From time to time we hear stories of our friends and colleagues talk about their recently bought shares, or discuss how ideal is it to enter the Philippine stock market during the "bull" or "bear" season. Newspapers also flash table of numbers showing stock market prices of various Philippine companies.

Yes, every day we are exposed to the dynamics of stock market. And yet, many of us are afraid to invest in the market because of horror stories we hear on how someone lost all their money in it.

If we are only quipped with the right understanding of how stock market works, then it will widen our choices on investment. A stock is a share of the business of a public company.

Buying a share of a company makes you a shareholder or stockholder, or simply part-owner of the business. The stock market is a place where you can buy or sell shares of public companies in the Philippines, it is the Philippine Stock Exchange or PSE.

Simply put, if you want a stock of a company that is worth P50, you would have to spend P50 for every share you want.

Thus, for shares you need to spend P5, You can make money from these shares by two basic ways:. Selling the stocks at a higher price. If after six months the worth of the stocks you bought rose to P per share, the total worth of your stocks would have doubled to P10, Selling them will give you gains of P5, This is the concept of "buying low and selling high. When the company profits they may choose to share the income to stockholders in the form of cash or additional stocks.

Stock prices go up or down depending on how people want to buy them.

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When people want to buy the stocks of a company, stock price goes up. Conversely, stock price goes down when people want to sell them. Short-term movement of the stock market is difficult to predict. However, you can evaluate the company's current financial condition and future plans as well as the industry condition of the company. Other investors rely on technical analysis such as identifying trends in price charts to determine the direction of stock price.

Market analysts refer to stock behavior as "bull" season for uptrend because of the bull's aggressive horns up while "bear" for downtrend due to bear's paws swiping down. Now that we have a basic understanding of the flow of stock market, we must now evaluate our current and potential financial position in order to determine viability in making the investment.

Purpose, amount of capital, and timeline. First, we must determine the purpose of the investment. What do we plan to achieve? Is it to generate cash immediately or build capital? Write down a personal investment mission statement that you can read every day to help you focus on your objective.

This may include the amount you are willing to invest now, the return you are willing to accept, and the time you are willing to commit to track the investment. While it is true that there are bigger returns on bigger investment, note that stock investment carries risk as stock movement can vary day to day with the economy also affecting fluctuation.

Therefore, the return expected on the investment should be realistic.

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To lower risk, investments may be spread into products with various levels of risks. This follows the rule "maximize return by minimizing risk. Should you find yourself short of capital or have not decided yet which financial instrument to invest into, consider investing on reading books to improve your financial literacy.

This is the no-risk highest investment you can give yourself today. List of authorized and qualified brokers person or corporation can be found in the PSE website and various Government and Business listings.

The investor will need to fill out a Customer Account Information Form and submit identification papers for verification. The broker then assigns a trader or agent to assist the investor in either buying or selling.

Place the order to the trader and ask for confirmation receipt. Details of the order include:. Pay before settlement date.

Online stockbrokers settle transactions on the same day of the transaction date. Note that there are transaction fees and taxes for the trading of stocks, as well as brokerage commission from buying or selling stocks. Further details on investing procedure and company listings are in the website of the Philippine Stock Exchange. Skip to main content. My Savings Time Deposit Mutual Funds Credit Card Savings and Checking Accounts. Real Estate Buying Old Resale vs. RFOs Tips before you buy.

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Share on Facebook Tweet Widget Google Plus One. What is a stock? How does the stock market work? What makes stock prices rise or fall?

Is there a way to know when the stock price will rise or fall? You can make money from these shares by two basic ways: What to do before entering the stock market Now that we have a basic understanding of the flow of stock market, we must now evaluate our current and potential financial position in order to determine viability in making the investment.

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