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Ask Geri: How to (1) Invest in Stocks Via Banks, (2) Beat Inflation and (3) Differentiate Blue Chips vs Smaller Cap Companies?

If ever you go for a UITF, just choose stocks-related funds assuming these meet your risk appetite. Banks will ask you to answer a questionnaire to determine your risk appetite and investment horizon. Initial investment can be as low as PHP10K and incremental investments as low as PHP1K.

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Hi Geri,
 
Apeng here. Thank you for answering my query, actually I was surprised you answered it hehe. Copy, on all your points. I can appreciate it more vis-a-vis the risk appetite of the would be investor.
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I’ll just fire away with my clarificatory questions.
  1. If I want to invest my money in stocks, how will I go about it? I don’t want to make a COL account or find a broker. Are there banks who act as brokers that can cater to clients like me? If ever how much is the initial investment? Can you cite which bank is preferable?
  2. The money I’m willing to commit into stocks are really for long term (with the idea of making a mark up if extra money comes up). Would it be correct that by doing this I can beat the inflation rate?
  3. Why do they usually recommend “blue chip companies” for newbies? When you say “smaller cap companies” can you cite examples.

Hi Apeng,

 
Thank you for reading my posts and for your patience in typing your queries. Really appreciate them. As promised, here are my two cents. After this, since you claim to be a beginner, I enjoin you to explore this link further: Beginner’s Guide.
 
Participate in Stocks via Banks
It seems that you have already made up your mind to invest in stocks but you are not willing to open an online trading platform, such as COL Financial. Neither are you willing to go through stock brokers, but rather via banks. I assume too that you are a retail investor, and as such the easiest way will be to invest via UITF products of banks. Or if you want professional fund managers outside of banks, Mutual Funds is a similar instrument. As far as I know, banks do not directly purchase individual stocks for you upon a phone call. Brokers do that. Unless otherwise you are referring to bank-affiliated trading platforms such as BPI Trade and First Metro (of Metrobank).
UITF and Mutual Funds work the same way. They pool the money from retail investors and invest these in funds such as equity funds (stocks), bond funds, balanced funds (mix of stocks, bonds and long term deposits). You can find more details here: Are you Ready for UITFs / Mutual Funds?

If ever you go for a UITF, just choose stocks-related funds assuming these meet your risk appetite. Banks will ask you to answer a questionnaire to determine your risk appetite and investment horizon. Initial investment can be as low as PHP10K and incremental investments as low as PHP1K. It depends on the bank of your choosing. Some banks also offer a monthly subscription program wherein they will invest a fixed amount for you every month.

Which bank is better? Check out their fund performances available in their websites. Consider as well that you need to open a savings account with them which will serve as the repository and mother account of your investments. Likewise, consider the proximity of any branch to your area in case you need to add more funds. Or how cool their internet banking is. Reading up on some posts in UITF will reveal which bank I’m fond to use for my UITF.

Another option is to go for a Variable Unit Linked Insurance. With this, a portion of your monthly savings is invested (also in funds of your choosing), while at the same time you get benefits in case of death, disability and critical illness. More details here: How VUL Insurance Works?

Beat Inflation?

Investing in stocks or UITF is not guaranteed to give you gains, more so, not guaranteed to give you gains that beats inflation. Not guaranteed. But I would say with proper strategy, objective and long term investment horizon (your investment OHA), investing in UITF and stocks gives you a much better chance to beat inflation (4.4% as of Sep2014) compared to parking your money in savings accounts.

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Blue Chip for Newbies

Let me just reiterate what I told you in the comments section. They usually recommend blue chip companies for beginners since these are the more stable and profitable companies that are known to last even during economic downturns, whose stock prices are more or less stable, hence less risky. These are your PLDT, Globe, utility companies, San Miguel, Jollibee etc. There is very little chance that these companies will fold, and their stock prices plummet to near zero. In the long term you can expect growth from blue chip companies, steady but not necessarily steep. And oh, dividends too.

Based on Investopedia, a large cap company has market capitalization of USD10B or roughly PHP450B. If we are to follow this definition, small cap companies will be those with less than PHP450B in market capitalization (computed as stock price x outstanding shares). Not sure if this applies to our local setting though because we if ever, majority of PSE listed companies will fall under small cap companies.

But I can assure you that there are lots of smaller cap companies that have fundamentally sound financials and promising growth prospects. Just check out my tag cloud and look for PSE: *** links and you’ll know which stocks I am fond to follow. Caveat though, I am not giving you a buy recommendation.

I do hope you get to begin your investment life as soon as possible and as non-traumatizing as possible. And oh, if you ask me personally, go for both UITF and retail trading via online platform. It helps to know firsthand what you are doing (and what fund managers will be doing) with your money.

Keep on reading and commenting!

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About Geri (356 Articles)
Founder and main author. Husband, used-to-be-breadwinner, God-made multi-millionaire, employee, financial planner and adviser, investor, stocks trader, entrepreneur, agri-preneur, book author. Firm believer that all Pinoys deserve a richer life. Not a guru, but a forever student of the investments world, a work-in-progress.

10 Comments on Ask Geri: How to (1) Invest in Stocks Via Banks, (2) Beat Inflation and (3) Differentiate Blue Chips vs Smaller Cap Companies?

  1. Happy New Year, Geri!

    Apeng

    Like

  2. Happy new year too Dan the Man. Cheers to more investments and better ROI!

    Like

  3. HAPPY NEW YEAR IDOL!!!

    Dan the Man

    Like

  4. Pardon me if I use it loosely. Retail investors (as I understand it) are those who invest for their own use, their own funds and own money. Small time investors like me or like those who use online trading platforms will fall into this category. This is separate from institutional investors: the fund managers, companies, government agencies who also invest.

    Like

  5. Sir/Mam,

    Ano po ang ibig sabihin ng retail investor?

    Salamat

    Like

  6. hahaha ayaw ko na palang tumawag!

    aantayin ko na lang ang post mo hehe

    kenchi

    Like

  7. Kenchi, grateful for your appreciation. I'm actually working on a post specific to Pag-IBIG MP2. Just running some numbers on the returns. Called Pag Ibig yesterday to inquire some more. Should you inquire more information from them, kindly share with us. ☺

    Like

  8. Nice info re MP2 ng Pag Ibig.

    Makapag inquire nga hehe

    Salamat dito.

    kenchi

    Like

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