Do you want to invest in the stock market but do know how? Well, its not as difficult as you think. In today’s world, investing in the stock market is easy as opening a bank account, thanks to the benefits of technology. Below is the step-by-step guide on how to buy your first stock.
1. Formulate your investment philosophy.
Why do you want to invest in the stock market? What type of stock investment you want to pursue? How do you select a company to buy? These are just some of the questions you need to ask yourself before buying your first stock. Investment philosophy takes enormous time to develop because this is where the “true work” happens.
First, you need to identify the reason why do you want to invest. Is it for retirement? Is it for the education of your kids? Is it for enlarging your assets? Second, what type of investment do you want to pursue? Do you want to become a trader – buy and sell? Or do you want to become an investor – buy and hold?
Not only your philosophy will serve as the basis of your actions, it will also serve as a guide towards your investment journey. Unless you want to lose your capital, you need to be prepared, firm, and guided about your investment actions.
2. Open your stock trading account.
You can open your stock trading account through stock brokerage firms. Some of these firms are COL Financial, BPI Trade, First Metro Sec, and BDO Nomura. Stock trading account is an electronic, online account where all the process of buying and selling shares happens. Here, you can see all the information about the listed companies in the Philippine Stock Exchange, their share prices, board lot, etc.
After choosing your stock broker, you can apply to them via online. Opening the stock trading account comprises a series of questions that needs to be answered honestly by the applicant. The answers are subject for approval and might take around 1 week to 3 weeks depending on the preference of the stock broker.
3. Fund your stock trading account.
After opening your first stock trading account, you need to fund them by the use of a settlement account. Because you cannot directly buy shares by the fund in your ATM/bank account, you need to transfer funds to your settlement account. All transactions whether it’s about applying for a settlement account or transferring funds from your settlement to bank account (or vice versa) can be made through online.
Bank Account to Settlement Account to Buying of Shares
Selling of Shares to Settlement Account to Bank Account
4. Buy your first stock.
Buying company shares is easy. Based on your investment philosophy, you can screen, assess, and evaluate the companies you are most interested in. One of the main factors in starting to invest in the stock market is the required minimum capital.
How to calculate for the minimum investment of the company?
To calculate, you need to identify two things: Company share price and Company Board Lot. Every company has their own share price and board lot and by multiplying them, you can identify the amount of minimum capital a company has.
For instance, an ABC Company has a share price of 900 pesos and a board lot of 10. Multiplying them (900 pesos x 10 board lot) will give you a minimum investment of 9000 pesos.
5. Manage your stock using your investment philosophy.
Your investment journey will not end after buying your first stock. Depending on what type of investor you are will determine how and what further efforts are required to continue what has been started. If you are a trader, what price movements and patterns are you considering? If you are a value investor, what quantitative measurements are you using? All of them will vary on your investment philosophy.
Buying company shares is not that arduous as some may think. Gone are the days when you have to take a commute to stock exchange or call your stock broker to buy stock because you think it’s going to move upward. Nowadays, provided with minimum effort on your desktop, you can easily do anything you want with regards to stock investment. Opening your stock trading account, buying and selling your stock, and making transactions on your cared funds, can be made by the use of technology.