(Last Updated On: September 13, 2022)
Before reading this article I hope that you have understand what is a stock market already Base from our discussion on the previous article. You can visit it back to check so that you can appreciate the information from this topic. You can click the underlined link.
There are two ways of earning from the stock market. One is by price appreciation and another is by dividends. For this discussion we will only be considering the former (price appreciation) so we can understand how it works.
“Price appreciation refers to increase in share price of a stock”
In Philippine stock market setting, we can only earn from the market if the price of the stock that we have bought have gone up from its initial price.
For example, if I buy now from the stock shares of Jollibee Corporation at P204/share and tomorrow the price increased or appreciated to P214/share you will earn, if later your will sell already at this price. So the price difference per share of 10 pesos will have an impact of 10/204 or 4.9%. You will earn 4.9% from this transaction. Great right?
But think again.
Of course, there is a possibility of losing in the market as share prices move by the second, and it fluctuates in price in both ways. It can go up or down, so better choose wisely which stocks you are going to trade or invest in. Later I will explain also the difference between investing and trading in the market.
Now basing from our previous discussions on what the stock market is, we will continue explaining the effect of price appreciation. Remember this transaction last time when I bought the company shares for Global Ferronickel? This is the summary of my transactions when I bought 30,000 shares of the company. Later on when you have your brokerage account this transaction will be included on your transaction history.
So now that we have bought the shares these transactions will also have a data for the transaction #, Order# and everything else on what you see on the photo below. For this example, I have previously applied for my brokerage account with the company called COL Financial so all formats you will see will come from these brokerage firm. We will also have another discussion with the Brokerage firms that I know so you can see the difference. For now COL financial is the most popular brokerage firm in the Philippines
There are different companies listed on the stock market, so you can have as many as you want, later however try to learn how to diversify properly so you don’t get lost on tracking shares from the company that you buy. Too many stocks you buy will clutter on your portfolio.
Good thing our brokerage firm has a section on our account where we can see the summary of stocks that we buy. We call this our portfolio. For COL financial account holders this is how it looks like. I have shaded the sensitive details for personal reasons.
Notice the red rectangle I put on the %gain and gain area of my portfolio? There is a green colored value which signifies that my trade or investment have already earned a 3% increase after I bought the shares.
This happened because the actual price in the market of the shares I bought have as compared to the average of the price I bought it before (average of share price + broker commissions + tax deductions) is higher, so the market price of my stock have appreciated and earned 3% already!
Now you have a basic understanding how to earn from share price appreciation. Just a word of caution as always, if the market share price can go north, it can go south as well. So be careful always on what stocks you buy. Better study first the market before doing your trade or investment.
Oh by the way you know what happened to this stock? I kept it for another day and the price did move up more from the 3% gain I showed you. The price now appreciated more and so I decided to sell it already. Earning more than 10% in few days on the market is quite good so better take your profits or earnings from the market while it is still on the high prices.
I hope our discussions have shown you how to earn from price appreciation from the market. As you have learned here there is a potential of earning passively on the stock market. See you on our next topic.