The Stock market explained in simple terms

Many have already asked me about the Stock Market, Stock trading, and stock investments. And many really is confused about it. Some say it is only for the rich and affluent people or thus who are learned men and women in the business district of Makati City.

But your wrong. Stock investing or trading is for everyone. In the Philippines one can open a stock brokerage account with the nine accredited brokers allowed to carry on online stock trading. Of the nine 2 which are also the stock investing arms of a bank, First Metro Securities of Metrobank (have no maintaining balance) and BPITrade of BPI(requires a 500 pesos maintaining balance) according to my friend Jerry who has both accounts to maximize the potential of stock trading in the Philippines.

So how will a layman or a normal Juan or Maria understand the stock market and stock investment so that the Filipino population will not be afraid to try investing in stock in the Philippines?

 source: feudart.com

 IS LIKE

 source: aileenapolo.blogspot.com

I have two analogies that I always use. The first one is the one I use  to explain to a friend what is a stock market in general. As the name says it is a market. So I want you to imagine yourself in the middle of a wet market or probably imagine yourself walking in Divisoria. What would you normally see? I guess you would see at least two types of people there. One are the buyers like you and second are the sellers who keep on doing all sorts of ways to get your attention. Why are you in Divisoria? You are in Divisoria to buy something at a bargain. You might be able to buy the same item in SM Department stores or in Cubao but at a higher price so you go to the market like Divisoria. 

You went to Divisoria to buy, same as you going to the Philippine stock market to buy. The only difference though is that instead of you buying stuffs, in a stock market or bourse you buy shares of stock of a company. And you buy it only at a bargain. Who in the world would buy a kilo of mango for 10,000 pesos that would be insane right. On the other hand you also sell stocks so you take the place of the sellers. You will always be on the look out for potential buyers by making your voice heard by giving a buyer a good price on your stock.

Now one more thing, in the wet market sellers and buyers interact directly but in the stock market a buyer or a seller interact through a broker which is accredited and certified by regulatory bodies. In a way it is a safeguard to protect the interest of participants in the stock market.

Another analogy I use is the bouncing ball. The stock market is like a bouncing ball. It goes up and down. It is never steady. This analogy explains the theory of Supply and Demand. When demand for a stock rises a rise in price is also seen. As a ball is given force, the force given to it reflects by the height it goes. When the ball is way way up the tendency is for it to go down  losing the upward force. The ball's weight becomes the indicator that the market is overbought making the ball heavy thus gravity pulls it down. When all the stocks are bought it is normal for those who bought it to sell at again so as the price go down they try as much as possible to take profits by selling their stock holdings before it reaches their cost.

And as the ball touches the ground it bounces again thus continuing the cycle. So when stock prices are on the rise investors like you and me try to buy it while it is still low to profit when it peaks and before it goes below our cost. When stock prices starts to go down after enjoying a high price we wait for it to reach the bottom and buy stocks when it is about to rise again.

The Stock market explained in simple terms

Many have already asked me about the Stock Market, Stock trading, and stock investments. And many really is confused about it. Some say it is only for the rich and affluent people or thus who are learned men and women in the business district of Makati City.

But your wrong. Stock investing or trading is for everyone. In the Philippines one can open a stock brokerage account with the nine accredited brokers allowed to carry on online stock trading. Of the nine 2 which are also the stock investing arms of a bank, First Metro Securities of Metrobank (have no maintaining balance) and BPITrade of BPI(requires a 500 pesos maintaining balance) according to my friend Jerry who has both accounts to maximize the potential of stock trading in the Philippines.

So how will a layman or a normal Juan or Maria understand the stock market and stock investment so that the Filipino population will not be afraid to try investing in stock in the Philippines?

 source: feudart.com

 IS LIKE

 source: aileenapolo.blogspot.com

I have two analogies that I always use. The first one is the one I use  to explain to a friend what is a stock market in general. As the name says it is a market. So I want you to imagine yourself in the middle of a wet market or probably imagine yourself walking in Divisoria. What would you normally see? I guess you would see at least two types of people there. One are the buyers like you and second are the sellers who keep on doing all sorts of ways to get your attention. Why are you in Divisoria? You are in Divisoria to buy something at a bargain. You might be able to buy the same item in SM Department stores or in Cubao but at a higher price so you go to the market like Divisoria. 

You went to Divisoria to buy, same as you going to the Philippine stock market to buy. The only difference though is that instead of you buying stuffs, in a stock market or bourse you buy shares of stock of a company. And you buy it only at a bargain. Who in the world would buy a kilo of mango for 10,000 pesos that would be insane right. On the other hand you also sell stocks so you take the place of the sellers. You will always be on the look out for potential buyers by making your voice heard by giving a buyer a good price on your stock.

Now one more thing, in the wet market sellers and buyers interact directly but in the stock market a buyer or a seller interact through a broker which is accredited and certified by regulatory bodies. In a way it is a safeguard to protect the interest of participants in the stock market.

Another analogy I use is the bouncing ball. The stock market is like a bouncing ball. It goes up and down. It is never steady. This analogy explains the theory of Supply and Demand. When demand for a stock rises a rise in price is also seen. As a ball is given force, the force given to it reflects by the height it goes. When the ball is way way up the tendency is for it to go down  losing the upward force. The ball's weight becomes the indicator that the market is overbought making the ball heavy thus gravity pulls it down. When all the stocks are bought it is normal for those who bought it to sell at again so as the price go down they try as much as possible to take profits by selling their stock holdings before it reaches their cost.

And as the ball touches the ground it bounces again thus continuing the cycle. So when stock prices are on the rise investors like you and me try to buy it while it is still low to profit when it peaks and before it goes below our cost. When stock prices starts to go down after enjoying a high price we wait for it to reach the bottom and buy stocks when it is about to rise again.

The Stock market explained in simple terms

Many have already asked me about the Stock Market, Stock trading, and stock investments. And many really is confused about it. Some say it is only for the rich and affluent people or thus who are learned men and women in the business district of Makati City.

But your wrong. Stock investing or trading is for everyone. In the Philippines one can open a stock brokerage account with the nine accredited brokers allowed to carry on online stock trading. Of the nine 2 which are also the stock investing arms of a bank, First Metro Securities of Metrobank (have no maintaining balance) and BPITrade of BPI(requires a 500 pesos maintaining balance) according to my friend Jerry who has both accounts to maximize the potential of stock trading in the Philippines.

So how will a layman or a normal Juan or Maria understand the stock market and stock investment so that the Filipino population will not be afraid to try investing in stock in the Philippines?

 source: feudart.com

 IS LIKE

 source: aileenapolo.blogspot.com

I have two analogies that I always use. The first one is the one I use  to explain to a friend what is a stock market in general. As the name says it is a market. So I want you to imagine yourself in the middle of a wet market or probably imagine yourself walking in Divisoria. What would you normally see? I guess you would see at least two types of people there. One are the buyers like you and second are the sellers who keep on doing all sorts of ways to get your attention. Why are you in Divisoria? You are in Divisoria to buy something at a bargain. You might be able to buy the same item in SM Department stores or in Cubao but at a higher price so you go to the market like Divisoria. 

You went to Divisoria to buy, same as you going to the Philippine stock market to buy. The only difference though is that instead of you buying stuffs, in a stock market or bourse you buy shares of stock of a company. And you buy it only at a bargain. Who in the world would buy a kilo of mango for 10,000 pesos that would be insane right. On the other hand you also sell stocks so you take the place of the sellers. You will always be on the look out for potential buyers by making your voice heard by giving a buyer a good price on your stock.

Now one more thing, in the wet market sellers and buyers interact directly but in the stock market a buyer or a seller interact through a broker which is accredited and certified by regulatory bodies. In a way it is a safeguard to protect the interest of participants in the stock market.

Another analogy I use is the bouncing ball. The stock market is like a bouncing ball. It goes up and down. It is never steady. This analogy explains the theory of Supply and Demand. When demand for a stock rises a rise in price is also seen. As a ball is given force, the force given to it reflects by the height it goes. When the ball is way way up the tendency is for it to go down  losing the upward force. The ball's weight becomes the indicator that the market is overbought making the ball heavy thus gravity pulls it down. When all the stocks are bought it is normal for those who bought it to sell at again so as the price go down they try as much as possible to take profits by selling their stock holdings before it reaches their cost.

And as the ball touches the ground it bounces again thus continuing the cycle. So when stock prices are on the rise investors like you and me try to buy it while it is still low to profit when it peaks and before it goes below our cost. When stock prices starts to go down after enjoying a high price we wait for it to reach the bottom and buy stocks when it is about to rise again.

Analyzing two companies of the same industry

source:http://getyourbizsavvy.com/

 

The best way to determine whether one company is better than the other is by comparing one to another company of the same industry.

For illustration purposes lets look at ABS and GMA7, Philippines top channels.

ABS   GMA7  Closing Price 08/06/2010             45.30           5.95 EPS               2.23           0.58 P/E %             20.36         10.26 52 week range  25.50-45.30   5.60-8.80  Par               1.00           1.00 2009 Income  1.7B   2.8B  Board Lot           100.00       100.00

Based on the data above one can make decision which stock to buy.

If you look at the two there is a huge difference in the price. Higher EPS indicates two things, one is that the other company has a bigger net income and the other company may have a smaller number of shares outstanding. As you compare GMA7 has a higher net income than ABS but ABS has higher EPS meaning ABS has a smaller number of shareholders...meaning the income is shared by a smaller number of people. P/E % of ABS is higher than GMA7 which might indicate that more people have confidence in ABS but it also means because of this confidence level ABS might be overpriced as compared to GMA7.  With these bits of info one can decide which to invest in. One pointer is that both companies are doing well... both has a high P/E %, Price range is wide meaning catching either stock at its lowest could possible go up again to that high level giving you profit when the timing is right. The only decision point now will be how much free money can you put in. If you have a limited fund GMA7 might be a better stock to buy but if funds are handy go for ABS. Again the above simple analysis are just sample analysis. Every person has his own way of looking at the data. Others rely on Technical Analysis which is a price change based analysis which is studying the price trend and looking at the buy and sell indicators.

Analyzing two companies of the same industry

source:http://getyourbizsavvy.com/

 

The best way to determine whether one company is better than the other is by comparing one to another company of the same industry.

For illustration purposes lets look at ABS and GMA7, Philippines top channels.

ABS   GMA7  Closing Price 08/06/2010             45.30           5.95 EPS               2.23           0.58 P/E %             20.36         10.26 52 week range  25.50-45.30   5.60-8.80  Par               1.00           1.00 2009 Income  1.7B   2.8B  Board Lot           100.00       100.00

Based on the data above one can make decision which stock to buy.

If you look at the two there is a huge difference in the price. Higher EPS indicates two things, one is that the other company has a bigger net income and the other company may have a smaller number of shares outstanding. As you compare GMA7 has a higher net income than ABS but ABS has higher EPS meaning ABS has a smaller number of shareholders...meaning the income is shared by a smaller number of people. P/E % of ABS is higher than GMA7 which might indicate that more people have confidence in ABS but it also means because of this confidence level ABS might be overpriced as compared to GMA7.  With these bits of info one can decide which to invest in. One pointer is that both companies are doing well... both has a high P/E %, Price range is wide meaning catching either stock at its lowest could possible go up again to that high level giving you profit when the timing is right. The only decision point now will be how much free money can you put in. If you have a limited fund GMA7 might be a better stock to buy but if funds are handy go for ABS. Again the above simple analysis are just sample analysis. Every person has his own way of looking at the data. Others rely on Technical Analysis which is a price change based analysis which is studying the price trend and looking at the buy and sell indicators.

Analyzing two companies of the same industry

source:http://getyourbizsavvy.com/

 

The best way to determine whether one company is better than the other is by comparing one to another company of the same industry.

For illustration purposes lets look at ABS and GMA7, Philippines top channels.

ABS   GMA7  Closing Price 08/06/2010             45.30           5.95 EPS               2.23           0.58 P/E %             20.36         10.26 52 week range  25.50-45.30   5.60-8.80  Par               1.00           1.00 2009 Income  1.7B   2.8B  Board Lot           100.00       100.00

Based on the data above one can make decision which stock to buy.

If you look at the two there is a huge difference in the price. Higher EPS indicates two things, one is that the other company has a bigger net income and the other company may have a smaller number of shares outstanding. As you compare GMA7 has a higher net income than ABS but ABS has higher EPS meaning ABS has a smaller number of shareholders...meaning the income is shared by a smaller number of people. P/E % of ABS is higher than GMA7 which might indicate that more people have confidence in ABS but it also means because of this confidence level ABS might be overpriced as compared to GMA7.  With these bits of info one can decide which to invest in. One pointer is that both companies are doing well... both has a high P/E %, Price range is wide meaning catching either stock at its lowest could possible go up again to that high level giving you profit when the timing is right. The only decision point now will be how much free money can you put in. If you have a limited fund GMA7 might be a better stock to buy but if funds are handy go for ABS. Again the above simple analysis are just sample analysis. Every person has his own way of looking at the data. Others rely on Technical Analysis which is a price change based analysis which is studying the price trend and looking at the buy and sell indicators.

PSE website: Company Stock Information Part 4

Another link in the stock information worth checking is the Chart link.

Again right click on the link and choose open in new tab. You will see three charts but concentrate on the chart on top. This chart shows the company's last price(sometimes term as the closing price) represented by the black line, open represented by the dark blue line, high represented by the red line, and low represented by the light blue line. 

Again you will ask me, "Louis what will I learn here I didn't even passed my Math subject in high school." 

This chart shows you the trend of the stock. If you look closely the X-axis or the one below the chart shows the months and on the Y-axis are the prices. This chart shows when and how much was the price of this particular company's stock price comparing how much was its closing price(which is the basis of next trading days starting price), what was its highest asking price and what was the lowest bid price. It will give you an idea when to buy, that is when it's low and when to sell that is when its high.

This is a very rudimentary form technical analysis. Technical analyst interpret such movement and then predict or we term it time the market so that they know when to buy or sell.  They have this signal like an abrupt jump in price or a steady rise of the price. A successive dip or a successive rise that guides them in there buying and selling activities. But for now lets contend ourselves with the simple analysis. Buy when its low, sell when its high, hold when price is steady, and take profit when there is a steady rise in price.

PSE website: Company Stock Information Part 4

Another link in the stock information worth checking is the Chart link.

Again right click on the link and choose open in new tab. You will see three charts but concentrate on the chart on top. This chart shows the company's last price(sometimes term as the closing price) represented by the black line, open represented by the dark blue line, high represented by the red line, and low represented by the light blue line. 

Again you will ask me, "Louis what will I learn here I didn't even passed my Math subject in high school." 

This chart shows you the trend of the stock. If you look closely the X-axis or the one below the chart shows the months and on the Y-axis are the prices. This chart shows when and how much was the price of this particular company's stock price comparing how much was its closing price(which is the basis of next trading days starting price), what was its highest asking price and what was the lowest bid price. It will give you an idea when to buy, that is when it's low and when to sell that is when its high.

This is a very rudimentary form technical analysis. Technical analyst interpret such movement and then predict or we term it time the market so that they know when to buy or sell.  They have this signal like an abrupt jump in price or a steady rise of the price. A successive dip or a successive rise that guides them in there buying and selling activities. But for now lets contend ourselves with the simple analysis. Buy when its low, sell when its high, hold when price is steady, and take profit when there is a steady rise in price.

PSE website: Company Stock Information Part 4

Another link in the stock information worth checking is the Chart link.

Again right click on the link and choose open in new tab. You will see three charts but concentrate on the chart on top. This chart shows the company's last price(sometimes term as the closing price) represented by the black line, open represented by the dark blue line, high represented by the red line, and low represented by the light blue line. 

Again you will ask me, "Louis what will I learn here I didn't even passed my Math subject in high school." 

This chart shows you the trend of the stock. If you look closely the X-axis or the one below the chart shows the months and on the Y-axis are the prices. This chart shows when and how much was the price of this particular company's stock price comparing how much was its closing price(which is the basis of next trading days starting price), what was its highest asking price and what was the lowest bid price. It will give you an idea when to buy, that is when it's low and when to sell that is when its high.

This is a very rudimentary form technical analysis. Technical analyst interpret such movement and then predict or we term it time the market so that they know when to buy or sell.  They have this signal like an abrupt jump in price or a steady rise of the price. A successive dip or a successive rise that guides them in there buying and selling activities. But for now lets contend ourselves with the simple analysis. Buy when its low, sell when its high, hold when price is steady, and take profit when there is a steady rise in price.

PSE website: Company Stock Information Part 3

Let's go back to China Bank's Stock information page.

Click on the Corporate Information link to learn more about the company you are interested. The link gives you a page full of information regarding the company like when did this company incorporated, contact information, the company's website, latest disclosures and reports submitted to SEC and PSE and much more.

Click the links inside this page. Use right click and chose open in new tab so that you can always go back to the same page that contains the Corporate information.

PSE website: Company Stock Information Part 3

Let's go back to China Bank's Stock information page.

Click on the Corporate Information link to learn more about the company you are interested. The link gives you a page full of information regarding the company like when did this company incorporated, contact information, the company's website, latest disclosures and reports submitted to SEC and PSE and much more.

Click the links inside this page. Use right click and chose open in new tab so that you can always go back to the same page that contains the Corporate information.

PSE website: Company Stock Information Part 3

Let's go back to China Bank's Stock information page.

Click on the Corporate Information link to learn more about the company you are interested. The link gives you a page full of information regarding the company like when did this company incorporated, contact information, the company's website, latest disclosures and reports submitted to SEC and PSE and much more.

Click the links inside this page. Use right click and chose open in new tab so that you can always go back to the same page that contains the Corporate information.