Discovering the Stock Market

Having read through different message boards about investments and finances, I've seen people ask about the viability and accessibility of the Philippine Stock Market (PSE) as an investment vehicle. Different questions have been raised about the topic, such as the profitability of investing in stocks, how to make money from investing, what risks are involved and how much capital do you need to get started. After browsing through the discussions many times over and analyzing the replies from those who have the experience, I decided to invest myself. But before pushing through, I had to do some research outside the message boards.

Many hours were spent in research about trading. You have to learn the stock market terminology, identify what factors affect price, different types of analysis, and different trading styles.

Investopedia.com is good place to start. The site provides many resources related to almost all types of investment vehicles. You can find articles that discuss how an individual can profit from a specific investment, how certain investments react to economic, political and/or global events, and comparisons of the different investment vehicles. You can learn a lot about diversifying your investments from their articles and they also have a section for investment terminology.

I needed historical and live data for analysis, and after some searching, I found a Yahoo! group (PSEi Data) that provides members the market data for the past 5 years. Now that I have the data, I had to learn how to read it. I researched about charts, moving averages, Elliot Waves and other signals and indicators. I didn't need to learn them, but I need to identify which analysis tool is right for me.

I also needed to follow the news, economic and business news to be specific. I had to learn how to identify which news items influence the stock prices and how foreign markets affect our local market. News on television and the Internet were my sources, and thanks to cable TV, I was able to follow the foreign market through Bloomberg and CNN. As a side effect, I also became a more "socially aware" individual.

Now it's time to put all the theories to the test. I signed up for the free online Stock Trading Game offered by PSE and started buying stocks with virtual/play money. The Stock Trading Game is a simulation of an online trading facility where players can trade stocks using virtual money with live market data. This one of the most useful resource I've found online.

It is now mid-May and I needed to plan my portfolio. PhilWeb (WEB) was definitely on my list, I've read about PLDT (TEL) buying a significant amount of WEB shares, PAGCOR's "support" for online gaming and the ongoing rollout of 3G services. All these factors would mean a probable increase in revenue for WEB.

Bank of the Philippine Islands (BPI) was next on my list. BPI during that time showed an impressive price performance. I bought a few lots at 64-66 and saw the price reach 70+. After that, BPI's price fell to the 50+ level.

Universal Robina (URC), HOLCIM, PhilEx Mining (PX) and Petron Corporation (PCOR) were also on my list. The rally on the price of gold made me want to take a position on the mining sector and I chose PX. The price of oil kept rising so I bought PCOR shares as well, but I don't know how the rising oil price would affect PCOR's stock price.

Market prices went down in June. My biggest loss came from BPI. The mistake I made was assuming the bull run was going to last forever, I should have relied on data instead. I kept my positions open, even at times when I could have made a profit by selling part of my shares, because I was afraid I might miss the opportunity of earning more, now, I realize I held on for too long. The flip side of this is if I close my losing positions now and the market rallies again in a few months, then I would blame myself for not holding on long enough. An effective technique for a beginner like me is to set "take profit" targets, i.e. to sell when the price goes up 5%-10%. I haven't seen a time deposit offer that much interest in one month. As you gain experience in trading, you'll be able to understand how to realize profits from long term positions.

In closing, I'd like to share these few observations I made during this study. There is a lot of information about investing in the stock market on the internet and most of them free, I was ready to buy books about the topic but I never ran out of online resources. Being an employee myself, I found it difficult to monitor daily the stock market performance. If I wanted to sell a share, I would place a sell order with my desired selling price online and check its status later. Most of the time I'd only have time to check back on that order during my lunch break. It's difficult, but manageable. If you are serious about investing, then this shouldn't be a problem at all.

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