Investing is one of the ways to make your hard-earned money work harder, and the stock market is one of the many investment avenues available. Investing in stocks can be exciting and potentially rewarding as the stock market offers investors the opportunity to participate in the growth and success of companies. However, it is crucial to understand the intricacies of stock investing, including the advantages and disadvantages, the distinction between common and preferred shares, and how beginners can enter the Philippine stock market.

Stock investing involves purchasing shares of ownership in publicly traded companies. Investors become shareholders and can earn profits through capital appreciation (increase in stock price) or dividends (share of company profits distributed to shareholders).

Pros:

1. Potential for high returns
   Historically, stocks have shown the potential for higher long-term returns compared to other investment options such as bonds or savings accounts. By carefully selecting well-performing companies, investors can benefit from the growth of their investments.
   
   
2. Diversification
   Investing in a variety of stocks across different sectors can help spread risk. Diversification allows investors to reduce the impact of potential losses from individual stocks and create a more balanced portfolio.
   
   
3. Dividends
   Some companies distribute a portion of their profits to shareholders in the form of dividends. Dividends can provide regular income and may potentially increase over time, depending on the company's performance.
   
   
4. Ownership and voting rights
   Stock ownership grants individuals partial ownership in a company, providing voting rights on certain matters. Investors can participate in shareholder meetings, voice their opinions, and possibly influence and provide input on important decisions (for common shares).

Cons:

1. Higher volatility and risk
   Stock prices can fluctuate significantly due to market conditions, economic factors, or company-specific events. Investing in stocks carries inherent risks, and investors may experience losses if they sell stocks abruptly during market downturns.
   
   
2. Doing more research and need for closer monitoring
   Successful stock investing requires thorough research, continuous monitoring of market trends, and staying informed about the performance and prospects of invested companies. This can be time-consuming and requires a commitment to ongoing learning.

As a newcomer to the stock market, understanding the differences between common shares and preferred shares is essential for making informed investment decisions. Both types of shares offer unique characteristics and potential benefits.

• Common shares
  Common shares represent basic ownership in a company and offer the potential for capital appreciation, meaning the value of the shares can increase over time. Holders of common shares may benefit from the growth of the company and sell their shares at a higher price in the future.  They also have voting rights and may receive dividends, but their claims on company assets and earnings are subordinate to preferred shareholders in the event of liquidation. 

• Preferred shares
  Preferred shares are a class of shares that typically have a fixed dividend rate and that’s why they are often considered as a hybrid between stocks and bonds. Preferred shares offer a more stable income stream and lower volatility compared to common shares. While preferred shareholders have no voting rights, they have priority over common shareholders when it comes to receiving dividends and company assets in case of liquidation. Different classes of preferred shares may have varying terms and conditions, such as the ability to convert into common shares or the existence of call provisions that allow the company to redeem the shares at a predetermined price.

Which is better for new investors? The choice between common shares and preferred shares depends on an individual's investment goals, risk tolerance, and preferences.  Here are some factors to consider:

a. Risk tolerance
Common shares tend to be more volatile and offer greater potential for capital appreciation. If you have a higher risk tolerance and seek long-term growth, common shares may be more suitable.

b. Income Focus
If you prioritize stable income and capital preservation, preferred shares may be a better fit. The fixed dividend payments can provide a consistent income stream.

c. Long-term vs. short-term goals
Common shares are typically better suited for long-term investors who can withstand short-term market fluctuations. Preferred shares may be more appropriate for investors seeking a steady income stream in the short to medium term.

d. Diversification
Diversifying your portfolio is crucial for managing risk. Consider including a mix of both common shares and preferred shares to balance potential returns and income stability.

Stock investing is suitable for various types of investors, but ultimately, each person's financial goals, risk tolerance, and investment knowledge should guide their decision to participate in the stock market. 

Start by learning the basics of stock investing, including key terms, market dynamics, and fundamental analysis. Utilize educational resources, online courses, or seek guidance from financial advisors.  Then define your investment objectives, risk tolerance, and time horizon. This will help determine if investing in stocks if for you. If you think it is, research the companies listed on the Philippine Stock Exchange (PSE).  Consider factors such as earnings growth, competitive advantage, and management track record when selecting stocks.  You don’t have to go in with guns blazing.  Begin with a small amount of capital and gradually build your portfolio. Diversify your investments across different industries and companies to spread risk.

Ready to get into the stock market? Open a brokerage account with Chinabank Securities!

ChinabankSecOnline is the online trading platform of Chinabank Securities, allowing investors to conveniently access research and information on listed stocks, and buy and sell them on the PSE using a mobile phone, tablet, laptop, or PC.

Here are the steps for opening a ChinabankSecOnline account: 

Step 1: It is highly recommended to have a Chinabank account as your settlement account. If you opt to have another bank as your settlement account, you need to fund your ChinabankSecOnline account with a minimum deposit of P50,000.

Step 2: Go to https://www.chinabankseconline.ph/, click the “Open an Account” tab, and fill out the required basic information.

Step 3: An email verification will be sent to your nominated email address.  Click the link and you will be redirected to the registration page.  Fill out the mandatory fields and select the verification option—video call or physical appearance at your Chinabank branch of account or Chinabank Securities Office.

Step 4: Depending on the verification option chosen, upload your valid ID and other pertinent documents.  Then click “Submit”.

Step 5: An application reference number (ARN) will be sent to your nominated mobile number. Wait for the video call schedule if you chose the video call option.  If you chose physical appearance, go to your Chinabank branch of account or Chinabank Securities Office.

Step 6: Allow 1-2 days processing, then you will receive an email on your application status. 

Investing in stocks can be a rewarding long-term investment strategy, offering the potential for capital appreciation, dividends, and ownership in companies. It is crucial to assess personal circumstances, seek professional advice if needed, and approach stock investing with a well-informed and disciplined mindset.  By learning as much as you can, carefully selecting stocks, diversifying your portfolio, you can embark on a successful journey into the Philippine stock market and work towards achieving your financial goals.

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