Online accounts comprised 27 percent of some 641,000 brokerage accounts in 2014, PSE data show
SIX YEARS ago, Ana Cristina Villar knew nothing about investing in the stock market.
It was 2010, the United States financial crisis and its global fallout were fresh on everyone’s minds, and interest rates were at record lows.
The times were volatile but that was also when Villar decided to open an account with online stock broker COL Financial Group Inc.
She started small, parking an initial P5,000 in three blue-chip companies with little support other than seminars given by COL and encouragement from family and a local ministry.
Initial losses
“I didn’t know how to invest,” Villar recounted in an interview with the Inquirer. “But I also didn’t like people telling me I can’t buy this stock or that.”
Both too “shy” and headstrong to deal with a live broker, Villar said she opted for an online platform, which gives investors the tools to execute trades on their own and usually at a lower cost, since commission fees are smaller.
That decision came with risks and without a live broker to lean on, Villar said she initially lost money. But she held on to her portfolio of Ayala Land Inc., SM Prime Holdings Inc. and Metropolitan Bank & Trust Co. The move turned out to be the correct call, given how much these companies have gained, riding on the booming Philippine economy.
Today, Villar believes she’s on a path toward financial independence and a comfortable retirement. She has also been paying it forward.
“I have many officemates who have approached me and have now started to invest,” she said.
Villar’s story is not common by any standard in an economy and culture that thrives on consumer spending. Moreover, investing in the stock market remains limited to a small part of the population, despite the relatively low cost of starting an account.
The Philippine Stock Exchange estimates that about half a percent of the country’s 100 million people invest in equities.
But it’s people like Villar who are driving the growth in online trading, which has been seeing steady if not significant gains in recent years.
Interviews with officials from two of the biggest players, COL Financial (formerly CitisecOnline) and First Metro Securities Brokerage Corp. indicated that online trading has come a long way in the Philippines.
“I think there is a secular trend towards online as a means to invest in the stock market,” COL Financial president and CEO Conrado Bate said via e-mail.
Data from the PSE showed that online accounts comprised 27 percent of about 641,000 brokerage accounts in 2014. That’s a steep gain from just 7 percent in 2010.
“I wouldn’t be surprised if in the next three to five years, online trading will dominate the total number of brokerage accounts while its contribution to the total value turnover could grow to around 20 percent to 25 percent,” Bate said.
Millennial investors
He said this was driven by so-called millennials, or young, tech-savvy individuals born in the 1980s and onward.
“This new base of investors like to take control of their lives and will find it essential to invest to be able to achieve their financial objectives early,” Bate said.
Gonzalo Ordoñez, president of First Metro Securities, likewise noted gains made by online trading. As such, he is optimistic that there is room for growth.
“We remain positive that the robust growth in the number of retail investors will be sustained moving forward with rising income, growing awareness of opportunities in the stock market and emergence of online/mobile platforms, and new products which make investing easier and more convenient,” he said in an e-mail.
There are advantages and disadvantages when it comes to online investing.
Like Villar, the difference can be as basic as a preference for limited to zero interaction with a live broker.
Certain advantages come with speaking with a live broker, however. They execute your trades, usually via a phone call or text message, and depending on the relationship, they can also make suggestions and even dissuade clients from making a potential bad bet.
Online trading is also cheaper, because customers execute orders by themselves.
Online trading commissions are pegged at 0.25 percent of the gross value per trade. An option for a broker-assisted trade means increasing that commission to 0.75 percent for First Metro Securities and 0.5 percent for COL Financial, information on their websites showed.
Bate said there was little difference in the process of opening an account either with a traditional brokerage house or an online-based platform.
Application forms and the necessary government IDs will need to be filled out, copied and submitted for processing. Online-based brokers allow application forms to be downloaded, as do a number of traditional brokerage houses.
Because of their focus on the retail market, the minimum investment amount required by an online-trading platform is relatively small.
COL and First Metro Securities require initial funding of P25,000 for a trading account. (Metrobank and PSBank account holders are exempted from the minimum amount for First Metro Securities). COL Financial also offers a so-called Easy Investment Program that allows an investor to start with a minimum of P5,000.
Features, benefits
The main features and benefits of an online platform are felt once an account is opened, and these revolve around real-time access and full control for the investor, as long as one has an Internet connection.
“With the Internet and social media, news travels fast nowadays so markets react quicker to breaking news than ever before. When the trading action is moving fast, you don’t want to be left behind, even for just a few seconds,” Ordoñez said.
“If you are a first time investor in the stock market and you plan to invest less than P500,000 then it is advisable to go online and invest on your own,” Bate said. “However before doing so, it is strongly suggested that you learn the basics about the stock market investing first.”
Online platforms also provide support via seminars, market updates and regular research analysis. This also helps differentiate each company from rival services.
Information for self-traders is not the sole domain of the platforms that operate them. Witness to this growing trend are individuals who parlay their stock market expertise—for a fee.
One of them is Miko Sayo, a stockbroker with Angping & Associates Securities Inc. He is better known outside his office as the technical whiz behind the 14-year-old blog tsupitero.com, which derives its name from the slang term for a short-term trader.
For a fee of P1,000 per month, a trader gains access to a daily technical report compiled by Sayo that includes three to five recommended short-term plays.
“The problem with online trading is that you are on your own, thus, traders, especially newbies, would need the services of people like me to give them direction,” Sayo told the Inquirer in an e-mail.
The growing clamor for information, aided by the boom of social media platforms, is prompting Sayo to expand the newsletter’s content to reach more customers.
“I’m thinking of adding fundamentals to it as it is purely a technical newsletter at the moment. A lot of firms have research and do fundamental reports. What I would like to do is to provide fundamental info to the short-term trader, not to the long-term trader,” he said.
The digital age has also made it easier for investors access information across multiple platforms. There are countless Facebook groups dedicated to stock trading as well as online forums where investors can swap tips and even gossip.
In some cases, however, that information is unverified, misleading and possibly outright false. For the unseasoned investor or trader, that can spell the difference between a windfall and painful losses.
“Financial scams and false market rumors are everywhere and sadly, despite good education, many still fall victim to these scams,” First Metro Securities’ Ordoñez said.
He said this was also why it was important for investors, especially newbies, to attend the seminars: to get started on the right foot and warn them about making hasty, ill-informed decisions in the pursuit of quick money.
“Managing risk is the essential ingredient that separates the boys from the men, so to speak. In my seminars, I always talk about the importance of position-sizes, cutting of losses, scaling up or down,” Sayo noted.
The common message is clear: the benefits of responsible investing or trading outweigh such risks. Whether online or through a live broker, in stocks or other financial instruments, setting aside money for these various vehicles should help protect individuals from financial uncertainty.
“Investing is going to play a very important role in one’s life,” Bate said. “Eventually, everyone will need to have their own investment account to achieve financial independence.”
That is advice that Villar has taken to heart. Since 2013, she has been setting aside P10,000 to P15,000 of her monthly income toward her stock investments.
She said the amount was just like paying off a car loan. But instead of losing value, this is one vehicle that has the opportunity to appreciate.