In Part 1 of this series, I gave an introduction to the amazing world of stocks. Part of improving the financial literacy of teachers is to know your investment options to grow your money. I hope it pushed you to open an online stock trading account. If not, go read Part 1 and explore the online brokers that you can choose from.
Now, the stock market is not for the faint of heart. It can literally be a roller coaster. In this game, you have to be like a robot in the sense you don’t get attached to your stock picks. It’s tough to do that but it can be done. If you get attached, you might hesitate to cut your losses when clearly the trend is not working in your favor.
Today, I will discuss the types of stocks you can invest in.
Blue Chip Stocks
Blue chip stocks are solid companies with a long track record of profitability. They also have a reputation of a stellar management team. Blue Chip Stocks in the Philippines are already icons of the industry. Everyone knows them.
Examples of Blue Chip Stocks
3) Ayala Corporation
Return on Blue Chip Stocks are not that stellar but you can be assured that they are not that volatile, i.e. their share prices do not go up and down rapidly. Blue Chip stocks are also known to give regular dividends every quarter so it’s a good side income if you park your money with blue chip stocks. Globe and PLDT are the leaders in giving out regular dividends which beat inflation easily on an annual basis.
Blue Chip Stocks are best for people who want to feel a certain level of safety and want a steady but consistent income stream. Their share prices are known to grow steadily over the years.
If you are looking to trade and want exciting stocks, you generally avoid Blue Chip Stocks unless there are big deals that they are engaging in, for example, an acquisition of a major company.
Growth companies are those that are investing heavily right now in projects and equipment so that they can expand their business dramatically. They take out loans and do other financing methods to finance their projects so that the projects can bring in more income for them in the future. They are heavily invested in expansion as well as buying companies to further grow their income streams.
In general, they give little dividends but if their projects and investments push through as planned, you can expect a good growth in their share prices because it will reflect in the rising revenues of the company when they report their financials to the public.
Companies in this classification would include the following:
1) San Miguel- they are investing heavily in infrastructure and mining projects. They used to be a blue chip when they were solely in the food industry but as they are now diversifying, they are considered a growth stock. If their projects push through as planned, their share price could surge in the coming years.
2) Philex Mining- the blue chip of the mining sector but generally they are still a growth stock as they are investing heavily in other mining projects. The surge in their share price is a testimony to their brilliant management, headed by Manny Pangilinan (MVP).
3) Metro Pacific- the holding company of MVP that controls Philex Mining, Maynilad, and Meralco.
4) Energy Development Corporation- the world class energy company that deals with geothermal power. Owned by the Lopezes through First Generation Corporation.
Shares in this category are generally mining companies because they don’t have established operations yet. Rumors drive the share price of speculative stocks. If there are rumors of foreign investors investing in speculative mining activities, it can drive the share price of these shares to dizzying heights.
The risk is very high for speculative stocks but if you time it well and get lucky, it’s like winning the lottery.
An example would be Lepanto Corporation. A year ago, they were in the 0.30 range. But now, they are in the 0.90 range and are threatening to breach 1 peso soon.
If you held on from last year to this year, you would have a profit of 300%!
Speculative shares are exciting but are very risky. You should only play it with money you can afford to lose.
Only play speculative shares if you have a good knowledge of stock trading, which is different from stock investing which is holding on to companies with solid fundamentals for the long term.
So always trade with caution when it comes to speculative shares.
In the comment section, please share what type of shares you are interested in investing in and I will give my two cents on what type of share it is and share my opinion on it.
For the next part of this series, we will discuss the philosophies or approaches in investing and trading stocks.
As homework for the next parts of this series, you guys can read the tutorial about stocks from investopedia.
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