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Stock Trading Basics You Have To Know
Sean: All right. All right. Thank you so much for being here. And we have questions on Discord that we are going to be answering. By ‘we’, I mean, me and Mr. Marvin Germo right here. Marvin, welcome to the show.
Marvin: Hello. Thank you for having me, Sean. It’s nice to be back.
Sean: Thank you so much for being on the show. We have a question from Erika. How can I start stock trading in the Philippines? Very basic, but maybe a lot of people still don’t know how to do that.
Marvin: It’s very, very simple. You just need a broker. I guess when you enter the stock market you need access, meaning you need a platform that will allow you to buy and sell the shares in the market. So it’s as simple as opening a broker which is online. Which of course, when you open a broker, they will ask you for IDs to be able to verify who you are, then the mailing address, also the proof of where you live, and proof of billing. Then after that, they give you an account. When they start to give you an account, that’s already it.
Basically, it’s as simple as that. When they give you an account already, you will have a password, then you’ll have to fund it. Then as you start funding it already, that’s what you can use to start buying stocks. So relatively straightforward as that, what’s needed to be studied, it’s not about, in my opinion, not about starting, but it’s more about analyzing what stocks fit you, and what stocks are meant for you as well. Because I think that’s a bigger thing and a larger question because it’s easy to enter especially for app-based platforms where you can get to buy and sell stocks.
It’s like a game, but since it’s like a game, you have to realize that you need to study what you need to buy. So if you don’t know what you’re supposed to buy yet, don’t get super excited because your time is long. You have enough time to be able to build the skills for it, so not as hard.
Sean: Very good. Very good. And there are a lot of brokerages that you can use.
Sean: For me, I use BPI Trade. And how about you, Marvin? What brokerage do you use?
Marvin: They can go to pse.com.ph to be able to check all the online brokerage platforms out there. So I think that’s the best way for them to be able to check and pick. I guess, if they want to start and they want to open something, that’s possible.
Sean: From Mitch, can you give us advice on how to manage risk and long-term investing? Is it safer to invest in an ETF, index funds or just to copy trading?
Marvin: Statistically speaking, the safest, not really the safest, because all of it has risks. Statistically speaking though, if you want something that’s generally safer, then ETFs that are tracking the index will do better. Because if it’s an ETF which tracks the index, you can recalibrate it. The ones that don’t make the cut get removed. The ones that are not as good get removed as well.
So if you want something that is safer, you should go with ETFs that track the index funds. So in the global market, you can look at the ones that tracks like Nasdaq, or Dow Jones, or S&P 500, then in the Philippines, the PSEi. But it’s the same. If you follow that, generally speaking, you will get the average also. There’s always a replacement if you’re going for something that is relatively safe.
Sean: This one from Mitch. Any advice on how not to lose money when copy trading in eToro?
Okay. I think like for me, at least in my experience, I lost money in copy trading. When you copy trade someone that’s not really that good, I guess you’ll lose money there. Or when the person you’re copy trading when the market fell down wasn’t on guard, he didn’t sell, then you might lose money there. Especially when you copied their open trades, when the market was high and then it fell down, it dropped, then you will lose money there. But Marv, you’re the expert here.
Marvin: It’s impossible not to lose money. Please remember this. Every time you go into an investment, you will always lose money. That is always part of it. Even if you check when you go to any copy portfolio, look at their portfolio, there will always be negatives. Even Jay Nemesis, March 2021, he’s ending it on the negative because it’s normal. It’s part of it.
I have not seen anyone who’s really rich that has never lost money. So I am not sure if there’s an answer to not lose money because even the best traders will also lose money. Long-term though, if you can ride the volatility, for example, they are down now, you believe that they are good, then there’s a chance that it will also recover. But there will always be a point in time that losses will happen.
So maybe just to add a layer of analysis there, the ones that are doing very, very well, as in boom, they have excessive revenue, then the average of the majority is a lot lower, if the market dropped, surely, they will be the one who will have the bigger drop on their revenue too. So that’s how you can look at it. The ones that, when everyone else is earning 10%, and for them, it’s 40%, 80%, for sure, when times are bad, they’re also the ones that are hit the most. Then the ones that are in the middle, if they’re at 20%, sometimes it will drop to 10%, 8%, then the ones that are at 2%, 3%, for sure, if the market is down, they’re not really as affected.
Maybe if you want to lessen your losses, then copy the ones that are not really getting high returns. But it’s the same. Even Olivier Danvel, who had a very, very large record, sometimes it’s also difficult for him too. So I don’t know, but please remember, losses will always be part of investing. You have to embrace losing. The name of the game is if you’re wrong, you tolerate an amount that you can lose with the context that you can recover it to your other investments.
I’m saying that because there might have been a lot of people who invested last year and they’ve only experienced gains. It won’t be like that forever. Even this run up in cryptocurrencies, there will be a point in time that it will go down. It will go down, it will correct, it will crash because that’s how things normally go. Then assuming that the fundamentals are great, it will also go back up again. But the question that people need to realize is this: In the midst of that loss, what do they do? Do they add? Do they cut? Do they reposition? Something like that.
Sean: Erika asks a very basic but very profound question. How can I make a lot of money with stock trading?
Marvin: Based on what we talked about earlier that it’s still based on the amount of skill that you put in. And then the term, a lot of money, I think that’s a bit subjective. For some people you would see that they are already happy with Php 2,000.00 a day, every day. That’s already okay for them. But there are people that don’t get that Php 2,000.00 everyday, but in a year, they get a million pesos. But they’re very, very passive also in their investments. So I think it depends also on what’s a lot for you. It also depends on how big your capital is. It depends also on the proficiency that you have in it.
But this is what I’ve realized, that the larger your portfolio is, the more money you have also. You will notice it. For example, Sean, he doesn’t care if he makes a thousand pesos, or two thousand pesos, or five thousand pesos, on a daily basis. What matters is, overall, the portfolio grows. Second is, he does not want his portfolio to drop. So what’s important for him is the overall growth later on.
Because you have to realize that two thousand, two thousand, four thousand, four thousand earnings on a daily basis are all fine. But once your portfolio reaches as big as Sean with eight digits on his portfolio.
Sean: Fake news, bro. Fake news. Fake news.
Marvin: You just log it out that what’s more important is it grows larger over a stretch period of time. And then, you will notice that as your portfolio grows, it’s more important to preserve it than getting the jackpot. So I think getting those large swings and trades is very, very nice if your portfolio is smaller. But when you are in the Sean Si level already, it’s more about storing that value.
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