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-----------TABLE OF CONTENTS------------

What is Investing ………………………………………………. 3

What is the Stock Market……………………………………… 4
History and performance of stock market…………………. 5
Percentage of stock investors………………………………... 5
Why it is important to invest…………………………………… 6
Different investing vehicles……………………………………..9
Time Deposits
Bonds
Mutual Fund
Unit Investment Trust Fund (UITF)
Equity (Stock Market)
How the stock market works…………………………………. 13
How money grows in the stock market……………………… 15
Capital Appreciation
Dividends
Law of compounding interest………………………………… 17
Basic investing strategies……………………………………. 20
Buy and Hold
Peso Cost Averaging (PCA)
Market Timing or Trading
Some tips for safe investing…………………………………. 22
How to open an account……………………………………… 24
Four-Step Application Process

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INVESTING
Before we proceed to Stock Market, we‟ll define first what is
investing?

It‟s actually pretty simple: investing means putting your money

to work for you. Essentially, it‟s a different way to think about
how to make money. Growing up, most of us were taught that
you can earn an income only by getting a job and working. And
that‟s exactly what most of us do.

There‟s one big problem with this: if you want more money, you
have to work more hours. However, there is a limit to how many
hours a day we can work, not to mention the fact that having a
bunch of money is no fun if we don‟t have the leisure time to
enjoy it.

You can‟t create a duplicate of yourself to increase your working

time; so instead, you need to send an extension of yourself –
your money – to work. That way, while you are putting in hours
for your employer, sleeping, reading the paper or socializing with
friends, you can also be earning money elsewhere. Quite simply,
making your money work for you maximizes your earning
potential whether or not you receive a raise, decide to work
overtime or look for a higher-paying job.

Most of us, if not all, have invested all our lives. When you went
to school, you invested your time to get something in return-
education. The point is, if you really think about it, you do a lot of
investing, all the time, maybe not in stocks but in life itself.

Investing is not gambling. Gambling is putting money at risk by

betting on an uncertain outcome with the hope that you might win
money. True investing doesn‟t happen without some action on
your part.

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A “real” investor does not simply throw his or her money at any
random investment; he or she performs thorough analysis and
commits capital only when there is a reasonable expectation of
profit. Yes, there still is risk, and there are no guarantees, but
investing is more than simply hoping luck is on your side.

Investing isn’t a get-rich-quick scheme. Taking control of your

personal finances will take work, and, yes, there will be a learning
curve. But the rewards will far outweigh the required effort. You
don‟t have to let banks or investment companies ( yung dodoble
yung pera mo with just a little period of time) push your money in
directions that you don‟t understand. After all, no one is in a
better position than you are to know what is best for you and your
money.

STOCK MARKET
What is stock market?

It is place where you can buy and sell shares of stock of a

publicly listed company. Stock market gives you the opportunity
to grow a small initial amount of money into big ones, and
becoming rich without having to take the risk of kick-starting a
business or having to make the sacrifices often made to get a
high paying job or career.

Stock market allows investors (you and I) to participate in the

company‟s financial achievements of the organization whose
shares are in their possession. When companies make profits,
stock investors make money when the company pays out their
dividends and by selling out appreciated stocks with a capital
gain profit.

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History and performance of stock market

The stock market plays a very important role in the investment

portfolios for practical and theoretical reasons. According to
Jeremy Siegel‟s 200 years of stat shows that stocks earn 8.3%
percent per year, while Ibbotson Roger‟s 78 years of stat shows
that stocks earn 10.4% per year. No other investment vehicle has
such an outstanding record of a long duration performance.

Stocks have offered the most potential for growth: Over the last
20 years, a survey shows that the stock market performs more
than savings accounts, and bonds. According to history, the
stock market has offered the most average potential returns than
inflation and bonds.

Percentage of stock investors

How many people invest in stock market now?

In Philippines, less than One percent (1%) of the population
invests in the stock market! And I can proudly say that I am now
a part of this low percentage.

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WHY IT IS IMPORTANT TO INVEST
To fight inflation

Inflation is defined as a continuous increase in the general level

of prices for goods and services over time. In other words, the
value or purchasing power of your money gets less and less over
time. Inflation hits everything from our basic necessities and our
comforts in life. All of us are subjected to inflation–no one is
exempted.

Here‟s an example which I know you can relate.

“Years ago the price of a candy is only 25 cents but now

(pambihira) it‟s already P1.00. Minsan wala ka ng mabili
sa piso. Ika nga saan aabot ang piso mo? The price of the
candy has been inflated and it will continue to grow year
after year after year.”

Whether we like it or not, the prices of our necessities li ke food,

transportation, rent, electricity will continue to increase. And in
the same way, the things that your money can buy will decrease.
After 20 years from now one peso might be equivalent to one
centavo of today! This is an inescapable truth.

Inflation doesn‟t only affect our current lifestyle. It also

tremendously affects our dreams for the future. It moves us
financially backwards little by little without consciously noticing it.

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We just keep on working hard for our dreams, but what we don‟t
realize is that inflation is pushing us back further and further
away from it. Although we know it exists but we ignore it.

Think about this, if your dreams cost 1 million today, it will cost
1.2 million in five years. In ten years it will cost 1.6 million, and in
20 years, it will nearly triple to 2.8 million. The good news is by
learning how to invest we can fight inflation.

The average inflation per year is approximately 5 percent, its just

0.01 percent per day. It‟s impossible for us to noti ce it on a daily
basis but has tremendous effect in the long run. Inflation is
almost an undetectable opponent of our financial lifestyle.

Here‟s another sad truth; many people assume they can increase
their money by putting it into a bank account, truth is your money
is losing its purchasing power year after year because the rate of
inflation is bigger than the interest given to you by the banks.
Most banks give less than one percent interest rate per year or
even less.

You will realize the power inflation when you decide to retire and
not fight inflation today. When you already 60 years old and do
not have enough money for your retirement, you will spend the
last of your days being financially burden to the people you love
the most. That‟s why it‟s important for us to prepare for our
future.

Look at the table below. It‟s an estimate of how much money you
need after you retire at age of 60 and assuming you live 10 more
years.

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The total cost of retirement is the amount you need to spend to
live 10 more years after you retire.

Now, I‟d like to bring your attention to the difference of the Yearly
Cost of Living over Current Spending. A 600, 000 per year
lifestyle today will be P4.2 Million in 40 years!

If you doubt the calculation shown in the tables, you can go

ahead and try to find a more precise answer.

I hope that the amount you have just seen scares you into taking
action straightway. Investing is very easy to delay, easy to
ignore, but the consequence from that is extremely painful.

It is important that plan for your retirement because someone will

definitely have to pay for it. It may be your spouse, your
son/daughter, or even you‟re your other relatives.

Now, it‟s not too late to plan your retirement, as you can see
there‟s a lot of time to prepare your future especially when you
are still young today.

DIFFERENT INVESTING VEHICLES

Time Deposits

A certificate of deposit or savings account helps for a period of

time (fixed term), with the knowledge that the individual who
makes the deposit can only withdraw by informing the bank. A
time deposit is defined as an interest bearing bank deposit which
has a certain maturity date. A bank demands that the depositors
give a thirty days notice before making a withdrawal from the
savings account.

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However, a passbook account is typically available money and
holders of an account can withdraw without any advance notice.
Deposit certificates are given for a specific term, like the
minimum of thirty days to the maximum of five years. Even
though depositors can withdraw funds from certificate of deposits
without any notice, there are legal actions for premature
withdrawal.

Bonds

Categorized under the common category regarded as fixed

income securities, this term „bond‟ is widely used to describe any
securities founded on a debt. When a bond is purchased, you are
giving out money to the government or a company. And i n return,
an interest will be agreed on when they eventually want to pay
back the money they borrowed.

What makes bonds attractive is that they are relatively safe. If

you‟re purchasing bonds from your government, it virtually
guarantees your investment, and it is free from risk. The stability
and safety, however, comes with a cost. Because the risk is
minimal, there is a bit potential return. This makes the return rate
of bonds widely lesser than the other securities.

Mutual Funds

Mutual fund is the collection of bonds and stocks. When you

purchase mutual funds, you‟re pooling your cash with a few other
investors, allowing you (as a member of the group) to hire an
expert manager to choose certain securities that is best for you.
A mutual fund is formed with a certain strategy planned, and their
main attention can be on anything such as small stocks,
company bonds, bonds and stocks, stocks in specific countries,
large stocks, government bonds, stocks in specific industries, etc.

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The major advantage of mutual funds is that an investor can put
his or her money without having the experience or time that is
always needed to select a good investment. Theoretically, an
investor should have a good return by hiring a professional and
giving him or her money to help in choosing the investment.
Actually, there are a few aspects of mutual funds you should be
careful of before selecting them.

Unit Investment Trust Fund (UITF)

Unit Investment Trust Fund (UITF) is already made investments

which support funds pooling from various investors with the same
investment goals. These pooling funds are managed by expert
fund managers. These funds are invested in different financial
instruments like money market securities, equities and bonds,
which are usually available to big investors alone.

In a unit investment trust fund (UITF), each Net Asset Value per
Unit (NAVPU) or participating unit value reflects the present
market prices of instruments which make up the unit investment
trust fund. Therefore, the net asset value per unit will increase
when the prices at the market increases and falls when the
market prices fall. When the market price increases, the unit
investment trust fund participant experiences huge returns
because the revaluation results into capital gains on the income.
When the market falls, the unit investment trust fund participant
experiences a capital loss which might be prevented by
deferment of redemption till the market situation becomes
favorable.

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Equities (Stock Market)

When equities or stocks are purchased, you become a part

owner of such business. This makes you entitle to vote in any of
the meeting held by the shareholders‟ and gives you the chance
to receive any of the profits shared among its owners. These kind
of profits are regarded as dividends.

Compare to the constant stream of income provide by bonds,

equities are volatile. Meaning, their values fluctuate everyday.
When you purchase an equity or stock, nothing is guaranteed.
Most stocks or equities don‟t pay dividends, such that the only
mean for you to make money is when there is an increase in
stock value; which may not happen.

Stocks or equities provide a relatively high income returns when

compared with bonds. However, a price will be paid for this high
potential return which is assuming the risk crashing some of your
investment or all.

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HOW THE STOCK MARKET WORKS
I found the simplest explanation on how the stock market works
from the book “The Stock Market Jumpstarter” by J3 Patino. The
diagram and explanation below come from his book.

To make the stock market work it needs interaction from four

groups of people.

TRADING
INVESTORS PARTICIPANTS

PHILIPPINE PUBLICLY
STOCK
EXCHANGE LISTED
(PSE) COMPANIES

In the diagram, we are the “Investors” and we only deal with the
“Trading Participants”.

The Publicly Listed Company and the PSE

The publicly listed company applies to the PSE so that they can
be allowed to offer shares of stock to the public. 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.

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The PSE and the Trading Participant (Broker)

The PSE does not directly transact with us investors. Only

Trading Participants licensed by the SEC are allowed to buy and
sell shares of stock. This was done simply for control purposes
and work simplification. The PSE prioritizes monitoring of Publicly
Listed Companies while the Trading Participants deal with the
investing public.

The Trading Participant and the Investor (You!)

You will have to contact a trading participant or broker if you

want to buy or sell shares of a particular company. 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 in summary, this is how the Stock Market Works: (1) The PSE
monitors and screens companies who would want to become
publicly listed. (2) The PSE assigns trading participants to
interact with the public for the buying and selling of shares. (3)
The trading participants become the middle man between the
PSE and the investing public.

Source: The Stock Market Jumpstarter” b y J3 Patino Page 14

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HOW MONEY GROWS IN THE STOCK MARKET
1. Thru Capital Appreciation

Capital appreciation or gain is an increase in the asset's

value based on an increase in the price of the market.
Mostly, the start-up money which was invested in the
stock has risen in value, and the capital gain part of the
market includes all the market value which exceeds the
cost basis or original investment. Capital appreciation or
gain is one of the main outflows of investment returns, and
the other being the interest or dividend income.

For example, let‟s assume you bought a stock or share for

10 pesos, however it is now being traded for 15 pesos per
share after a year. Your capital gain in the investment is 5
peso, or 50%, being that the share's price has risen by 5
pesos over your cost basis or purchase price.

2. Thru Dividends

A dividend is defined as the distribution of a part of

incomes coming into the company, which is decided by
board of directors, to the shareholders. Dividends can be
paid in form of cash or stock shares.

Cash Dividends

A cash dividend is the money paid to stock owners,

usually from the company's accumulated profits or current
earnings. All the dividends are to be declared by the
directors on board and are taxable as earning to the
investor. Long term investors who are looking to maximize
their profits should think about investing their dividends

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again. Most brokers will ask their clients whether he or she
wishes to cash out their dividends or reinvest it.

Stock Dividends

A stock dividend is a payment of dividend made in form of

more shares, instead of cashing out. Companies might
decide to share stock to their shareholders if the company
is short of liquid cash. These distributions are commonly
made in form of the fraction payments made per existing
stocks or shares. For example a company that is issuing a
0.05 stock dividend for every single share own.

Stock right offering

A stock right offering is the giving out of rights to a

company's shareholders which enables them to purchase
additional stocks directly from such companies and are in
proportion with their initial holdings, within a period of time.
In stock rights offering, the price of subscription at which
every share might be purchased in common at a
reasonable discount to the present price of the market.

For example, a company that trades their stock for 20

pesos might announce a stock right offering where all its
shareholders will be given one right for every share own
by them, with 4 rights needed to purchase another new
share for a subscription price of 19 pesos. The company
also specifies that such right expires on a specific date,
which ranges from 1-3 months from the day of declaration
of the stock right offering.

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LAW OF COMPOUNDING INTEREST
Compound interest called "the greatest mathematical discovery
of all time". This is partly true because, unlike calculus or
trigonometry we studied in school, compound interest applies to
our everyday life.

The law turns your money into something artistic and a very
strong income generating tool. Compound interest (sometimes
regarded as "compounding"), is the means of generating
incomes on an income reinvested.

For it to work out, two things are needed: Time and reinvestment
of incomes. The more time you put into your investments, the
more you can be able to speed up your initial investment's
income potential of your initial investment, which removes the
pressure on you. Let's take a look at the example below:

If you decide to invest PHP 100,000 today at 10% (average rate

of return in the stock market), in one year you will get
(100,000 x 1.10=) Php110, 000. Now, instead of withdrawing
your Php10, 000 gain from the interest paid, you let it be for
another one year. If you also earn the same 10% increase rate,
your investment will increase to (110,000 x 1.1=) Php 121,000
when the second year ends.

Because you invested again that Php 10, 000 you earned in the
first year, it works well with the initial investment, giving you an
extra Php 21, 000, which is Php 11,000 higher than the last year.
This small increment might seem too little now, but don't forget
you did not have to do anything to earn this extra money.

The increment in the amount invested every year is

compounding. This will keep going on as long as you continue to
reinvest and earn interest.

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The Advantage of Starting Young

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Take these two individuals as an example, Investor A and
Investor B. When Investor A was 25 years old, he invested
Php 5,000 for 8 years at the rate of 10.0% compounded interest.
While Investor B start investing when he was 33 years old, he
invested same Php 5,000 for 33 years at the same rate of
interest.

But as you can see in the table above, Investor A grows his
investment 36 times, while Investor B grows his investment only
6 times.

Even though Investor A invested less amount of money, by

allowing his investment to have more growing time, he earned a
lot more than Investor B.

So when is the best time to invest?

The best to invest was 20 years ago; the second best time is
NOW!

Don‟t wait till you are rich, till you get that promotion, till get buy
that home, till you have your first child, till you buy that car and so
on. Those are just lame excuses to procrastinate. It is when you
invest now, that you will be rich. The best time is now! The more
time you have, the more you make from investing.

Remember this: Time plays an important role in terms of

investing. The earlier, the better.

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BASIC INVESTING STRATEGIES
There are 3 basic investing strategies, which are:

 Buy and Hold

 Peso Cost Averaging (PCA), and
 Market Timing or Trading

1. Buy and Hold

The buy and hold investing strategy is purchasing a stock and

withholding it till the time ends (which is, till you need or want
to get the money). This investing strategy is comparatively
stress-free, since the daily, weekly, or monthly downs and ups
in the market will be ignored.

This can really be done when there is an amount of money

that you don't need immediately or in the nearest future, but
you mainly want to let it go. The most important thing about
this strategy is you are not being attached to your money. If
you make a lot of profits, awesome! But if you make losses, it
should be fine.

With the buy and hold technique, it is best for you to go with
today's industry giants (Bluechip Companies) . Go with the
companies that probably will last better for you. Such
companies are the ones with history of increasing into
different means of making money. Here are some bluechip
companies; JFC (Jollibee Foods Corporation), PLDT
(Philippine Long Distance Telephone Company, SMC (San
Miguel Corporation), and Globe Telecom.

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2. Peso Cost Averaging (PCA)

Peso cost averaging is the method of purchasing a fixed

amount of investment on a normal ground,regradless of the
price. When the price is low more shares are being bought,
and lesser shares are purchased when the prices are up.
Therefore, the average money cost per share will decrease
continuously. Peso cost averaging reduces the danger in
investing a big amount in just one investment at the
inappropriate time.

3. Market timing or trading

Market timing also called stock trading. This involves actively

monitoring the stock market for chances to purchase when
the stock is low, and sell when it is high. Market timing/stock
trading demands more time, dedication and skill. Also, it is
very exciting. If you want to keep checking on the stock
market everyday, and you really want to be involved in the
excitement, this is best for you. With the right market timing,
your money can be doubled in just one week! However, you
can experience the reverse. Your money could all be gone in
the same week if care isn't taking. The rush of losing and
winning is the reason behind the comparison of stock market
to gambling. While the technique of monitoring the falls and
selling at the rise looks easy, it involves a scientific knowledge
known as technical analysis.

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SOME TIPS FOR SAFE INVESTING
 Invest long term in bluechip companies

A blue chip company is a well established, financially sound,

and nationally recognized company. Blue chip companies
widely sell excellent quality, generally accepted services and
products. Blue chip companies are recognized for their ability
to weather downward trends and function profitably during
severe economic conditions, which is a part of their long run
of reliable and stable growth.

The title 'blue chip' came into existence because in the poker
game, the blue chip always have the biggest value.

 Avoid penny stocks as much as possible

A penny stock is known as a stock which trades at a market

capitalization and a very low price, mostly outside the main
market exchanges. These kinds of stocks are widely regarded
to be extremely risky and speculative because of their large
bid-ask spreads, liquidity unavailability, limited disclosure and
following, and small capitalization.

The term 'penny stock' is misleading because there isn't any

widely accepted definition of it. Some regard it as any stock
which trades for pennies or trades for less than P5, while
some others consider penny stock as any stock that trades off
of the main market exchanges.

A typical penny stock is known as a small company that have

an speculative share and highly illiquid. The company also will
be subjected to some listing requirements with lesser
regulatory standards and filing.

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 Don't time the market

Don't time the market simply because you cannot exactly

predict the market trend. It requires special skill if you want to
time the market, you need to learn advanced technical
analysis

 Get advice from professional

Getting advice from a professional on how best to manage

the risk you will face in the stock market will save you a lot.
These professionals will guide you in various ways and give
you advices on each investment.

They have studied the market well; more experience than you
are and can predict the market more accurate than you.
These qualities that they offer can help you manage the risks
in investing in the stock market.

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HOW TO OPEN AN ACCOUNT

Four-Step Application Process

1. Go to www.colfinancial.com and click on “Open an Account”:

Download and print these documents:

Completely fill out all forms:

a. Customer Account Information Form (CAIF)
b. Foreign Account Tax Compliance Act (FATCA)
c. The Online Securities Trading Agreement (OSTA)
should be read and kept by the account holder

Note: Tax Identification Number (TIN) is required.

2. Fill out application form and prepare other documents.

In the Application Form, be the “Primary Account Holder”.

Let your parent, spouse or child be your “Secondary
Account Holder”.

a. Prepare ANY two (2) of the following:

• Passport
• Driver‟s License
• Birth Certificate
• SSS ID (1999 credit card type only)
• Company ID with photo (if employed by top 2500
corporations)
•Major credit card with photo
• Senior citizen‟s ID

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 b. Prepare latest copy of ANY one of these in your or
spouse‟s name:

• Current utility bills (electric, water, cellphone, telephone)

• Credit card statements
• Club membership bills
• Bank statements

NOT E: For non-resident Filipinos, get a copy of one‟s proof of

income certified by employer and all documents must be
authenticated by the Philippine Embassy or Consulate.

NOTE: For non-Filipinos living in the Philippines, include a

photocopy of current visa, alien certificate of registration (ACR)
and proof of government permission to engage in
business/employment; validity of work permit must be at least
one year from its date of issue.

3. Submit forms and requirements

You may personally submit originally signed forms and clear ID

documents to COL Financial or through iRemit branches.

You may also send the originally signed forms to COL Financial
Business Center. Once they receive your requirements, a sales
officer will review your application and contact you to inform you
of the status of your application or any other requirements that
may be needed.

Here‟s their address:

COL Business Center

2403B East Tower, PSE Centre,
Exchange Road, Ortigas Center,
Pasig City 1605, Philippines
(+632) 651 5888

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 COL Investor Center - Makati
Ground Floor, Citibank Tower,
Valero corner, Villar Streets,
Makati City 1227, Philippines
(+632) 478 2954
(+632) 478 3316
(+632) 478 3275

COL Investor Center - Davao

2nd Floor Robinsons Cybergate,
J.P. Laurel Ave., Bajada,
Davao City 8000, Philippines
(+6382) 287 8192
(+6382) 287 8193
(+6382) 287 8194

Office Hours
Monday-Friday: 8:30 am to 5:30 pm

If you don‟t live in Manila, you can mail the documents to

their office.

4. Fund Your Account

If you‟re opening a regular account, the minimum amount to
invest is P25,000. Note: This is the money you‟ll buy stocks with.
But if you‟re opening an EIP or Easy Investment Program, the
minimum amount to invest is P5,000 only.

Option #1: Visit the Office

If you can drop by the office to submit your documents, you can
bring with you a check payable to COL FINANCIAL GROUP, INC.
Please include your Name and COL Account Number at the
back. Note that check payments will need three days clearing
period.

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Option #2: Deposit in the Bank

COL FINANCIAL GROUP, INC has accounts in BDO, Metrobank,

and BPI.

Note: If you do online banking, it‟ll be much easier for you.

After depositing, fax the deposit slip (or scan/email) to the COL
FINANCIAL GROUP, INC office.

All the information to do all these is found in

www.colfinancial.com. Just click on “Open an Account”.

Hope this little e-book inspired you to start investing as soon as

possible and I hope you enjoyed reading it. Feel free to share
this with your colleagues, friends and family.

Just direct them to www.IncomeTipsForPinoys.com so that they’ll

get this e-book for free.

If you have any comments, suggestion or feedback you can

email me at eduardo@incometipsforpinoys.com. Thanks Again.
God Bless You.

Sincerely,
Eduardo

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