THE PSEi (The Philippine Stock Exchange Index) What is it? -An index of OUR STOCK MARKET-PSEi is composed of the 30 largest and most active common stocks listed at the exchange based on their free float-adjusted market capitalization.You can view the PSEI here : http://www.pse.com.ph/stockMarket/marketInfo-marketActivity.html?tab=1&indexName=PSEi

What is the stock market? A venue wherein firms get capital from the public to finance their operations/expansion (An equity market) .Firms sell ownership to those who buy the stock (the SHAREHOLDER)When you buy a stock you become PART OWNER of the firm

What is the difference between a bond and a stock?BONDSTOCK

IOU of the Firm (you are a creditor)You own part of the company

Pays you interestPays you dividends (discretion of the board)

In case of bankruptcy, you get paid firstYou get paid last (if you get paid at all)

Long term maturitiesHighly liquid

What do I need to know before I start trading stocks?a. How to analyze the stocks and the economyb. How to tradec. THE SCAMS and all other bullshit in the market

I. How do I analyze stocks? a. Fundamental Analysisb. Technical AnalysisTwo "conflicting" views, but I suggest you use them side by sidec. Econometric Forecasting

Fundamental Analysisanalyzing the fundamentals of the firm - the balance sheet- the income statement- the cash flow statement You obtain these materials from the company website of the PSE website.

THE BALANCE SHEET (What should I look at?)- The financial statement that contains a company's assets, liabilities, and equityRemember A = L + OE?

THE INCOME STATEMENT -The financial statement that shows the income and expenses (operating and non-operating) of the company

Computing the financial ratios

These numbers are useless unless you compare it with the industry average. (NATIONAL/ INTERNATIONAL) You can also compute the percentages of the sources of revenue and expensesIt is also important to compute Y-o-Y changes of debt, capital, expenditures, and net income

TECHNICAL ANALYSIS (Refer the book of JOHN MURPHY) - predicting future stock movements based on past market trends-Trend analysis Famous technical analysis methodsThe Elliot wave theory

The Fibonacci Numbers1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144The Simple Moving Average/ Exponential Moving AverageThe Moving Average Convergence-Divergence (MACD)

c. Econometric ForecastingUse of math and statistics, and application of both financial and economic theory to try and forecast the behavior of financial instrumentsSample Model:

ANALYZING THE ECONOMY Getting the National Accounts and other economic indicators: http://www.nscb.gov.phImportant IndicatorsGDP - Gross domestic productGNP- Gross national productThese two accounts reflect the income of the economyCPI- Headline and CorePPIMeasure the changes in the price of goods and services in the economy ( why is it important? ) Imports- goods we buy from other nationsExports- goods we sell to other nationsInterest Rates-price of moneyForeign Exchange Rate- price of a currency relative to another currency

II. How do we trade? We earn profits from stocks in 2 waysa. Capital Appreciationb. Dividends We trade through a broker - Online - Brokerage Firm Online Stock brokers ( the ones that I have tried) www.colfinancial.comwww.firstmetrosec.com.phwww.bpitrade.comYou need at least 10,000 php to start an accountTake into account transaction costs: FOR BUYING AND SELLING:FEEAMOUNTREMARKS

Commission.25%Of the Gross Trade Amount

Value Add Tax (VAT)12%Of Commission

Philippine Stock Exchange Transaction Fee (PSE Trans Fee).005%Of the Gross Trade Amount

Securities Clearing Corporation of the Philippines Fee (SCCP).01%Of Gross Trade Amount

ADDITIONAL FEE FOR SELLING

Sales TaxNo. of Shares x Price x .005

EXAMPLEBuying-Total fees for buying 20,000 shares of ALI at Php5.00/shareFEECOMPUTATIONAMOUNT

Commission(20,000 x P5.00) x .25%P250.00

VATP250 x 12%P30.00

PSE Trans Fee(20,000 x P5.00) x .005%P5.00

SCCP(20,000 x P5.00) x .01%P10.00

TotalP295.00

Selling-Total fees for selling 20,000 shares of ALI at Php5.20/shareFEECOMPUTATIONAMOUNT

Commission(20,000 x P5.20) x .25%P260.00

VATP260 x 12%P31.20

PSE Trans Fee(20,000 x P5.20) x .005%P5.20

SCCP(20,000 x P5.20) x .01%P10.40

Sales Tax20,000 x P5.20 x .005P520

TotalP826.80

III. The scams and all other bullshit a. AMAN FUTURES GROUP - 12 Billion peso pyramid schemeb. High-Yield Investment programs- Through the internetc. Performance Investment Products Corp. (PIPC)-" guaranteed return of 10-15 percent every maturity period of eight weeks, or an average annual return of 12 percent a year. With $40,000 and a 12-percent return after eight weeks, you could earn $5,000. Has offices in Singapore, China, Japan, and India. In Plan A, you got 60 percent while the company got 40 percent. If a trader made $1,000 for you in the eight-week period, your net interest would be $600, while $400 went to the office. Your $40,000 was still intact. With Plan B, you got 80 percent while the organization got 20 percent. But the risk was that the capital was no longer guaranteed. If the trader lost, you shared in his losses. At the end of an eight-week period, you could have $39,000 instead of your $40,000 because your trader lost $1,000."Source: Inquirer Business

LESSON: A FOOL AND HIS MONEY ARE EASILY PARTED DON'T LISTED TO A GUY WHOSE JOB IS TO MAKE YOU MONEY