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In the past few years, a lot of Filipinos are becoming more and more interested in saving and investing money and I’ve also noticed more and more Filipino personal finance and investing books popping up at the local bookstore. Just last week my OFW (Overseas Filipino Worker) uncle who lives in America came over to visit and he told me he was going to start an investment account on a popular Philippine online stock broker. He had a lot of questions, and I was happy to answer him and teach the basics.
Read more here:
- What are the Different Kinds of Stocks?
- 5 Tips for Understanding the Stock Market
- Choosing the Best Stocks: 10 Investing Terms you HAVE to Learn
While talking to my uncle, I remembered that while he is comfortable with online registration and all that, a lot of older Filipinos aren’t really tech savvy and could fall prey to online scams. Here are some tips for you if you’re thinking of registering for an online investment or brokerage account.
Tips on How to Start an Online Investment Account
While you’re considering it:
- First tip: Make sure the company is legitimate. For Philippine companies, you can check the Securities and Exchange Commission to verify if the company is legitimate (just search the company name on the search bar). In any case, a lot of banks nowadays have investment departments open for the public and there are even some established online brokers that allow you to invest in stocks and other securities (“investments”). It’s usually best to invest with a well-known company, and if you’re investing with a relatively unknown one, you better ask around and do your research just in case if you want to avoid potential scams (like the Emgoldex scam long ago).
- Consider your alternatives (here’s a list of brokers in the Philippines). Just because your friend recommended an investment broker, that doesn’t mean you need to use the same company. There may be better ones that you can use.
- Is their system good enough? If you plan to invest for the long term, you can get by with basic charts, but you’ll probably need all sorts of financial data like P/E ratios, dividend yield, historical dividends, and more. On the other hand, if you’re a trader, you have to make sure that their tools have everything you need. Do they have some good charts, tools, and trading indicators that you want to use like stochastic, moving averages, and more? Don’t hesitate to ask and double check. Good brokers will usually have some form of customer service department that can answer your questions.
- Check if they have a trial account system. If they do have one, you can usually register for free and you can use this account that contains some “play money” to test their trading tools and system. (Note: Most online Forex trading companies have this, but not all stock and mutual fund brokers do.)
- Check their fees. Avoid brokers with high fees and transaction costs. Remember that just about anything you do in your investment account, every withdrawal and deposit, every stock bought or sold, will likely have fees, and these will eat into your investment whether your money grows or not. Make sure that the company you plan to use has low fees. Again, check out some other brokers and compare.
Before you register:
- Again, make sure the company is legitimate.
- Next, make sure it’s the correct website. Just to be safe, search for the website on Google and then click the top link (not the ads displayed). The top result will usually be the company’s main website, and you can usually find their “open an account” pages there.
- Check for the “HTTPS” in the website’s URL. While it’s not a guarantee against scams and hackers, it means the website is secure.
- Check the requirements. Registering for an online investment account usually requires some form of identification like a government issued IDs (driver’s license, passport, etc.). Brokers from banking companies will sometimes need you to have a bank account with them (ex. BPItrade needs you to have a BPI savings account, BDO Nomura will need you to have a BDO online account). Make sure your documents are up to date and valid.
- Check the minimum investment requirements. Some have tiers where you get better facilities and trading systems depending on the amount of your initial deposit.
- Check for minimum maintaining balances just in case. Some brokers (like BPITrade) have minimum maintaining balance requirements where, should you fail to meet it (ex. you already used invested all the cash or you withdrew it all), you can get hit with penalties or debt unless you cancel the account.
- If you need to register in person, check their schedule and location. Some brokers aren’t open on weekends or are only open during office hours.
- Bring extra requirements just in case. If they need a couple of IDs, bring one or two more just in case. Also, you might need to give them photocopies of your IDs if necessary.
A few investing tips:
- Don’t invest money that you can’t afford to lose. Sometimes, despite our best efforts, things can go wrong. The broker might run into problems or your account might get locked or cancelled (like what happened to me with IronFX. The company froze before I could withdraw the last of my cash). It’s great to invest, but it’s also great to have some spare cash saved for emergencies or awesome opportunities.
- Know your risk tolerance. The best investments are often very volatile, meaning their prices go up and down like a roller coaster. Be sure to check if you can stomach the price changes.
- Choose investments based on your knowledge, experience, and risk tolerance. Some investments like index funds, money market funds, and others are good beginner investments (read this guide). Other investments like small-cap stocks, options, futures, and others like them are for knowledgeable or experienced investors only.
The most important tip: STUDY how to invest.
If you’re a beginner to investing, you have to learn these words by Warren Buffett:
“Risk comes from not knowing what you’re doing.“
It’s dangerous to do things that you haven’t really studied how to do.
Would you bet your life savings on a card game if you don’t know how to play and win in that card game? You probably wouldn’t risk losing your money there. Similar to how it’s foolish to risk your life by driving in a busy highway if you don’t know how to drive a car, it’s also foolish to invest your money on things you don’t really know.
One of the worst things you can do is blindly follow a friend’s advice, especially if they’re not investment professionals either. That’s like taking surgery and medical advice from a truck driver or engineer instead of a surgeon or pharmacist. That’s a recipe for disaster. The most important tip I have for you is that, before you start investing, you need to study and learn the basics.
Anyway, we’ll end the lesson here for now. All I can say is that it’s awesome that you’re learning how to invest and are actually going to try it. You’ve just taken one more step towards improving your financial future.
Thankfully there are a lot of great resources online, so if you want to learn more about how to profit from the stock market, you can read more on sites like Amana capital review.
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