HOW THE STOCK MARKET WORKS | Stock Market 101 for beginners | Philippine Stock Exchange

Summary

In this video, Charm from Ready to Adult Philippines explains the basics of the stock market, demystifying complex concepts for beginners. She covers key topics such as the nature of stocks, types of stocks (common vs. preferred), how companies raise funds through IPOs, and how stock prices fluctuate based on supply and demand. Charm also introduces the concept of dividends and capital gains as ways to earn from stocks, and emphasizes the importance of research before investing. With practical advice on starting with blue-chip stocks, she encourages viewers to take a cautious and informed approach to investing.

Takeaways

• 😀 Stocks are portions of a company, and owning shares means owning a small part of that company.
• 😀 Common stocks give voting rights, while preferred stocks offer priority in dividends.
• 😀 Companies sell stocks to raise capital for growth, assets, and research & development.
• 😀 An IPO (Initial Public Offering) is how a company transitions from private to public, offering stocks to the public for the first time.
• 😀 The stock market is a platform where buyers and sellers exchange shares, facilitated by stock exchanges like the PSE (Philippine Stock Exchange).
• 😀 Investors can earn from stocks in two ways: through dividends (company earnings distributed to shareholders) and capital gains (profit from the increased value of shares).
• 😀 Stock prices fluctuate based on company performance, market news, and supply and demand, similar to how fish prices change at a market.
• 😀 The buying and selling of stocks are facilitated by brokers, who act as intermediaries between investors and companies.
• 😀 You don’t need billions to start investing; some online brokers allow you to begin with as little as 1,000 or 5,000 pesos.
• 😀 When starting out, focus on blue-chip companies, and don't overwhelm yourself with too many stocks—experts suggest sticking to 3-5 stocks in your portfolio.
• 😀 The stock market is a higher-risk investment, so only invest money you're willing to lose, and always conduct your own research before buying stocks.

Q & A

What are stocks?

Stocks, also known as shares or equities, represent portions of ownership in a company. If you buy a share of a company, you own a fraction of that company.

What is the difference between common and preferred stocks?

Common stocks give shareholders voting rights, while preferred stocks prioritize receiving dividends, meaning they get paid dividends before common stockholders.

Why do companies sell their stocks?

Companies sell stocks to raise capital for growth, acquiring assets, and investing in research and development to improve their products and services.

What is an IPO (Initial Public Offering)?

An IPO is the process by which a private company becomes publicly traded by offering its stocks to the public for the first time, typically on a stock exchange.

How does the stock market work?

The stock market is a marketplace where companies sell their stocks to the public, and investors can buy and sell these stocks. Stock prices fluctuate based on supply and demand, and a stock exchange facilitates these transactions.

How can an investor earn money from the stock market?

Investors can earn from the stock market through dividends, which are portions of a company’s earnings distributed to stockholders, and capital gains, which occur when a stock's price increases and is sold for a profit.

What causes stock prices to fluctuate?

Stock prices fluctuate due to factors like news, public opinion, and a company’s performance. The main driver, however, is supply and demand, where more buyers push prices up and more sellers drive prices down.

What are capital gains?

Capital gains are the profits made when an investor sells a stock for more than they paid for it. For example, if you buy a stock at 100 pesos and sell it later for 110 pesos, the 10 pesos is your capital gain.

What is the role of a stockbroker?

A stockbroker acts as the intermediary between investors and the companies whose stocks are being bought or sold. They facilitate transactions either through a person or an online platform.

What are blue-chip companies and why should beginners invest in them?

Blue-chip companies are well-established, financially stable companies with a track record of strong performance. Beginners are advised to invest in blue-chip companies because they are considered safer and more reliable.