Beginners guide stock market pdf

But first, it is important to understand the difference between trading and investing. This appreciation is usually due to the company consistently having profits, increasing its market share, and operating efficiently. However, trading is completely different. The time horizons involved with trading are usually a week or a day, and in some cases, traders only hold stocks for a few seconds.

Trading aims at profiting through fluctuations in the share prices over a short period of time. Technical analysis is most commonly used for trading only. It involves studying price patterns and trends and using these to forecast future price movements so that action can be taken accordingly.

This is usually done in two main ways:. There are several known patterns that traders look for in a particular stock to trade accordingly and try to profit. Depending on whether the technical analysis says a stock will go up or down, traders can take positions appropriately.

Traders often use several technical indicators while studying chart patterns, such as Moving Averages, Bollinger Bands, and the Relative Strength Index. Each of these indicates a different kind of price action, and traders usually try out indicators in different combinations until they can figure out which one works best for them. Fundamental analysis is most commonly used by investors and was popularized by Warren Buffet as a good way to consistently profit in the stock market over long periods of time.

It involves analyzing the company in great detail to understand the fundamental principles behind the business model that the company operates under. This is done by:. Once this process has been concluded and viable companies have been identified, investors then buy shares of these companies and hold them.

When the company prospers, the share price increases accordingly, and the investor profits from being the part-owner in a successful, profitable company. Occasionally, even fundamental investors use technical analysis once they have identified companies they want to invest in.

This is done so that optimal points can be identified where the stock is at its lowest, thus maximizing profits for the investors. A stock dividend is, put very simply, a share in the profits of a company. Therefore, you are entitled to a share in the profits of the company. Whenever a publicly traded company declares a profit, they retain part of it to finance their future operations and expansions. However, the rest of the profit is paid out to the shareholders in the form of dividends.

Some companies pay more dividends than others; hence their shares are more valuable since there is the possibility of a dual benefit: a dividend and an appreciation in the share price. Thus, owning shares in companies that pay high dividends is a good way to generate passive income as an investor. Stock exchanges usually have thousands of stocks that you can choose from to trade and invest in.

These stocks can be classified in various ways, such as based on their sector, the country they are headquartered in, and the total value of their stocks.

However, say you want to know how the entirety of a particular sector is doing. Are you ready to get your piece of it? This book will teach you everything that you need to start making money in the stock market today.

Join the thousands of smart traders and investors who have profited from this ultimate guide to the stock market. A Beginner's Guide to the Stock Market. Are you ready. Shares Made Simple. At last a book that champions the small investor, the growing bank of potential shareholders who have cash to spare but fear entering the jungle that is the Cit. Beginners Guide to the Stock Market. Beginners Guide to the Stock Market Are you new to stocks and the stock market?

Are you considering investing or trading in stocks but still have many doubts ab. In order to use it you just need to do three things.

Then look for the table matching that amount of spending you answered in 1. In that table, look at the age nearest to yours in the left side of that table. Current Spending. A P, per year lifestyle today will be P4. If you doubt the numbers shown in the tables, by all means go ahead and try to find a more specific answer.

The important thing is that you know and plan for your retirement because someone will definitely have to pay for it. I sincerely hope that the amount you have just seen scares you into taking action immediately. Investing is very easy to delay, easy to ignore, but the tradeoff from that is extremely painful.

This is our tendency to think of money in its absolute amount rather than what it can buy. Roberto is a burly construction worker. Being very powerful, he is always in demand. In a single day he usually has jobs, one in the morning, another one in the afternoon, and the third one before dinner.

With his morning job, Roberto earns P This is the money he uses to buy his favorite lunch meal: the Jollibee Champ. The Champ meal costs exactly P pesos, and the money he earns is just enough. This increased his pay to P per day.

Delighted at the news, he sets aside the extra P15 for his savings. Roberto gives himself a pat on the back for being P15 richer! That day, Roberto goes to Jollibee and orders the same Jollibee Champ Meal, but it sees in the menu that it already costs P He thinks to himself that it was fortunate he got a raise. So Roberto takes the rest from his savings, leaving only P5. This is an example of the difference of the absolute amount of money vs.

Roberto got a P15 raise, but his food also got more expensive by P So in reality, he only got richer by P5. The fortunate thing about this example is that the pay-raise was higher than inflation. If the Raise Is Lower than Inflation… A more upsetting situation is when inflation becomes higher than the pay-raise given. Both of them earned P per day, and both of them always bought the Champ meal. A year later, Kharl also got a raise. However, his salary was increased to only P Nonetheless, Kharl is still happy with the raise.

Kharl then goes to Jollibee with Roberto. At the counter, Kharl also ordered the Champ Meal. He handed out his money to the cashier, and waited for the receipt. You only gave me P With his mouth wide open, he looked at the menu, and then stared back at his money. He looked at the menu, then back at his money. He kept doing this for about a minute, until the guy behind him asked him to hurry up.

So as not to keep the people waiting, Kharl just changed the order to a regular cheeseburger. Poor Kharl! He was happy that he got a raise. But, he could no longer afford his favorite Champ Meal. Because his raise was lower than inflation, what he actually got was a pay-cut. Again, this is the effect of the money illusion. Purchasing Power of P10, starting year 10, If there were no salary increases, the bottom-line effect is that you received a pay-cut equal to the inflation rate.

So if your pay-raises over the past years have beaten inflation significantly and consistently, you have a better chance of fighting inflation.

However, you will still need to prepare for your retirement. Inflation Rate since year 8. But, credit card debt is much more powerful. This is eight times more powerful than inflation! This is why your top priority should be to get out of debt first. Record the amount you pay for your debt and the amount you borrow each month. Decrease the amount you borrow each month.

Increase the amount you pay for your debt each month. You may have heard the advice before, but are you doing it? Chances are, not yet. So my advice is just start with 1, follow with 2 and then 3.

This is the most important step to solve the problem. From borrowing P5, per month from different people, just try and borrow P4, this month. From paying back only P3, per month, start paying back P3, This objection is one of my favorites.

For a long time, I believed this! There are many investments available aside from the stock market. There are time-deposits, bonds, mutual funds, foreign currency, precious metals and many others. In fact, successful investors put their money in different investment vehicles. Investment Vehicle What is it? Time Deposits A time deposit is a fixed-deposit which cannot be withdrawn for a certain period of time. Generally, the higher the amount, and the longer the period, the higher the returns.

In the short term, time deposits are useful. However, for wealth building, they are almost useless because their returns are always lower than inflation. Bonds A bond is one way an institution borrows money.

When you purchase a bond, you are essentially lending money to that institution. In return, you are paid interest during the life of the bond, and get paid the principal amount of the bond at the end of the term. Mutual funds are a collective investment scheme. This means that money from different investors is pooled into a single fund.

The pooled funds may then be invested into bonds, or equities, or even foreign exchange. By buying shares of stock in a company, you become a part-owner of that company.

I have two categories of reasons why I strongly recommend investing in the stock market. The first is of a purely economic reason, while the second is about your growth as an investor. When you buy a stock of a company, you become part owner in these corporations. So when they make money, you also make money. You have no legal obligation to pay income taxes from income generated from the stock market.

Investing in the stock market entails a lot more responsibility than making a one-time bank deposit. And because it requires a little more responsibility, you get to learn more. As a reward, you also get to earn more. This is very important to me, because I believe that financial literacy is the solution to poverty. If every Filipino knew how to manage their money well, how to invest, and ultimately how to create wealth, we can become a first world nation again.

The stock market is a place where you can buy and sell shares of stock of a publicly listed company. They have two offices — one in Ortigas and one in Makati. There are only select representatives called Trading Participants or brokers who can directly buy and sell shares of stock, though.

For individual investors, we just transact with these brokers. In a sole-proprietorship there is just one share of stock owned by the founder of the company. In corporations, there are multiple shares which can be owned by many different people.

These are the shares which are bought and sold in the stock market. The corporation must be a publicly listed company. A publicly-listed company is a business that offers its shares of stock to the public. This is usually done in order to finance its expanding operations.

Now because the general public can invest, the company must first pass strict standards set by the PSE. So to recap on what the stock market is just 4 things: 1 It is a place where 2 you can buy and sell 3 shares of stock of 4 publicly listed companies. There are three interactions between the four groups of people that make the stock market work.

The company must comply with very stringent requirements before the investments are opened to the public. The PSE protects you, the investor, and safeguards your interests. This was done simply for control purposes and work simplification.

For this, the broker will charge a very small fee for the buying or selling transaction. Brokers also provide you with information on which companies are good to buy in addition to their transaction services. So you make money the same way its business owners make money. These are through dividends and capital gains.

Dividends The dividends are your share of earnings in the company as an investor. Each shareholder was to receive PhP1 per share. At that time I had 1, shares of FPH. So in effect, by declaring dividends they are also paying themselves. Capital Appreciation or Capital Gains The second way is through capital appreciation. This simply means that company you own is worth more than when you bought it. Two years later, the price of FPH was already P So if you bought shares of FPH, you could have made P1, The amount of money you can gain or lose in the stock market is always a percentage of the amount of money you put in.

How high or low this percentage is dependent on how willing you are to learn and how disciplined you are in applying what you learn. I personally think that this is just average given that was a very good year. He doubled his money in just a year!

However, if we were in the year , during the time of the financial crisis, the average return was negative! So if an investor made a profit, his performance was already considered above average. This PSEi graph is useful because it is often used as a benchmark on how the market performed. As you can see, the PSEi was going down the whole year of The stock market is very risky.

One of the principles of forecasting a process of making intelligent predictions , is that the more specific a prediction is, the more likely it is to be wrong. The opposite is also true in the sense that the more general predictions are more likely to be correct. This is why investing in the short term is seen as more risky than investing for the long term. The stock market is inherently risky because you can never predict the exact value of your investment.

The good thing is that this amount of risk is acceptable if you acknowledge the fact that you could be wrong. With diversification and other investing strategies, this type of risk can be easily managed. On the contrary, the inherent risk becomes a huge problem when the investor assumes that his prediction is going to be right. If he assumes that there is no chance of error, the investor will most likely have prepared no plans in the event that he is wrong.

This is the much more dangerous type of risk we must be aware of, the risk due to ignorance. Risk Due to Ignorance The risk due to ignorance is perfectly expressed in one of my favorite but highly underrated quotes on investing.

There are only good investments, and bad investments. When I read the quote above, I got really confused. If Robert Kiyosaki was right, it meant that it was possible to get higher returns, without having to take on higher risks.

All you needed to do was to become a smarter investor. This was puzzling, but at the same time empowering. From this there has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. Our view is different. The rate of return sought should be dependent, rather on the amount of intelligent effort the investor is willing and able to bring to bear on his task.

The minimum return goes to our passive investor, who wants both safety and freedom from concern. The maximum return would be realized by the alert and enterprising investor who exercises maximum intelligence and skill. Rather, it depended on disciplined study. This is because you can never exactly predict what the value of your investment will be in the coming years.

The Biggest Problem in Investing The biggest problem that can arise with investing is when your personal situation forces you to suddenly sell your investments for cash when the market is down. Mark invested all his savings — amounting to P, — in the stock market. Unfortunately, he got into an accident where the bones in his leg got crushed. The medical fees were P, And even though his company offered medical benefits, his employer would only pay for P20, So Mark had to find a way to pay for his share of P80, The only other place he had money was in the stock market.

Unluckily, at that time, the market was down and the value of his investment was just P80, The value would go down and then it would go up again. It would go down and then it would go up again. Normally, he would just wait it out. But this time was different.

He had to pay the hospital. So, he withdrew his investment worth P80, , taking a loss of P20, This is one of the most discouraging things that can happen when you put all your money in the stock market. In order to prevent the problem above, there are three ways to protect your investments from a sudden need of cash. I recommend that you do all of them, before you invest in the stock market.

Protect yourself with insurance. This is to make sure that when an accident happens to you, your loved ones, your car, home, or business it will be the insurance company that will be obligated to pay for it. Shield yourself with an emergency fund.

An emergency fund is a sum of money set aside just for emergencies. The general minimum of this amount is 6 months of your living expenses. So if you suddenly need money because you lost your job, you can live off your emergency fund until you find a new one. There are people who spend in total 1 hour per year. While there are those who go at it 8 hours per day! When I was starting out, I took a look at my portfolio every hour! It was very exciting to see my money move up, and terrifying to see it move down.

That habit lasted for about two weeks, and then I got used to it. Checking it frequently just became boring and well, a waste of time. Now, I just spend 30 minutes every Saturday and Sunday to read up on the stocks I have. And once a month I spend a little more time to place my buy orders in the stock market. I now spend more time studying the stocks, rather than just staring at my portfolio and illogically cheering it on. Instead, the money you can make is proportional to the quality of investment knowledge you have learned and applied.

They asked about their cars, suits, shoes, vacations, houses, worries, and more. Of course they also asked them about how long they kept their investments in a particular company. A great majority of them hold their stocks for a minimum of one year. Thus, they can focus their time and energy to master their understanding of a much smaller variety of offerings in the market. Stanley Ph. Danko Ph. With the widespread use of the internet, you can start investing for as low as P5, The primary limitation before was that you needed a personal stock broker in order to be able to invest.

So the stock brokers who had limited time had to set a minimum amount of investment before they accepted individual investors. But today, there are online stock brokers who allow you to invest in the stock market on your own. All you need is a computer and a stable internet connection. You can send your buy or sell orders online.

Here are the websites of some online brokers. Take note that this list is not complete. I am not paid to promote them. I just highly recommend them, being a satisfied customer myself.

They are the largest online brokerage in the country. They are also the most active when it comes to promoting stock market education. They even hold introductory stock market seminars every week at their office. Stress and risk are highly related to each other. Stress comes from the feeling of being out of control, of not knowing what to do next. And not knowing what to do next is simply a cause of lack of information caused by the lack of research.

Imagine two college students taking a Calculus exam. Student A studied several weeks before the exam. Student B just started studying the night before. Who do you think would be more stressed before, during and after the exam? Rick just heard the news that his officemate, Steve just made P30, in one day from the stock market. He asked a friend for more information and to let him in on the next big thing on the stock market.

A week later his friend tells Rick to invest in XYZ Company so that could double his money in a week. Rick gets excited over the news, and on the same day, invests his P, savings into XYZ.

The next day, Rick looks at his account… his money is just P90, He demands an explanation from his friend. Rick being a very trusting guy follows the advice… One week later, he opens his account…. And boom. Account Balance: P10, Imagine the stress Rick was going through.

He blamed his friend for losing his money, and swore that he would never invest in the stock market again. Rick was unprepared and took on a lot of risk due to ignorance.

I also counted the number of steps and clicks you had to make for the basic transactions. I also made a distinction whether the stock market term is really useful. Count the number of buttons available in your TV remote, and then count how many of those buttons you actually use.

What you see when you open the order window. There are three ways to get your money into the stock market. The key here is to find which best fits your desired style of investing. These funds are professionally handled by the fund manager. In a mutual fund, you are not buying specific company. Instead, what you are buying are shares of that specific fund. So if the fund is invested in 10 different companies, your money is also invested in those 10 different companies.

This also means that you no longer have to decide which companies to buy, and when to sell them. That responsibility is delegated to the fund manager. The good thing about this is that you can get advice made specific to your investing needs: Your investment goals, your timeline, and your tolerance to risk. A good stock broker will be able to advice you on what to buy, when to sell, and notify you of the upcoming opportunities.

You can even assign some brokers to manage your portfolio for you while you go on vacation.