25. Swabeng Discussion: Earning through The Stock Market by Price Appreciation

My apologies for just showing a few on the last post. :D


Anyway, Here are the two ways how to earn in the Stock Market. This will be the first part.


1. Price Appreciation.

A. Let's say on January 4, 2010, you bought 1000 shares of Jollibee (Code: JFC) priced at 59.00 pesos per share (closing price) which means you have spent around 59,000 pesos (exclusive of fees and charges).

Then on August 4, 2016, you decide to sell all of your 1000 shares of Jollibee for 260.00 pesos per share (closing price). This means your 59,000 pesos has grown to 260,000 (exclusive of fees and charges) or your money has grown to around 340% since the time you bought shares of JFC. You may refer to the chart below for the price movement of JFC from the time the shares have been bought to the time the shares have been sold.

Jollibee's Uptrend

B. On the other hand, on September 4, 2014, you bought 100 shares of PLDT (Code: TEL) priced at 3460 pesos per share (closing price) which means you have spent around 346,000 pesos (exclusive of fees and charges).

Then on December 5, 2016, there was an emergency that you needed a certain amount of money but your only source was the stocks of TEL that you have. You have no other choice but to sell all 100 shares of TEL for 1280 pesos per share (exclusive of fees and charges). From the time you bought TEL until you sold them, your loss was at 63%, some that all of us don't want to happen (sell at a loss). You may refer to the chart below for the price movement of TEL from the time the shares have been bought to the time the shares have been sold.

PLDT's Downtrend

Then how did the price per share of JFC went up from 55 pesos to 260 pesos? and How did the price per share of TEL went down from 3460 pesos to 1280 pesos?


Here's the explanation.

Price of a Stock is usually dictated by the buyers and the sellers. In a wet market it is usually called the law of supply and demand. If there is a high demand for a stock, its price would usually go up. On the other hand, if the demand for the stock is low, its price would usually go down.

Other factors for the increase and decrease of the stock's price includes updates (positive/negative) from the business, market sentiment, annual (or quarter) earnings report, as well as local and global issues that may have something to do where the certain stock is categorized.


On the next post, we will show you the other way on how to earn money in the Stock Market. Stay tuned.

24. Swabeng Discussion: Stock Market (The Bare Basics)

Now that we have already discussed Mutual Funds and Unit Investment rust Funds, I guess its time to discuss some more ways to earn money passively.


That is through the Stock Market.


Now what is the Stock Market Exactly?


The Stock Market is referred to as a place where shares of Public Listed Companies are Traded (Buy or/and Sell).


To make it simple, lets compare the Stock Market with a Wet Market (The one that our Moms usually go to buy/sell fresh produce).


When you go to a wet market, products there are group into sections like Meat, Fish, Vegetables, Poultry, etc.


In a market, not all prices are the same. Some are more pricey than others but the cost may increase or decrease depending on the Supply and Demand.


This is the same with The Stock Market. Instead of buying produce, you're buying shares of stocks. When you buy shares of stock, that makes you also a part owner of the company.


Prices of shares increase or decrease depending on the number of buyers and sellers for the Stock.


How you earn through the Stock Market? There are two ways. First is the price appreciation and Second through Dividends. Both of them will be discussed on the next post.


Till then.

23. Swabeng Dilemma: UITF of MF

Now that I've share a little on both Unit Investment Trust Fund (UITF) and Mutual Funds (MF), which of these two would be better to invest in?


Mutual Funds?

OR

Unit Investment Trust Fund?


While the two may have some similarities, they do have their own differences.

Let us count the ways.


1. Types of funds and investments. 

Practically, both offer the same types of funds to their clients. Ranging from Money Market Fund, Bond Fund, Balanced Fund and Equity Fund. There would be some difference in the types of funds that one or the other offer like Dividend Funds, Dollar Funds, Index Funds and the like. Regardless of the list, there is once fund that I'm sure that is tailor-made for you.

For the list of mutual funds, you may check their official website here, while for the list of unit investment trust funds, you may check their official website here.


2. People who handles the funds. 

Seasoned professional fund managers are the ones who handles the funds. Speaking of which, they usually handle not just millions of pesos but billions of pesos. Which means they have to trade very meticulously to avoid possible losses.

Imagine the fund manager has 100 Million pesos and Risk of 2 to 3 percent, this means that the fund manager can only lose 2 to 3 million pesos. That's a huge amount for a retail investor like you and me.

The difference is that Mutual Funds are regulated by The Securities and Exchange Commission (SEC) while UITFs are regulated by The Bangko Sentral ng Pilipinas (BSP).


3. Procedures in opening an Account

Each Bank or Mutual Funds have their own specifics when it comes to how to open an account for them and how to top-up your account on a time basis. Just the same their respective sets of procedures will actually help you understand better regarding their type of fund you have chosen.

Definitely, their forms will be different but what needs to be filled-up like your name, address, contact number, email etc are the same across all forms.


4. Funding and Maintaining your account

All funds require a minimum amount to open (from as small as 5000 pesos) and a certain period of time for holding them (from as short as 30 days). Once you were able to fund your account initially, you may add-up accordingly (from as low as 1000 on most accounts) on a timely manner. When you feel that you were able to reach your targets, you may sell it at a profit.

The price of the fund are either expressed in Net Asset Value Per Share or NAVPS for Mutual Funds while for UITF, it is expressed in Net Asset Value per Unit.


5. Fees and Charges. 

Also remember that there are corresponding fees on this investment. But there are times that the longer you hold on to your investment, exit fees are usually waived. Annual fees usually is within the 1 to 2 percent of your portfolio as well as there are also sales fee.

While Mutual Funds are Tax-Exempt, UITF's comes with a 20% withholding tax on capital gains. At the same time, management fees are higher for Mutual Funds compared with UITFs.


For now, these are the comparison between a Mutual Fund and a Unit Investment Trust Fund. Let me know in the comment section if there are other similarities or differences between the two.

22. Swabeng Strategy: Types of Mutual Funds

I'm sure you have an idea how and where to invest in Mutual Funds according to your risk appetite and time horizon. If not, let me share them with you.


1. Money Market Funds

This type of fund is ideal for those who only intends to invest within a short period of time usually less than 1 year (Between 3 -12 months) and if you need the money with a year or less this fund is for you. This is usually better than keeping it in your savings account. This can be your alternative to your time deposit account since it give a higher interest (subject to risks).


2. Bond Funds

This type of fund is ideal for those who won't be using their money for the next 1 to 3 years. As the name implies,your funds will be mostly invested in Bonds and some cash. This fund is a little bit riskier than Money Market Funds but it still safe investing on this type.


3. Balanced Funds

This type of fund is ideal for those who won't be using their money for the next 3 to 5 years. Balanced funds are invested in a combination of Equities, Bonds, Money Market and keeps a little cash. Risk tolerance for this type is in between the conservative and the aggressive.


4. Equity Funds

This type is for investors who can take as much risk as they can knowing of its possible rewards when the time comes. Most of your funds will be invested in Equities (Mostly Bluechip Stocks or Strong Second-Liners) with a little cash. If you won't be using your money for at least 5 years or more, this type of fund is for you.


Regardless of what you'd choose, what matters more is what works for you.

Till the next post.