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How to Invest in Stocks in the Philippines – Part 2

For this article, we’ll cover the process of how to invest in stocks in the Philippines.

When you have finally decided to invest in stocks and have created a plan for yourself, then it’s time to actually buy the stocks themselves.

Buying Stocks in the Philippines

1. Choose a stockbroker

A stockbroker is an individual or institution that has been accredited by the Philippine Stock Exchange to place buy and sell orders for an investor. 

In this regard, you can choose from more than 100 licensed stockbrokers in the Philippines. There are two types of stockbrokers, namely, traditional and online. Traditional stockbrokers refer to licensed individuals who receive orders for stocks through phone calls or other means of communication. On the other hand, online stockbrokers make use of a digital trading platform where investors can place their buy or sell orders. 

Each has its own advantages and disadvantages. But it’s ultimately up to you to determine which one works best for you. The agreements and specifics of buying stocks through a traditional stockbroker can be better obtained directly from them. Because of this, we’ll work on the assumption that you’ll make use of an online stockbroker. 

how to invest in stocks in the Philippines: choose a traditional or online stockbroker
Philstocks Financial, Inc. has a mobile app that can be downloaded from the App Store and Google Play. You can access your account with them through this platform.

There are 32 online stockbrokers in the country. However, from that relatively long list, we have gathered the most frequently used among them. They are as follows, in no particular order:

  • BDO Securities
  • COL Financial
  • First Metro Securities (FirstMetroSec) 
  • Banks of the Philippine Islands (BPI) Trade
  • Philstocks Financial, Inc. 

Choosing from any of the five online stockbrokers listed above provides ease of use and affordability. Given that BDO and BPI also offer savings accounts, which are often a requirement prior to opening a trading account with them, you can easily transfer money to invest. Also, the minimum amount required to open an account ranges between PHP 0 and PHP 5,000. This gives you access to buy and sell stocks, no matter how much you initially have. 

But in terms of the volume of trade, the top 5 stockbrokers in the country as of April 18, 2022 are the following: 

  • Salisbury BKT Securities Corporation (20.14%)
  • UBS Securities Philippines Inc. (15.13%)
  • J.P. Morgan Securities Philippines, Inc. (11.31%)
  • COL Financial Group, Inc. (7.65%)
  • CLSA Philippines, Inc. (5.46%)

It is important to note that the list above changes from day to day. 

workshops
There are webinars about investing in stocks that are organized by relevant institutions, such as online stockbrokers or the Philippine Stock Exchange.

In general, these platforms do not just allow you to trade. They also have other services that can help you as you invest in stocks in the Philippines. These include, but are not limited to, reports about companies and the market, advice on whether to buy or sell, and the market indices. 

Because of this, there are different factors to consider when choosing a stockbroker. Take note of the required minimum amount to open an account with them. At the same time, evaluate them against the ease of depositing and withdrawing funds, the usability of their site, and the trustworthiness of the institution. This can help provide you with a seamless investing experience.

2. Open an account with an online stockbroker 

When you have decided which stockbroker to transact with, the next step would be to open an account with them.

In general, you will be asked to completely fill out a “Customer Account Information Form (CAIF).” Then, with this form, you must submit two valid IDs and specimen signature cards. Additionally, some brokers may require proof of billing, other relevant documents, and an initial cash deposit.

After submitting, you just have to wait for a couple of days, around 1 to 2, for your application to be approved. 

3. Fund your online trading account 

Once approved, you can start funding your online trading account with the amount of money you plan to buy stocks with. If the online stockbroker already required an initial deposit during account opening, then you can use this to purchase stocks. If this is not the case, then you can deposit any amount necessary to purchase the stocks you intend to. 

fund transfer
Online stockbrokers provide numerous ways in which you can fund your account.

Each online stockbroker accepts different payment methods through which you can fund the account. You can usually deposit over-the-counter at a bank, transfer money through your online or digital bank account, or pay by debit or credit card. 

The processing time will depend on how you fund your account. There are instances when the money that you deposit will be credited to your trading account within 30 minutes. However, it can also take up to 1 to 2 trading days. Some also charge respective fees and have minimum and maximum limits on how much you can deposit.

4. Place an order

There are numerous stocks listed on the market. When you’ve done your due diligence in researching the companies, you can now finally place an order. This can be as easy as entering the number of shares you want to invest in and clicking the “buy” button. However, the specific process of placing a buy order is dependent on the online stockbroker. Some also have the option of completing a buy order over the phone, should you have limited access to the internet. 

The settlement date of transactions for online stockbrokers is on the same date as when the transaction was made. In comparison, traditional stockbrokers have a settlement date of T+3. This means that payment for the buy orders must be made within three days from the date of the transaction.

buy 1
You can place an order when the market is open.

Trading days at the Philippine Stock Exchange are from Monday to Friday, 9:30 a.m. to 3:30 p.m. They are closed on weekends and national holidays. Placing a buy or sell order can only be done when the market is open.

5. Receive your shares

When this is done, you will receive a confirmation receipt and an invoice within 1 to 2 business days. This serves as proof of ownership of the stocks that you placed an order for. 

A physical certificate to ascertain ownership of stocks is issued upon request to your stockbroker. You are also required to pay an upliftment fee in such situations. The specific amount depends on your stockbroker, with some charging PHP 150 or PHP 250.  

6. Monitor your investments

After buying stocks, make sure to set a schedule to see how they are faring. This can help you determine whether the losses and gains of your stocks are still aligned with your own standards. 

Also, keep yourself updated with the economic performance of the country. Strong economic growth, decreasing rates of inflation, and stable interest and foreign exchange rates are favorable for the stock market. The opposite trend for such indicators means that the economy isn’t doing too well, which has implications for the performance of the stock market. But make sure not to be too swayed by the emotions that such situations bring about. Keep yourself level-headed, re-evaluate your strategy, and make calculated decisions.

PSE
A library is accessible at the office of the Philippine Stock Exchange. Using its facilities and services is free of charge.

You can do your research at a library in the office of the Philippine Stock Exchange, which is located at PSE Tower, 5th Avenue corner 28th Street, Bonifacio Global City, Taguig City. It is open on weekdays, Monday through Friday, from 9:00 a.m. until 4:00 p.m.

But, of course, there are also reliable and up-to-date resources available on the internet. You can use resources from your online stockbroker to build your knowledge about investing in stocks in the Philippines.

What is the Board Lot System?

A board lot or round lot system is used in the trading of stocks. The Board Lot Table shows you the minimum number of shares that you can buy or sell at a specific price range. Because of this, the minimum amount of money that you can invest in a given company is highly dependent on the market price of the stock and its respective board lot. 

Let’s take a look at an example of how the board lot system works when buying and selling stocks. 

Market Price (PHP)Tick SizeLot Size
10.0001 to 0.00990.00011,000,000
20.0100 to 0.04900.001100,000
30.0500 to 0.24900.00110,000
40.2500 to 0.49500.00510,000
50.5000 to 4.99000.011,000
65.0000 to 9.99000.01100
710.0000 to 19.98000.02100
820.0000 to 49.95000.05100
950.0000 to 99.95000.0510
10100.0000 to 199.90000.110
11200.0000 to 499.80000.210
12500.0000 to 999.50000.510
131000.000 to 1999.00015
142000.000 to 4998.00025
155000.000 and UP55
Philippine Stock Exchange Board Lot Table

Definition of Terms

“Market price” refers to the range of prices of any given stock. The specific market price will depend on the stock that you intend to buy or sell. 

A “tick size” is the smallest price change allowed for a stock. For example, a stock that has a market price of PHP 10,000 can either decrease or increase in increments of PHP 5. This means that the stock can be bought or sold for PHP 10,005, PHP 11,000, and so on. It cannot be priced at PHP 10,001 because it is not divisible by the tick size of PHP 5.

“Lot size” is the minimum number of shares that you can buy or sell. 

Buying Transaction

Let’s say that you want to purchase a stock from company X that has a market price of PHP 5.00. Looking at row 6 of the Board Lot Table shows that you can buy shares in multiples of 100. Any number of shares that is not divisible by 100 cannot be bought for PHP 5.00. This means that, in terms of the number of shares, you can buy 100, 200, and so on. 

So, if you want to buy 100 shares in company X for a market price of PHP 5.00 per share, then you will need to invest PHP 500.

Selling Transaction

The lot size is also applicable when selling shares. Because of this, a share that has a market price of PHP 5.00 must be sold in multiples of 100 shares. So, if you plan to sell your shares in company X, then you must sell at least 100 of them.  

Furthermore, with the shares that you bought for PHP 5.00 each, you plan to make a profit out of it by selling them. To do so, you must look at the “tick size” column. Given that the stock is priced at PHP 5.00, you can sell it in increments of PHP 0.01. This means that you can sell it at any price that is divisible by PHP 0.01. So, you can trade it for PHP 5.01, PHP 10, and so on to gain from it. 

However, this does not automatically mean that you will be able to sell it at your preferred price. It will also depend on whether the buyers are willing to purchase a share of company X at the price you’re selling it for.

Are there Fees and Taxes to be Paid?

Yes, buying and selling stocks is charged relevant fees and taxes. They can be found in the tables below. 

Fees for Buying and Selling Stocks

The amount of transaction refers to the number of shares bought or sold multiplied by the buying or selling price.

FeePrice (PHP)
Stockbroker’s CommissionAmount of Transaction x Commission Rate
Value Added Tax (VAT)12% of the stockbroker’s commission
Securities Clearing Corporation of the Philippines (SCCP) FeeAmount of Transaction x 0.01%
PSE Transaction FeeAmount of Transaction x 0.005%
Stock Transaction TaxAmount of Transaction x 0.6%
Stock Trading Costs

The broker’s commission ranges from 0.25% to 1.5% of the transaction value. However, some do charge a minimum commission fee of PHP 20. If the calculated commission fee in relation to the amount of transaction is below PHP 20, the higher fee will be charged. At the same time, the stock transaction tax is only applied to investors who sell their shares.

Let’s see how much in total you would need when you intend to purchase 100 shares for PHP 100.00 each. We will assume that the broker’s commission is 0.25%. 

ComputationFee
Amount of TransactionPHP 100 x 100 sharesPHP 10,000
Stockbroker’s CommissionPHP 10,000 X 0.25% PHP 25.00
Value Added Tax (VAT)PHP 25 x 12%PHP 3.00
Securities Clearing Corporation of the Philippines (SCCP) FeePHP 10,000 x 0.010%PHP 1.00
PSE Transaction FeePHP 10,000 X 0.005%PHP 0.50
Total Cost to Buy StocksPHP 10,000 + PHP 25.00 + PHP 3.00 + PHP 1.00 + PHP 0.50PHP 10,029.50

With this, you will need PHP 10,029.50 to buy 100 shares at a given company.  

On the other hand, let’s see how much you’ll earn when you sell 100 shares for PHP 100.00 each. We will similarly assume that the broker’s commission is 0.25%. 

ComputationFee
Amount of TransactionPHP 100 x 100 sharesPHP 10,000
Stockbroker’s CommissionPHP 10,000 X 0.25% PHP 25.00
Value Added Tax (VAT)PHP 25 x 12%PHP 3.00
Securities Clearing Corporation of the Philippines (SCCP) FeePHP 10,000 x 0.010%PHP 1.00
PSE Transaction FeePHP 10,000 X 0.005%PHP 0.50
Stock Transaction TaxPHP 10,000 x 0.60%PHP 60.00
Total Cost to Buy StocksPHP 10,000 – PHP 25.00 – PHP 3.00 – PHP 1.00 – PHP 0.50PHP 9,910.50

Based on the table above, you will earn PHP 9,910.50 after selling 100 shares at a price of PHP 100 each. 

Withholding Tax

If you invest in domestic corporations that give out dividends, then you should also keep in mind that they are subject to a withholding tax. The specific percentages charged are found below. 

Recipient of DividendsWithholding Tax
(% of dividends received)
Filipino citizen or resident alien10
Non-resident recipient engaged in trade or business in the country20
Non-resident recipient not engaged in trade or business in the country25
Non-resident foreign corporation30

Conclusion

With this, the process of how to invest in stocks in the Philippines is relatively simple. But make sure to remember that there are fees and taxes when it comes to investing. The challenge now becomes deciding which specific stocks to invest in.

Pained by financial indecision? Want to invest with Adam?

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Adam is an internationally recognised author on financial matters, with over 735.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

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