gross trade amount

d.      Securities Clearing Corporation

of the Phils. fee (SCCP fee)                =  0.01 % of the gross trade amount

2.       Selling

a.       Stock broker’s commission                =  0.25 % of the gross trade amount

b.      VAT on Stock broker’s commission  = 12 %

c.       PSE transaction Fee                            = 0.005 % of the gross trade amount

d.      Securities Clearing Corporation

of the Phils. fee (SCCP fee)                = 0.01 % of the gross trade amount

e.        Sales Tax                                            = 0.005% of the gross trade amount

Here’s a transaction example:

      Buying 100 shares of BPI stock at a price of 59/share:

a.       Commission      = 0.0025 x 59 x 100 =  14.75   = 20  (minimum commission charge)

b.      VAT                  = 20 x 0.12                              =   2.40

c.       PSE                   = 0.00005 x 59 x 100              =   0.30

d.      SCCP Fee         =  0.0001 x 59 x 100                =   0.60

                                                                            -----------

                                                                                23.30 (total charges)

 Total amount to be paid = (59*100) + 23.30    =  5,923.30

      

       Selling 100 shares of BPI stock at a price of 61/share:

           

a.       Commission      = 0.0025 x 61 x 100 =  15.25          = 20  (minimum commission charge)

b.      VAT                  = 20 x 0.12                                     =   2.40

c.       PSE                   = 0.00005 x 61 x 100                     =   0.31

d.      SCCP Fee         =  0.0001 x 61 x 100                       =   0.61

e.       Sales tax           =  0.00005 x 61 x 100                      =   0.31

                                                                                   -----------

                                                                                      23.63 (total charges)

 Total amount to be received = (61x100) – 23.63     =  6,076.37

You should be aware of these charges so you can calculate at what price you are going to sell your stocks in order for you to get a certain profit.