As a new investor, how should I pick stocks to invest in?

For 99% of people who ask this question, the best answer would probably be: “You don’t.” But that’s a very unsatisfying response to give someone who has come to the market with big eyes and bigger dreams, and it’s the kind of response that starts out true but could (at some point) cease being true and constructive as the investor gains understanding and skills. The PSE is a tough market, and the past few years have been even tougher still. So tough that even pro traders like CTS Global [CTS 0.74, down 1.3%; 18% avgVol] have faced significant losses and have just parked huge chunks of cash in government bonds to wait out this “low interest” market. What gets lost in the big eyes phase of entering the market is the importance of playing defense. The goal, of course, is to build wealth over time through investing, but you don’t build wealth by just sniping a few random stocks and hoping for the best. Make no mistake: it is HARD to pick stocks that will go up, and it’s even harder to time your entrance and exit of those stocks to make a decent return, especially with some of the ridiculous spreads that we get here with non-index stocks on the PSE. My advice is not sexy or fun: slow down. Read some of the free content out there to help you understand your goals, time horizon, and risk appetite. There’s a great FAQ on the subreddit /r/phinvest that can help new investors take these first steps. I know some people who use the market like a savings device, and who just mechanically put a fixed chunk of money into their trading account each month and immediately put that into the PSE’s only ETF, First Metro Philippine Equity Exchange Traded Fund [FMETF 103.60, down 1.3%]. I know others who have a long-term view and dip cash consistently into a small basket of stocks that they think will do well over that period. There are lots of strategies, but the key here is to have some sense (even if it’s vague) of what you’re doing and why you’re doing it before you throw a huge percentage of your discretionary income at some random conglomerate with name recognition.

MB bottom-line: The worst outcome for new traders is to buy one or two stocks and lose 20-40% in their first year for lack of strategy and respect for risk, sell at a loss, and leave the market for good. In those cases, all that’s happened is that the PSE has acted like a mechanism to transfer cash from big-eyed hopefuls to professional traders and seasoned degens. The key to surviving is not dying. The key to not dying is to not suffer huge losses. The key to not suffering huge losses is to do your homework on what stock you’re buying and why. The key to doing your homework is to pay respect to the downside of trading and to know (before you buy) when you’ll sell and abandon the bet to mitigate potential losses. Pick a brokerage that lets you set an effective stop-loss, like DragonFi or AAA Equities. You don’t want to become one of those new traders who is still holding on to that P35k in Megaworld [MEG 2.00, down 1.0%; 111% avgVol] stock that they bought back in 2022 for P60k, posting “what should I do?” on random message boards hoping for some magic guidance to fix the situation. Before we get a real pump, before there’s some sweeping bull market that shines so bright and attracts thousands of new (and oftentimes desperate) moths to its light, take the time to do the reading and think about what you’re about to do. If you just want to play with your money and you don’t mind losing most or all of it, I’m not going to get in your way; that’s your right. But if you want to keep it and grow it, please don’t be a member of the FY24 batch of people who just chucked their cash into the void and hoped for the best. Don’t be easy money. Don’t be 1/100th of some rich guy’s third supercar.