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Don't Be Intimidated: Here Are Basics Of Investing In Stocks

Charm de Leon of Ready2Adult PH breaks it down for you.
What Are The Basics Of Investing In Stocks?
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Back in high school, I made a little money from taking the senior portraits of my batchmates and because of how ~successful~ it was (for a student, lol), I became curious about businesses. I took an entrepreneurship classwithout understanding much of the syllabus—and it was such an eye opener. We even came up with a fake business plan that we pitched to *real* entrepreneurs, and they gave us feedback on whether or not they'd invest in our ideas. (They did not hold back! Criticism was so real for 18-year-old me.)

Part of the course was an introduction to the stock market. But at the time, the concept seemed so big and scary—even though we were technically just learning through a simulation—that my brain couldn't process all the information. If I'm going to be honest, I was just investing in brands and companies that looked familiar, without fully understanding where my "money" was going. 

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At 30, I can't afford to do the same. I'm slowly building my emergency fund, but I'm also curious about what else I can do while I'm learning about the basics of personal finance. As much as I care about what happens to my money, my learning style when it comes to real-world concerns is really through videos and podcasts (read: not combing through dry articles about the stock market—my mind drifts kaagad!). So at least for the basics, I found that Charm de Leon's explainers on the Ready2Adult PH YouTube channel effectively broke it down for me. 

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What are stocks and how does the stock market work?

Ok, so stocks (also referred to as "shares" or "equities") are just portions of a company. Companies sell stocks to raise funds, which are then used to acquire assets, expand, or conduct research research and development. Doing this helps a company improve their products and services.

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There are two types: common and preferred. If you have enough common stocks, you can get voting rights; and preferred stocks naman, you get priority of the dividends. And you're like, what are dividends? Same question. According to Charm, it's "when companies earn and they decide to give a portion of their earnings to the investors or the people who bought their stocks. These can be done quarterly or annually." That's one way of earning through stocks. 

A private company has to submit an IPO (initial public offering) to an exchange if they want to become a publicly traded one. In the Philippines, it's just the Philippine Stock Exchange (PSE), which TBH, makes it so much simpler for a newbie like me. 

Part of the reason why prices of a stock fluctuate is, of course, public opinion. Do people think a company is going to be around for a long time? And as a company's value increases, so does its stock price. Another factor is supply and demand. If more people buy a stock, the price goes up; if more people sell, it goes down. 

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So how do you start trading stocks?

First, you'll need a broker or a "middle man", though this doesn't have to be an actual person. It can be a platform or a website (an online brokerage account). You need a broker because you can't buy a public share directly from a company. 

As a new investor, you want to look at blue chip companies (aka the top-performing ones); in the Philippines, there are roughly 30. Charm says it's recommended that you start with having fewer than 10 stocks in your porfolio, really focusing on three to five. 

The most important thing to remember, though, is never to invest money you need in the short-term or money you're not prepared to lose. 

If you're ready to know more about basic stock market terms (like the difference between PSE, PSE, and PSEi) check out her other videos:

And in part two, she actually walks you through an online brokerage account:

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