1.

HOME  
2.  INVEST  
3.  STOCKS

PSE board lot and why 8k is

the minimum stock
investing
Updated January 29, 2021 by Author:PESOLAB
 Facebook
 
 Twitter
 
 Google+
 
 LinkedIn
 
 Email
How much do you need to start buying stocks from the Philippine Stock Exchange
(PSE)? Is there a minimum amount when you invest? In this article, I’m going to answer
these questions.

More than that, I’ll try to explain why you should listen to long-time traders when they
said that P8,000 is considered best practice and why it should be your minimum when
you start buying company shares from the Philippine Stock Exchange.

Article table of contents

 PSE board lot
 Why ₱8,000 is recommended minimum investment
 Is it advantageous to follow the 8k minimum all the time?
o Scenario 1: Effect on capital
o Scenario 2: Effect for a falling stock or market
o Scenario 3: Effect for a rising stock or market
 Take-away

PSE board lot

So let’s answer the first question. What’s the minimum amount?

There’s actually no definite answer. That’s because there is a rule that dictates how
much you need to acquire stocks.

According to the Philippine Stock Exchange, you have to follow what is stated in the
minimum board lot as shown in the table below.
 PSE minimum board lot
As you can see, the minimum amount depends on the stock price and the required no.
of shares.

So for example, 2GO Group Inc. (the first in the alphabetical order of publicly listed
company) has a stock price of ₱10.20 as of September 2019. Looking at the table,
you’re required to buy 100 shares. Your total minimum investment amount is P1,020.

DETAILS AMOUNT

2Go price ₱10.20

Required shares 100

Price x Required shares

Total
₱1,020 

When you invest in any stocks, your stock broker’s trading platform automatically
computes the amount for you.
Why ₱8,000 is recommended minimum investment
However, experts will tell you that you should not invest according to what the board lot
tells you. The reason: you’re going to be on the losing end of the deal.

Why? Because of fees.

As you may already know, every time you buy or sell stocks in the stock market you
would have to pay fees, charges, and taxes. Please see the table below.

Fees,
charges, and taxes when trading stocks in the Philippines.
 *SCCP is Securities Clearing Corporation of The Philippines
 **When you sell, you will have the same fees plus the tax of 0.6%
When you purchase stocks, you have pay the broker’s commission. It is the amount
from whichever is higher between ₱20 or 0.25% of your total investment.

There is also a value added tax representing 12% of the broker’s commission. Other
charges include PSE transaction fee (0.005%) and SCCP fee (0.01%). The taxes are
deferred. Meaning, you’d only have to pay 0.6% when you sell your stocks. All of these
would be charged to your account regardless if you made money from your investment
or not.

So how do experts agree on the ₱8k minimum?

This amount is based from the broker’s fee, which starts at ₱20 to 0.25% of the total
invested amount. In order to keep the commission at its lowest, you would want to know
the least amount where the commission remains at 0.25%.

By dividing ₱20 ÷ 0.25%, you actually get ₱8,000. See the table below for more details.
 By investing at least Php 8,000, you
can minimize the cost in investing in the stock market in the Philippines.
From the table, you may notice that as you go lower than ₱8k, the bigger the portion
goes to the commission. But if you invest equal to or higher than ₱8k, the cost of
obtaining a stock remains at 0.25%.

Is it advantageous to follow the 8k minimum all the

time?
The answer seems pretty obvious. As you can see from the example above, the lower
the amount being invested the higher the cost becomes.

However, you may have some doubts. That is why we will try to answer if it is beneficial
to follow the expert advice of investing at least ₱8,000. We will look at peso cost
averaging. Three scenarios are drawn up to see the effect of broker’s commission on
capital, as well as gains (or loss) in a rising stock/market and in falling stock/market in a
span of a year.

Scenario 1: Effect on capital

Let’s imagine that you can only save ₱2,000 every month. You have two choices:
should you invest monthly or should you wait until you can accumulate ₱8,000? Here
are some of the assumptions in this scenario.

 Only the broker’s fee is considered. All other fees and taxes are excluded.
  The period covers one year.
 You’re investing ₱2,000 per month in one case, and in another case you’ve
waited four months until your money reaches the minimum before you invest.
See the table below.

MONTH 2K CAPITAL 8K CAPITAL

January 1,980 7,980

February 1,980

March 1,980

April 1,980

May 1,980 7,980

June 1,980

July 1,980

August 1,980

September 1,980 7,980

October 1,980

November 1,980

December 1,980

Total 23,760 23,940

The table supports the result of the earlier example. Capital is better preserved when
the recommended minimum is observed. You’re able to accumulate ₱23,940 versus
₱23,760 in the course of 12 months.

Scenario 2: Effect for a falling stock or market

Suppose that you are investing when the stock or in the case of index funds, the market
is falling.
In this scenario, we will invent a stock whose price starts at ₱1.00 at the beginning of
the year and decreases ₱0.05 in each month. The goal is to see which situation you’re
better off. Are you better off saving ₱2,000 per month or waiting until you’ve got enough
money to reach the minimum amount?

Here are some assumptions.

 All stocks are sold at the end of the year at a loss.

 Only the broker’s fee is considered, including redeeming the stocks.
 Falling stock price decreases by ₱0.05 monthly.
See the table below.

MONTH STOCK PRICE 2K CAPITAL BALANCE 8K CAPITAL BALANCE

Jan 1.00 1,980 7,980

Feb 0.95 1,980 3,861

Mar 0.90 1,980 5,638

Apr 0.85 1,980 7,305

May 0.80 1,980 8,855 7,980 14,364

Jun 0.75 1,980 10,281

Jul 0.70 1,980 11,576

Aug 0.65 1,980 12,729

Sep 0.60 1,980 13,730 7,980 18,753

Oct 0.55 1,980 14,566

Nov 0.50 1,980 15,222

Dec 0.45 1,980 15,680

End of year 0.40 13,937 12,502

 MONTH STOCK PRICE 2K CAPITAL BALANCE 8K CAPITAL BALANCE

Redeemed 13,902 12,472

The table shows that in a falling stock or market, it may seem like you are better off
investing a little consistently rather than saving up the recommended amount.

The result that you see here is a typical price history when you follow the peso cost
averaging strategy at a time the stock that you invest in or the market (in the case
of index funds) is going down. The risks of getting lower value of your portfolio are
spread. That is why under ₱2k capital, you end up getting ₱13,902 while under ₱8k
capital you only get ₱12,472.

That is a difference of ₱1,432.

However, it is important to note that you’re still paying more to the brokers when you
don’t invest at least ₱8,000. Why? Because the first scenario of capital preservation still
holds. You’re still paying 1% fee for each time you invest ₱2,000 compared to only
0.25% when you meet the recommended amount. This fact however is overshadowed
by the effect of spreading the risks in peso cost averaging.

One more caveat: in reality, stock prices don’t follow such a predictable rate of
decrease.

Scenario 3: Effect for a rising stock or market

Now, let’s imagine that the stock price or market is rising. Just like the previous
scenario, we will invent a stock whose price appreciates by ₱0.05 every month. See
below the assumptions.

 All stocks are sold at the end of the year.

 Only the broker’s fee is considered, including redeeming the stocks.
 The stock price begins at ₱1.00 and increases ₱0.05 monthly.
See the table below.

MONTH STOCK PRICE 2K CAPITAL BALANCE 8K CAIPTAL BALANCE

Jan 1.00 1,980 7,980

 MONTH STOCK PRICE 2K CAPITAL BALANCE 8K CAIPTAL BALANCE

Feb 1.05 1,980 4,059

Mar 1.10 1,980 6,232

Apr 1.15 1,980 8,496

May 1.20 1,980 10,845 7,980 17,556

Jun 1.25 1,980 13,277

Jul 1.30 1,980 15,788

Aug 1.35 1,980 18,375

Sep 1.40 1,980 21,036 7,980 28,462

Oct 1.45 1,980 23,767

Nov 1.50 1,980 26,566

Dec 1.55 1,980 29,432

End of year 1.60 30,381 32,528

Redeemed 30,306 32,447

As you can see, you’re better off saving up your money for a bit longer rather than
investing it a little every month. In this scenario, you get ₱32,447 when you meet the
recommended amount and ₱30,306 when you invest ₱2k monthly.

In reality, stock prices don’t increase in a consistent manner.

Take-away
Investing in the stock market is exciting and also risky. And the first ever lesson to learn
is to never lose capital. One way to do that is to keep your costs in trading at the
minimum and invest with a capital of at least ₱8k. This way, you get to maximize your
investment.
In all three scenarios indicated above, meeting the minimum keeps the cost of investing
low. In a market or stock with falling value, peso cost averaging may spread the risk but
you’re still effectively paying more to commissions. In a market or stock with rising
value, you’re in a better position when you follow expert advice. (It is crucial to mention
that no one can predict the market, and generally equities are going to appreciate in
value in the long-term.)

However, this is a recommended practice. It is hardly an edict that must be observed all
the time. It is up to the individual investor to decide what strategy to follow.

Hence, going below the recommended amount can be understandable such as:

 First time investors who have little cash to spare

 When you believe that the potential returns are such that you don’t mind
paying a higher broker’s fee, and that you’d feel bad if you’re going to miss
out on the opportunity.