Stock investing for newbies

Our being third world still is partly because not even one percent of the entire population of the Philippines invests in the stock market.

Through a recent investor education campaign dubbed "First Learning Session on Basic Stock Investing" (an initiative of the Bosconian International Chamber of Commerce, Inc. and the Philippine Stock Exchange, Inc.), it was learned from Wealth Securities, Inc. chief investment officer Ernest Evangelista that it's high time we set aside the notion that stock investing is for the rich only. Instead, a culture of savings should be promoted aggressively, integrated especially in school curricula.

The country should be educated about the potential of the stock market left untapped. Survey worldwide shows that Philippine stock market earning is 80 percent higher than the fixed income investments. Forbes Magazine said that "stocks are the foundation of nearly every portfolio. Historically, they have outperformed most other investments over the long run."

Interestingly, investments are in liquid form or something that could be easily converted to cash.

The FREEMAN: What must a newbie do for a start-up?

ERNEST EVANGELISTA: The one we are having now - the seminar - is part of my advocacy to promote wealth health. Those interested must first learn how to save. Never spend beyond what you can earn. The problem with us is that a spending culture lies at the microcosm of our being Filipinos. Or that we have a very low culture of savings.

TF: What's the best thing there is to learn in stock market investing?

EE: That this involves risk. Law on supply and demand governs the system, therefore it got risks (volatility risk and permanent risk). So you have to invest passive income, not active income. Passive income is extra money or money that you may consider to not actually be there. It is good to know also that the stock market was invented as an investment vehicle, not a gambling den. When it's too good to be true, it is not true. Remember the case of Legacy which promised 30% interest? Who would believe it when it offered above what the banks can offer? Also, beware of stock market's fiercest enemies: greed and fear. This is either you hold on to your money or you fear to sell your share.

TF: How much capital could a newbie put up?

EE: It could be as low as P5,000. At Wealth Securities, initial investment is P10,000 (check www.wealthsec.com). With stock market investing, risk is manageable. Risk versus yield tradeoff favors the yield if portfolio is managed well. You don't have to know everything about investing in order to have an informed decision. You just have to know the right thing!

TF: You mentioned that had we only been educated about the stock market earlier in school we could have helped push this country to being first in Asia perhaps?

EE: Actually that is the problem with most schools because the idea of saving and investing is not much embedded in the school curriculum. I would say that yes, just like our Asian counterpart Singapore which eagerly encouraged its citizens to put up their money in stocks, we really have the potential to become a wealthy nation with a population educated soundly in finances.

TF: That means that our economic problem does not only lie with the kind of leaders we have? Or the lack of entrepreneurs that takes root in the "factory mentality" espoused by most schools?

EE: Come to think of this: Our country is currently doing good being second in Asia and third globally - next to Brazil and Indonesia. Maglihok man gyod and ekonomiya, so dili na tinood nga way nahitabo sa atong ekonomiya, hinungdan nganong pobre gihapon ta!  We could blame our current status as third world to the kind of leaders, for all we want, but bottom line is we have not really encouraged much of the entrepreneurs and promoted a strong culture of savings. Bulagsak kaayo ta, mokita og gamay gasto dayon! Entrepreneurs are really a country's saving grace, because entrepreneurs do a lot to move our economy. And if only people will come to realize the value of saving, or away from the shopping mentality, and invest more, yes, we could be where we want to be.

TF: But we are supposed to spend, di ba? Patronize the enterprises?

EE: Yes, but we must know what to spend on. We have to know if our priorities are of help or of detriment to our economy. Else, kinsa may madato lang? Sila lang permi negosyante? If we invest, or if we trade, kita tanan will be enjoying what it's like to live in the spirit of wealth health.

TF: So how do I find the right brokers, in order not to end up investing in some financial scams?

EE: The right broker works with the right venue, the right platform. He/she is accredited by the Philippine Stock Exchange, so visit the PSE Cebu office and go over the list (2nd Floor, Insular Life Building, across Starbucks-Ayala). You can also learn more from PSE's market education assistants on how to spot a phony.

TF: How long have you been conducting seminars to educate the public about stock investing? How long will you be there before you could learn how the entire system works?

EE: Five years. As for getting to understand everything, I have to live with it. There's really so much to learn. But as I've underlined: You don't have to know everything, just the right thing.

TF: How should a probable investor think of himself if he is not proficient in numbers?

EE: Accounting is a good background, but it's basically about dividend payouts (share in the income of a company), so you only need the basic mathematical operations. And of course the right attitude: never be greedy, never fear about how the trading would affect entirely the investment flow. One has to have this risk appetite, remember?

TF: Would you share any recommended readings?

EE: Get to study the life of Warren Buffett. It's very inspirational. He started with a hundred dollars and from there moved on to become multi-millionaire. He is third richest person in the US. Be bullish to get a stock investing orientation from PSE, engage your organization, your family, your neighbors, your circle of friends. In the long run, you might consider chipping in to raise a shared fund to meet minimum investment. PSE can educate you more about the sectors (financial, industrial, holdings, property, services, mining and oil) whose expansion projects could be invigorated by your culture of savings.

TF: You said your services can be accessed via cyber-vironment?

EE: Yes, we have offered services online for the opening of accounts with a three-day trial. It also features a menu for Frequently Asked Questions to guide the investor. But I would say that the traditional way still works best because we get to build strong relationships with our clients. Unlike virtual clients, we get to call the person or meet up with the person for updates, or simply to bond and chat on trends, or just about anything significant.