Invest in the local stock market while inside GCash using GStocks PH.
Disclaimer: This post aims to educate, and not to give financial advice. Investments have different risks and it is up to the investor to do due diligence to make their own decisions regarding his money.
It’s a really long time coming. At first, GCash launched GInvest, which focused on mutual funds. Eventually, their wealth management products also began increasing. Now with GCrypto and the upcoming GStocks Global, GCash could provide lots of different investment products to all of their users. Even those who haven’t created their stock market brokerage accounts. It hasn’t been done before and I’m excited to see what other types of products we will be able to see in the wealth management space in the future.
Table of Contents
Introduction to Investing
Investing is basically setting aside some cash to make it grow. This is different from saving. We are not just storing the money, we are making money work for us.
Before, when you needed to invest, you also needed to pay for middlemen or for services that act like middlemen before you can invest.
But now, as the Internet makes things interconnected, it also makes investments available quickly 24/7. Investing has never been as accessible as it is currently.
However, this speed has never translated easily with our fellow Filipinos. Many of our countrymen are not Internet savvy and don’t even have a credit card or a savings account to start with. What more when it comes to investment vehicles like mutual funds, stocks, real estate, or time deposits?
What is interest?
Interest is the amount charged by anyone giving a loan or doing work with money. It is usually expressed in terms of percentage or rate.
For example, there are deposit products with a 4% APR or annual percentage rate. This means that the deposits will gain 4% yearly.
However, it can be expressed differently to give a false impression, i.e., 4% APR for a certain month actually means a smaller rate because you need to divide the 4% by 12 because there are 12 months in a year.
In a nutshell,
4% = 0.04 per year / 12 months in a year = 0.0033 per month (or 0.33% per month)
So, a Php 1000 investment will only earn Php 3.30 in that particular month, less if you take account of taxes.
What is simple interest?
Simple interest is a one-time compounding of your principal with a certain rate. Usually, we can see this with credit cards or other simple loans.
Here is a more in-depth explanation:
The formula of total amount due to simple interest is: A = P (1 + rt) where: A is the total amount gained P is the principal amount (or the original amount you've invested) r is the interest rate (or the total percentage / 100) t is the time your money is in the investment, it can be any unit of time (years, months, days, etc) An example is the interest in GCredit. If you used GCredit to pay 500 pesos to a merchant, and you plan to pay it off the week after. How much interest in total do you have to pay? Given: Principal = 500 r = 5% = 0.05 t = 7 / 30 days So the total amount due after 7 days is: 500 x (1 + (0.05) x 7/30) = 505.83
What is compound interest?
Compound interest is the backbone of investing. This means that once you’ve provided the principal, once interest sets in, this total amount is reinvested and in turn, this makes the interest bigger. Once this goes on for a while, this can be big enough that you can even live off the interest as a type of recurring income.
Here is an in-depth explanation:
The actual formula of compound interest is: A = P (1+(r/n))^nt where: A is the total amount gained P is the principal amount (or the original amount you've invested) r is the interest rate (or the total percentage / 100) n is the no of times the principal is compounded per unit t t is the time your money is in the investment, it can be any unit of time (years, months, days, etc) As a real world example, given the annual interest rates of a certain fund is fixed at 8% and you've put in Php 1000 at the start, what's the total amount after 3 years? t = 3 years n = 1 as interest is compounded after every year A = P (1+r/n)^3(n) A = 1000 (1+(0.08/1))^3(1) A = 1000 * 1.256 A = 1256 So after 3 years, your investment is worth Php 1256 with a gain of Php 256
What are some terms used in investing?
Most of the time, there are a lot of terms used in investing that are out of the reach of any beginner. Here are some terms encountered, and I will try to explain each as simply as I can each term:
- Stocks – part ownership of a company; the stock market allows you to buy stocks of different publicly traded companies and the value of each share of stock usually also represents the value of the company as a whole
- Shares – can be summarized as the smallest “part”, so shares of a stock are the smallest unit of ownership
- Bonds – company-owned debt, some debts are more valuable than others; for example, big companies more often than not take responsibility to pay their debts than others
- Treasuries – government-owned debt; these are considered safe investments as they are backed by the government and will likely not disappear soon
- Some treasuries include:
- Treasury bills – short-term debt (less than a year)
- Treasury notes – medium-term debt (more than a year, less than 10 years)
- Treasury bonds – long-term debt (more than 10 years, may stretch to 30 years or more)
- Some treasuries include:
- Equities – part ownership of a company; the main difference is stocks are publicly traded and the value would most likely fluctuate day-per-day, while equities are privately owned and the value is not easily computed
- Securities – is an umbrella of any type of ownership or debt; it may include shares, bonds, equities, treasuries, and others
- Dividends – distribution of profits shared to investors in the company, usually divided by the number of shares that investor owns; some companies invest their profits to themselves, others share dividends
- Fixed-income – it means it provides a fixed amount of income per period
What are investment funds?
Investment funds are funds that are pooled (or bunched together) from different investors and professionally managed by a manager or company. Each investor gets a share of the pool (or bunch), and each value of this share is usually called a NAVPU (Net Asset Value Per Unit), which represents his part of the investment. These funds come in many forms:
- Mutual Funds – funds that consist of stocks and bonds, usually managed by a company
- Unit Investment Trust Funds (UITFs) – funds that contain stocks, bonds, and securities (similar to mutual funds) but these are often provided by banks
- Index Funds – funds that represent a certain segment of a market, usually the stock market
- Feeder Funds – funds that manage other types of investments; usually these investments are hard to get into (for example, overseas stock markets or hedge funds)
- Hedge Funds – funds that employ alternative strategies to earn high returns, usually exclusive for high net worth investors
So when a fund appreciates in value, the NAVPU also goes up. When an investor sells his share, then the difference between the NAVPU price he bought and when he sold consolidates to become a profit for him. On the downside, if an investor sells his share when the NAVPU is below the price he bought it, then it becomes a loss.
What are the different types of investments in mutual funds?
Mutual funds are managed by a company. How they make different types of mutual funds depends on the mixture of different investments:
- Bonds – basically a loan of a large known company that pays out a fixed income over time
- Stocks – units of ownership of a public company; you can buy and sell these in the stock market
- Government Securities – loans owed by the government
How safe are government securities?
Government securities are some of the safest, most conservative investments because these are backed by the government, and governments don’t just disappear overnight. They also do their best to pay off their dues even if it means they’ll print cash to do it.
How safe are bonds?
Bonds are also conservative investments because these are often loans by large, stable (“blue chip”) companies – they need cash to fund their expansions and projects so this is where they source their funds. These are usually also backed by big banks, so it is in their best interest to pay these loans.
How safe are stocks?
Stocks are considered aggressive investments because the price of the stock is based on the market. And the market represents people buying or selling, often based on their feelings and short-sighted information. Unfortunately, feelings are not logical and information can also originate from hearsay and rumor. This fuels its unpredictability with really high gains, but also very high losses. This also makes it profitable with the right mindset at the right timeframe (like 7 years or more).
One big difference between stocks and bonds is the ownership factor – if things go bad financially, the lenders are the first to be paid, as obligated by law. Last are the shareholders.
How do these investments factor into different types of mutual funds?
Since different investments have different risks, mutual fund companies combine one or more of these to form a mutual fund that leverages different mixtures of these different types of risks.
For example, there are mutual funds that are low risk, and these usually consist of bonds and government securities. There are funds that are balanced, and these are usually stocks mixed with some bonds. There are also funds that are high risk and typically these mainly consist of stocks.
How do I Invest in Stocks?
What are stocks?
Stocks are units or shares of ownership in a company. If you buy shares of stock, then you become a part-owner of the company. You can buy these shares at a stock market, in the case of the Philippines, it is locally managed by the PSE (Philippine Stock Exchange), and through multiple accredited brokers (like CitisecOnline or AB Capital).
For GStocks Global, they have partnered with Easy Equities to be able to buy and sell US stocks.
Why would I need to invest in stocks?
Investing in stocks can be a way of making money without spending a lot of time or effort to start. Some investments require you to spend either time or money to start and maintain it. For stocks, generally, you only need to put money and you will be able to reap the benefits later on.
Generally, investing in the stock market has bigger gains than traditional investments like time deposits or government bonds and securities. However, bigger gains also mean bigger risks so when investing here you should consider not touching the investment for a long time. Generally, if you look at the stock price of a company for a long enough period (usually in terms of decades), it gives a better return on your investment.
Stocks have non-fixed prices, depending on what is happening in the company (or in the market as a whole). It is in these differences in price that traders look to invest in. When you buy low and sell high, then you can make a profit.
How do you make money in stocks?
There are generally two ways — when your stock value appreciates, or when you earn dividends from your stocks. Dividends are a type of revenue some companies share with their shareholders. These dividends are from profits the company gained while doing business.
When is the best time to invest in stocks?
Generally, the best time to buy is during a recession. The best time to sell is when the market is bullish. But because we as beginners don’t know what the best time is, one recommendation is to invest some money at a set time period, via cost averaging — meaning buying stocks at regular periods at a set price.
This also applies when selling your shares as well. You can also do that by reverse cost averaging. This works for people who need some money at regular intervals.
Is it hard to invest in the stock market?
It is hard because there is a lot of information to take into account. However, as with many things, if you put in the work to learn, you can lessen your mistakes.
The act of investing is simple enough that doing so can be done anywhere with an Internet connection. COLFinancial is one such platform to invest in. Another is GStocks PH. Other alternatives can be FAMI (First Metro) and Phil Stocks. GStocks Global is currently hosting a game where you can win prizes.
If you need pointers on how to invest, you can first take a look at the SmartPinoyInvestor beginner’s guide. There are also a lot of books related to this subject. You can look into The Intelligent Investor by Benjamin Graham, who was Warren Buffett’s mentor. This book is more than 70 years old, and the principles described here still hold true today.
What are some good stocks to buy?
An easy pick is a stock that serves a public need and would stick around for a long time. Part of being an investor is doing your research to find the best stocks that fit your investment appetite.
An example is if you want consistent dividends, then perhaps you can invest in REIT (real estate investment trust) stocks as these are focused on providing dividends taken from the rental income of big property owners.
Where can I look up stocks available in the market?
You can look it up from inside the platform you are using (like COLFinancial or in GStocks PH) but you can also use the PSE Lookup Tool to find companies you may be interested in investing in.
For GStocks Global, there is a built-in tool to check out the different US stocks you can purchase.
What are some considerations when buying or selling stocks in the stock market?
Buying and selling stocks take time to process, as the local stock market is only open on weekdays from 9:30-12:00 PM and from 1:00-2:30 PM. Aside from that, topping up your account wallet also is not instant as you need to wait 1 banking day for it to be processed.
For GStocks Global, this follows the US Stock Market trading hours, which are 9:30 PM – 4:00 AM Philippine time.
Another consideration is that when buying stocks, you cannot buy just 1 unit of stock. There are lots (or groups) of stock and these are the minimum units you can buy. Some stocks you can buy by lots of 10, others 100, and there are other lot sizes available.
In contrast, for the US stock market, you are able to buy single shares.
What is GStocks PH?
GStocks PH is a product from inside GCash that enables a user to buy and sell stocks from the local stock exchange. In this implementation, they partnered with AB Capital Securities to provide the trading experience from inside GCash itself.
Getting your Risk Profile
You will need to take a questionnaire to be able to acquire your risk appetite. Answer truthfully as the results of this questionnaire hold for 3 years — meaning GCash will not ask you again until that time.
The results of this questionnaire will determine your risk appetite and GCash will be recommending you some investments depending on this appetite.
How do I register for an account in GStocks PH?
Registering an account is easy, you need to click the GStocks PH icon from inside GInvest. Then once inside, click on AB Capital Securities and start the process of creating an account. Most of the heavy lifting has already been done for you as your registered data is used in creating the account.
Probably the most hassle part is taking a selfie video (with a submitted valid ID) and the personal signature picture as you need to upload those separately in your application.
Once registration is done, you need to wait at most 7 banking days for your account to be processed and activated. You will be receiving an email that you can now open your account.
How do I top-up my funds in GStocks PH?
Before you can buy any stocks you first need to top-up your funds inside your AB Capital account. Take note that topping up funds take 1 business day to be processed.
From the AB Capital main page, click on the Top Up button. Input your top-up amount and confirm the payment.
How do I withdraw my funds in GStocks PH?
Similarly, you can also withdraw your funds from your account wallet. In this case, it takes 2 banking days to be processed.
From the AB Capital main page, click on the Withdraw button. Input your desired amount and confirm the withdrawal request.
How to buy or sell stocks in GStocks PH?
Once your account is created and your wallet is funded, you can now go inside the trading platform. The first thing you see in the trading platform is the list of different Top 30 stocks. At the bottom, you can cycle through different features like checking your orders, and your portfolio.
Once inside the AB Capital page, you can check out the different stocks and click on each to see its individual chart and also to buy or sell it. The price of the stock varies during the course of a day, and when buying, don’t try to overplan it as you are a stock investor and not a stock trader. Stock traders actively check the charts and find ways to gain when the market is open.
When you click on Buy, you are then taken to a page where you can specify the quantity and the price you are buying the stock. I recommend you buy it at a price closest to the one quoted to you as the sale finalizes immediately that way.
Once your order is placed, you will be able to see on the Orders page the status of that particular order. The system will eventually inform you via the alerts page that it is finished.
For selling, it works in a similar way. Any proceeds will immediately go to your account balance.
Can I cancel my buy or sell order on the trading platform?
You can cancel the order as long as it is not yet fulfilled, however, you cannot cancel around 15 minutes before the trading hours start (9:15-9:30 AM) and a few minutes before the end (2:48-2:50 PM).
Is there a fee to use the platform?
No, using GStocks PH is completely free. However, take note that in selling stocks you should also consider the taxes included.
We talked about how stocks work in our little primer and how we can put this into action by creating a GStocks PH account. We delved into the details of registering as well as the how-tos of top-ups, withdrawals, and how to buy and sell stocks in lots using the platform.
I have a new e-commerce site where you can buy some e-books here: GCR Prime
After reading about what GCash is, here are the main GCash features: