Awakening of the Intelligent Marginal Investor: Introduction

The Starter Investor Reads The Intelligent Investor

Effective from our update on April 5, 2023, we have rebranded from Marginal Investor to The Starter Investor. For additional details, please visit our About Us page.

This article is the first of a series that will show how The Starter Investor understood and applied the principles and techniques described in the book The Intelligent Investor by Benjamin Graham in the context of a beginning investor who is a Filipino, residing in the Philippines and with a shoestring budget to begin with.

The book is not an easy read but given sufficient interest and careful thought, any start-up investor may pick up jewels of insights that may guide one in this game of money and investing. The contents of the book are as follows:

Part One: General Approaches to Investment

• What the Intelligent Investor Can Accomplish

• The Investor and Stock-Market Fluctuations

• The Investor and His Advisers

• General Portfolio Policy: The Defensive Investor

• Portfolio Policy for the Aggressive Investor: Negative Approach

• Portfolio Policy for the Enterprising Investor: The Positive Side

Part Two: Principles of Security Selection

• United States Savings Bonds: A Boon to Investors

• Security Analysis for the Lay Investor: General Approach

• Stock Selection for the Defensive Investor

• Stock Selection for the Enterprising Investor: The Appraisal Method

• Detection of Undervalued Issues by Security Analysis: Three Examples

• The Pattern of Change in Stock Earnings and Stock Process

• Group Studies of Earnings and Price Developments

Part Three: The Investor as Business Owner

• Stockholders and Managements

• A Study of Stockholder-Management Relations in Two Industries

Part Four: Conclusion

• "Margin of Safety" as the Central Concept of Investment

• Appendix: Buying and Selling by "Central Value" Method

Since the book was first published in 1949, the examples may no longer be relevant. Even some suggestions may already be obsolete at this time. Nevertheless, I would never hesitate to recommend the purchase of the book by anyone who is seriously interested in buying common stocks for investment purposes.

Speaking of common stocks, we just got a copy of the Notice of Annual Stockholders Meeting, being an investor of Ayala Corporation to be held at the Grand Ballroom of the Hotel InterContinental Manila, Ayala Center, Makati City, on Friday, April 3, 2009, at 9:00 a.m.

Reading from the accompanying SEC Form 20-IS, we found out that Ayala Corporation as of December 31, 2008, has:

• 496,983,784 number of common shares outstanding.

• 103.7 billion pesos market capitalization based on the closing price of its shares.

• 209 pesos/share closing price.

• 7,916 is the approximate number of registered holders of common shares.

• Henry Sy, Sr. is the top 6 registered holder of common shares with 1,296,636 shares.

Our next post will be related to the topic What the Intelligent Investor Can Accomplish. Check it out.

Finding Funds for Investment: Tips and Strategies

The Starter Investor Guide for Accumulating Investment Funds

Effective from our update on April 5, 2023, we have rebranded from Marginal Investor to The Starter Investor. For additional details, please visit our About Us page.

Finding the money

Finding the money to fund our investing activities is among the most important first steps of our journey to financial freedom.

Budget deficit

Let us imagine someone who has a monthly salary or earnings of between Php10,000.00 to 15,000.00 monthly. And assume that this employee or this self-employed individual has one or more of the following financial commitments:

• salary loan either from the Social Security System (SSS) or the Government Service Insurance System (GSIS);

• personal loans like those offered by Chinatrust, Citifinancial, Banco de Oro, Asialink, or even your local credit cooperative;

• business loan from commercial banks, rural banks, or even the now familiar micro financing institutions;

• obligations arising from cash advances and purchases using credit cards offered by Citibank, Banco de Oro, BPI, AIG, Metrobank, among many others;

• housing loan from PAG-IBIG;

• assortment of borrowings including those from relatives, friends, and others.

In addition to the above obligations, we must also include household expenditures like the following:

• living expenses (food, clothing, medicine),

• utilities (water, electricity, telephone),

• education,

• transportation,

• entertainment,

• miscellaneous expenses.

Most likely than not, under this scenario, expenses will be much more than what we have for income. Living within our means will now be a very challenging proposition given the existing commitments and fixed expenses that demands our limited resources. What can we do? Where can we find the money to invest? Is there a way out of debt?

First Law of Gold

We cannot delay investing for our future. There is a huge opportunity cost when we consider the impact of compound interest, whether it applies to our debts, or to our investments. Our desired situation is to diminish in an orderly fashion, the outstanding balances of our debts. At the same time, we also gradually accumulate funds for our planned stock trading activities.

The first place to look for funds, of course, is our paycheck or any regular income that comes our way. These funds should not just pass through our hands straight away to our creditors.

We find an excellent solution from the book The Richest Man In Babylon. Stated as The First Law of Gold, here is our strategy:

"Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family."

Described in the a different way as the First Cure For A Lean Purse, the book further explained the first law in this manner:

"For every ten coins thou places within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul."

Allow this thought to sink into your subconscious mind and meditate on it. Once you started believing in it, express it in action.

Practical application

Let us say we apply the above principle at that point when we have decided to start saving for our nest egg. Some compromises may have to be made here and there. But the important thing is we start the program. Here is what our savings schedule may look like in Philippine peso (Php):

Savings for Year 2007

• October - 160.00
  
• November - 440.00
  
• December - nil
  

Savings for Year 2008

• January - nil
  
• February - 100.00
  
• March - 25.00
  
• April - nil
  
• May - nil
  
• June - 600.00
  
• July - 500.00
  
• August - 100.00
  
• September - nil
  
• October - nil
  
• November - 400.00
  
• December - 120.00
  

Savings for Year 2009

• January - 1,600.00
  
• February - 2,000.00

Our total savings would have been Php6,045.00 after 17 months, or close to Php360.00 monthly savings on average. This amount represents about 2% to 4% of our monthly salary or earnings assumption.

BPI Trading Account service charge

In another post entitled BPI Trade: Best Online Broker for Novice Trader, we mentioned that our BPI Direct Trading Account requires an Average Daily Balance of PhP 5,000.00. In practice, however, we learned that BPI will stop charging the Php100.00 monthly service charge if your account balance is over Php1,000.00.

Thus, using our example above, BPI would have applied the service charges for the first 14 months of our savings program or a total of Php1,400.00. This is equivalent to about one-fourth of our gross funds accumulated.

Flow of money

Presented here is how our money will flow once we started our stock trading activities. To avoid further expense, we will consider someone who has a payroll ATM account with BPI. What we mean is an employee who was given by his or her company a BPI Savings Account wherein an employee's salary is directly credited. This type of account has no stated maintaining balance; and consequently, it does not incur any service charges.

We enroll this BPI Savings account with BPI Express Online to be able to transfer funds over the Internet to our BPI Direct Trading Account.

To withdraw funds from our trading account, we will fill up a web form with BPI Trade, which then will transfer the withdrawn amount into our BPI Saving Account. The funds is now available for withdrawal through ATMs.

Money accumulated

After deducting the BPI Direct service charges, our net saving is about Php4,645.00 or roughly Php275.00 monthly. On the average, we would have saved 2% of our monthly salary or earnings.

Now is the right time to invest

Clearly, it takes tremendous effort, patience, and resolve to start a savings program for investment purposes especially if you are deep in debt or have lots of financial obligations and limited income. But this should not stop us from making our first step however small, towards financial freedom.

In the end, we should rather be more motivated now than ever to accumulate that money we need for investment.

Online Trading and Investing: More Resources to Explore

Discover investment resources to expand your knowledge

Effective from our update on April 5, 2023, we have rebranded from Marginal Investor to The Starter Investor. For additional details, please visit ours About Us page.

Updated April 7, 2023

This is blog is an attempt to apply the principles of investing found in several of our favorite books on business and investing.

The Stater Investor, previously known as the Marginal Investor blog, identifies some basic websites for online stock trading that we consider essential for investors to know. We consider these websites as our favorites and serve as our foundation for finding and testing successful online stock trading strategies. These basic websites may provide beginners with a starting point for navigating the complexities of the stock market and may serve as a guide for those with limited experience in online stock trading.

• Ayala Corporation

Web Site: https://ayala.com/

The Ayala Corporation is one of the oldest and largest conglomerates in the Philippines. It is a holding company that operates through various subsidiaries and affiliates engaged in diverse business segments, such as real estate, banking and financial services, telecommunications, water infrastructure, and healthcare. The company was founded in 1834 and has played a significant role in the development of the Philippine economy. Ayala Corporation's subsidiaries and affiliates are known for their brand equity, innovation, and contributions to social development in the Philippines. Some of the well-known companies under Ayala Corporation include Ayala Land Inc., Bank of the Philippine Islands, Globe Telecom, and Manila Water Company.

• Bank of the Philippine Islands

Web Site: https://www.bpi.com.ph/

The Bank of the Philippine Islands (BPI) is one of the largest banks in the Philippines in terms of assets, deposits, and capital. It is a universal bank that offers a wide range of financial products and services to individuals, businesses, and corporate clients. BPI provides traditional banking services such as deposits, loans, and credit cards, as well as investment and insurance products. The bank has a vast network of branches and ATMs nationwide, making it one of the most accessible banks in the Philippines. BPI has a long history dating back to 1851 and has played a vital role in the development of the Philippine economy, serving as a financial partner to individuals and businesses in the country for over a century and a half.

• BPI Trade

Web Site: https://www.bpitrade.com/

BPI Trade is an online trading platform offered by the Bank of the Philippine Islands (BPI) that enables investors to buy and sell stocks, exchange-traded funds (ETFs), and other securities listed on the Philippine Stock Exchange (PSE). BPI Trade provides investors with access to real-time market information, research, and analysis tools to help them make informed investment decisions. The platform allows clients to monitor their portfolio, track market trends, and execute trades online. BPI Trade is a popular choice for investors who prefer to manage their investments online, offering a convenient and accessible way to invest in the Philippine stock market.

• The Philippine Stock Exchange

Web Site: https://www.pse.com.ph/

The Philippine Stock Exchange (PSE) is the primary stock exchange in the Philippines, where stocks and other securities are bought and sold. It is a platform that connects buyers and sellers, allowing investors to invest in publicly traded companies through the buying and selling of stocks. The PSE is an essential part of the Philippine economy, providing a means for companies to raise capital, and for investors to participate in the growth of these companies. It plays a vital role in the development of the Philippine financial market, serving as a barometer for the country's economic performance and growth.

Thematic Investment Areas Explored by The Starter Investor

The Stater Investor focuses on three main areas of investing: microbusinesses, agribusiness, and most importantly, investing in the Philippine Stock Exchange (PSE) with minimal capital. This platform provides valuable insights for individuals who possess a strong inclination to invest in common stocks but have limited financial resources. We suggest that you take a look at our snapshot of the Philippine Stock Exchange in our earlier post.

The Starter Investor navigates the stock market

The primary aim of the Stater Investor is to assist aspiring investors in identifying and utilizing investment opportunities in the Philippine Stock Exchange, even with minimum capital. The blog offers valuable tips on navigating the stock market, including conducting thorough research, analyzing market trends, and choosing the most suitable stocks for investment. The Stater Investor acknowledges that many individuals may not possess the necessary funds to make significant investments. Therefore, the platform seeks to assist investors in starting with the little they have, while providing practical strategies to maximize returns on investment.

Investing in microbusinesses and agribusiness

The Stater Investor recognizes microbusinesses and agribusiness play a significant role in the Philippine economy. As such, the blog also provides insightful information on these areas of investment, highlighting potential opportunities and challenges. While these areas may not be the primary focus of the platform, they offer a viable alternative for those who may not wish to invest in the stock market.

The Starter Investor's mission statement

In conclusion, the Stater Investor is a valuable resource for individuals looking to invest in the Philippine Stock Exchange with minimal capital. The blog offers practical tips and insights to assist beginners in navigating the stock market and maximizing returns on investment. Additionally, while the platform's primary focus is on investing in the stock market, the blog also provides valuable information on microbusinesses and agribusiness, which are also viable investment options for aspiring investors.

Ayala Corporation: Viable Option for Starter Investors

Ayala Corporation a Leading Presence

Ayala Corporation (Ayala) is the holding company of one of the largest and most diversified business groups in the Philippines. It maintains a leading presence in:

• real estate development (Ayala Land, Inc.),

• financial services (Bank of the Philippine Islands),

• telecommunications (Globe Telecom, Inc.),

• water delivery, sewerage and sanitation services (Manila Water Company, Inc.),

• electronics manufacturing services (Integrated Microelectronics, Inc.), automotive dealerships (Ayala Automotive Holdings Corporation),

• technology-related investments (Azalea Technology Investments, Inc.),

• investments in business process outsourcing (LiveIt Investments, Ltd. and HRMall, Inc.), and

• overseas real estate investments (AG Holdings Ltd).

The company was founded in 1834, incorporated in 1968, and was listed on the Philippine Stock Exchange (then Makati Stock Exchange) in 1976.

Source: Definitive Information Statement for Annual Stockholders' Meeting on April 3, 2009, Record Date on February 25, 2009 (Securities and Exchange Commission SEC Form 20-IS).

The Starter Investor's first investment

Here are the reasons why investing in Ayala Corporation (AC) stock can be beneficial for novice investors who would be making their first buy order in the Philippine Stock Exchange (PSE) through an online broker such as BPI Trade:

• AC is a large conglomerate operating in various sectors, providing a cushion against market fluctuations.

• AC has a stable history of growth, consistently delivering strong financial performance.

• AC's subsidiaries and affiliates have strong brand equity, innovation, and contributions to social development in the Philippines, instilling investor confidence.

• AC has a strong commitment to sustainability by integrating ESG factors into its business operations, potentially resulting in better risk management, operational efficiency, and long-term value creation.

• AC is listed on the well-regulated Philippine Stock Exchange, providing a transparent and accessible trading platform for investors with limited funds.

BPI Trade: Best Online Broker for Novice Trader

Online Stock Trading and Investing

NOTE: This is an old post and most of the details are not current anymore. We are not updating this post anymore since its posting on March 7, 2009. So readers are advised to go straight to the BPI Trade website for signing up and other details. Here is the link to the BPI Trade FAQs:

BPI TRADE FAQs

Getting started in online stock trading and investing is not that difficult at all. Here are the suggested steps:

1. Choose an online stock broker: BPI Securities Corporation
2. Open the required settlement or beneficiary bank account for your trading activities: BPI Savings or Checking Account
3. Apply for an online stock trading account: BPI Trade
4. Put funds into your trading bank account: BPI Express Online
5. Make your first online stock trading transaction: BUY Ayala Corporation (AC) shares

Step 1: Choose a stockbroker.

The first step, according to the Philippine Stock Exchange (PSE) investing procedures, is to choose your stockbroker. A broker is person who acts as intermediary between a buyer and seller, usually charging a commission. They must be registered with the exchange where the securities are traded. (You may click on the images to enlarge.)

Online Brokers

The PSE has a complete list and information about all its trading participants who are authorized and qualified to trade either equity or debt securities for you. This list is also available on the Exchange's website and the PLDT directory's Government and Business listings yellow pages under the category of stock and bond brokers.

Trading Participants may also be called "Members of the Philippine Stock Exchange, Inc." Online brokers are considered trading participants.

BPI Securities Corporation & BPI Trade

In our case, we have chosen BPI Securities Corporation and will use their BPI Trade services for our online stock trading and investing.

This is a wholly-owned subsidiary of the Bank of the Philippine Islands (BPI). In July 2000, the company launched "bpitrade.com", an on-line stock trading facility via internet or through wireless access protocol (WAP). "bpitrade.com" enables clients to view live stock market information, online buying and selling of stocks, access to research reports.

For stock transactions, BPI Trade charges a commission of 0.25% on the gross value of each trade, or a minimum commission of PhP 20.00.

Step Two: Open Settlement or Beneficiary Account

You will be required by BPI Trade to nominate a Settlement/Beneficiary Account. This can be a BPI savings or checking account that shall receive the withdrawals from your stock trading bank account: a BPI Direct savings account. You must also be one of the account holders of the nominated Settlement/Beneficiary Account.

Settlement Account

Settlement Account means for BPI Trade Cash Client, the bank account with BPI/BPI Family Bank/BPI Direct designated by you, into which amounts you will withdraw from your BPITrade Bank Account will be credited.

BPI Savings or Checking Account

Thus after choosing BPI Securities as your online stockbroker and before you apply for a BPITrade Account, your second step will have to be to opening a savings or checking account with your nearest BPI branch or BPI Family Savings Bank branch, if you don't have one yet. Use the BPI branch locator to find out your nearest branch.

BPI Savings Account

If you opened a BPI Expressteller Savings Account as your Settlement/Beneficiary Account, maintain an average to daily balance (ADB) of Php3,000.00 to avoid service charge. Even better, maintain an ADB of Php5,000.00 and your deposit will earn interest.

Step Three: Apply for an Online Stock Trading Account

Now, after you have opened a savings or checking account with BPI or BPI Family Savings bank, you are ready to open you BPITrade account. Here's what you need to do next:

Go to the BPITrade website

Go to the BPI Trade web site at https://www.bpitrade.com/ to apply for an online stock trading account

Apply Online

Simply click “Apply Now,” and then click “Apply Online”:

Choose appropriate Online Application Form

There are two options for the online application form. Choose between an individual account or a joint account.

Fill up the Online Application Form

Fill up the online application form with the required information. Prepare to nominate a user ID and password for your BPI Trade account.

Print, Sign and Submit Forms

Then print, sign, and bring the forms to your nearest BPI branch, BPI Family Savings Bank branch, or BPI Express Remittance Center for signature verification. .

Minimum investment required

There is no minimum investment required to open a BPITrade account. However, before you can purchase shares of stock, fixed income securities, or mutual funds, you must first deposit funds into your BPITrade Bank Account. The BPITrade bank account (“Settlement Account” maintained with BPI Direct Savings Bank) requires an Average Daily Balance of only PhP 500.00.

Monthly fees

There are no monthly maintenance fees on your BPITrade Securities Account. However, your BPITrade Bank Account will require a monthly average daily balance of PhP500.00. The average daily balance is computed as follows:

ADB = (Day 1 ending balance + Day 2 ending balance +...+ last day of month ending balance) / No. of days in the month (i.e. 28/30/31 days)

BPITrade Bank Account

For trading purposes, BPITrade shall open a new BPITrade Bank Account in your name. All credits and debits as a result of your trading activities shall be made against your BPITrade Bank Account.

BPI Direct Savings Bank

BPITrade Bank Account means the bank account with BPI Direct Savings Bank which a Cash Client is required to open and maintain, in connection with his securities transactions.

Cash Client

Cash Client means a new client of BPI Securities Corporation/BPI Capital Corporation. More specifically, a Cash Client is a new client of BPI Sec/BPI Cap who apply for the BPITrade online trading facility. The Cash Client is allowed to purchase either Equities or Fixed Income Securities up to the Available Cash balance in his BPITrade Bank Account.

All incoming cash into a Cash Client’s account (e.g. sale proceeds, cash dividends, maturities, etc.) are credited to his BPITrade Bank Account.

You will need to make an initial deposit to your Settlement Account to open a BPITrade account. These funds are to be used in purchasing stocks, fixed income instruments, or mutual funds, and do not represent a balance requirement. You may also contribute your existing stock portfolio as your initial securities in your BPITrade account.

Step Four: Put funds into your BPITrade Bank Account

Once your account application has been approved, you will recieve via e-mail your BPITrade Bank Account Number. There are four (4) ways to fund your BPITrade Bank Account.

1. Through the Branch: Go to any BPI Branch and make an Over-the-Counter deposit straight to your BPITrade Bank Account.
2. Through Expressphone or the ATM: You can transfer funds into your BPITrade Bank Account from your BPI Account or BPI Family Savings Bank Account through these facilities. Enroll your BPITrade Bank Account by calling 89-100 or visiting your branch of account.
3. Through www.bpiexpressonline.com: Enroll your BPITrade Bank Account in BPI Express Online and transfer funds from your other BPI, BPI Family Savings Bank or BPI Direct accounts. Click on “My Portfolio” and enroll your BPITrade Bank Account as an Additional Savings Account. If you are not yet a BPI Express Online client, please enroll on the website now.
4. Through Telegraphic Transfer from your bank, or through any overseas BPI Express Remittance Center (BPI SWIFT Address for Telegraphic Transfers: BOPIPHMM) .

Note that deposits made to your BPITrade bank account shall be reflected in your Cash Position in BPITrade the NEXT trading day.

Step five: Make Your First Online Stock Trading Transaction

Open the BPI Trade website, log in to your BPI Trad account using your nominated User ID and password, check your available cash position, then proceed to make your first BUY order for Ayala Corporation common stock in board lots of 10 shares.

The Philippine Stock Exchange in a Snapshot: Key Points

Buying or Selling Shares of Stocks

NOTE: This is an old post and most of the details are not current anymore. We are not updating this post anymore since its posting on March 7, 2009. So, readers are advised to go straight to The Philippine Stock Exchange website for more details. Here is the link to the PSE:

The Philippine Stock Exchange, Inc.

Trading Participants

In the Philippines, the only operating stock exchange is the Philippine Stock Exchange or PSE. Its main function is to facilitate the buying and selling of stocks and other securities through its accredited trading participants. (You may click on the images to enlarge.)



The PSE has two trading floors - PSE Centre in Ortigas, Pasig City and PSE Plaza in Ayala, Makati City - where trading participants trade daily - from 9:30 a.m. to 12:10 p.m. except Saturdays, Sundays, legal holidays and days when the Central Bank Clearing Office is closed.

Stocks and Securities

Stocks are shares of ownership in a corporation. When you become a stockholder or shareholder of a company, you become a part-owner of that company.

Securities, on the other hand, are proof of one's ownership or indebtedness in a company. Securities are easily bought and sold in the stock market.

Examples of securities are treasury bills and commercial papers, which are considered as short-term and are traded in the money market; and stocks and bonds, which are long-term and traded in the capital market.

Unit of Trading

Trading of shares shall be in terms of fixed minimum amounts called board lots. Depending on the price range of a particular stock, the unit of trading ranges from 10 to 1,000,000 shares. The cost of a transaction, therefore, varies from company to company since the prices of each company differ according to its par value.

Ayala Corporation (AC) shares, for example, are traded in board lots of ten (10) shares in the PSE.

The Starter Investor's Favorite Stock

For starter investors looking to make their first investment in the stock market, Ayala Corporation (AC) stock may be a viable option. Here are five reasons why choosing AC stock can be advantageous, even with limited funds:

• Firstly, Ayala Corporation is one of the largest conglomerates in the Philippines and operates in diverse business segments, such as real estate, banking and financial services, telecommunications, water infrastructure, and healthcare. This diversification provides a buffer against market volatility, reducing the risk for investors.

• Secondly, Ayala Corporation has a long history of stable growth and has consistently delivered strong financial performance, making it an attractive investment option.

• Thirdly, Ayala Corporation's subsidiaries and affiliates are known for their brand equity, innovation, and contributions to social development in the Philippines. This brand reputation can help provide investors with confidence in the long-term viability of the company.

• Fourthly, Ayala Corporation has a strong focus on sustainability, incorporating environmental, social, and governance (ESG) factors into its business operations. This approach can potentially result in better risk management, higher operational efficiency, and long-term value creation.

• Finally, Ayala Corporation is listed on the Philippine Stock Exchange (PSE), which is a well-regulated market that offers a transparent and accessible trading platform. This allows investors with limited funds to invest in AC stock with ease and confidence.

In conclusion, investing in the Philippine Stock Exchange (PSE) can be a smart choice for those looking to diversify their portfolios and grow their wealth. By understanding the key points about the PSE, such as the basics of online stock trading, investors can make informed decisions and minimize risks. Moreover, with the availability of online trading platforms such as BPI Trade, investing in the PSE has become more accessible and convenient. For novice investors, choosing a reputable company such as Ayala Corporation (AC) for their first investment can be a sound strategy due to the company's stability, strong financial performance, diversification, brand reputation, and focus on sustainability. With these key points in mind, individuals can start their journey towards successful investing in the Philippine Stock Exchange.