1. Enumerate the classifications of stocks and explain each.

 Common Stocks are the most common type of stock that represents ownership in
a company. Shareholders have voting rights in corporate decisions and can
receive dividends. Examples in the Philippines include SM Investments
Corporation and Jollibee Foods Corporation.
 Preferred Stocks provide investors with fixed dividends and give them priority
over common stockholders during payouts. However, they usually do not come
with voting rights. San Miguel Corporation Preferred Shares are a prominent
example.
 Blue-Chip Stocks are shares of large, reputable companies with a stable financial
performance. These stocks are generally low-risk investments. In the Philippines,
Ayala Corporation and BDO Unibank are popular blue-chip stocks.Growth
Stocks: Companies with high growth potential (e.g., Converge ICT Solutions,
AllHome Corporation).
 Growth Stocks are shares of companies expected to grow rapidly in revenue and
profits. They usually reinvest earnings rather than pay dividends. Examples
include Converge ICT Solutions and AllHome Corporation.
 Income Stocks provide shareholders with regular and consistent dividends,
making them ideal for investors seeking steady income. Manila Electric Company
(Meralco) and PLDT Inc. are well-known income stocks in the Philippines.
 Value Stocks are companies considered undervalued based on financial metrics
compared to their market price. Investors often seek them for potential gains
when the market corrects their price. Metro Pacific Investments Corporation and
LT Group Inc. are examples of value stocks.
 Cyclical Stocks are sensitive to economic cycles, performing well during
economic growth and struggling in recessions. Cebu Pacific and Megaworld
Corporation are examples, as travel and real estate are heavily influenced by
economic conditions.
 Defensive Stocks are companies that remain stable even during economic
downturns due to their essential services. Globe Telecom and Manila Water
Company are reliable choices for defensive investments.
 Penny Stocks are low-priced and often high-risk investments, typically traded
below PHP 5. Due to their volatility, they appeal to speculative investors.
Examples include Abra Mining and Industrial Corporation and Premiere Horizon
Alliance.
 ESG Stocks prioritize environmental, social, and governance factors, attracting
investors concerned with sustainability. ACEN Corporation and First Gen
Corporation are leading ESG companies in the Philippines.
 Small-Cap Stocks have a market capitalization of less than PHP 5 billion. They
often offer high growth potential but come with higher risk. Examples include
Axelum Resources Corp and Fruitas Holdings Inc.
 Mid-Cap Stocks are companies with market capitalizations ranging from PHP 5
billion to PHP 50 billion. They offer a balance between growth and stability.
Robinsons Land Corporation and UnionBank of the Philippines are notable mid-
cap stocks.
 Large-Cap Stocks are established companies with a market capitalization
exceeding PHP 50 billion. These stocks are generally stable and favored by long-
term investors. Ayala Land Inc. and SM Prime Holdings are prominent large-cap
stocks.
 IPO Stocks are shares of newly public companies sold through Initial Public
Offerings. These stocks can offer rapid growth potential. Recent IPOs in the
Philippines include Figaro Coffee Group and Citicore Energy REIT.
 REIT Stocks are Real Estate Investment Trusts that generate income through
commercial property rentals. They are ideal for investors seeking passive income.
AREIT Inc. and RL Commercial REIT Inc. are examples of REIT stocks.
 International Stocks allow Filipino investors to buy shares of foreign companies
through Philippine Depositary Receipts. Del Monte Pacific Limited and Max's
Group Inc. are examples.
 Dividend Stocks are companies that provide regular dividend payments, offering
reliable income to shareholders. Examples include Aboitiz Power Corporation and
GMA Network Inc.
  Tech Stocks represent companies in the technology sector, focusing on
innovations in telecommunications and IT services. Converge ICT Solutions and
Globe Telecom are key players in the Philippine tech market.
 Speculative Stocks are high-risk investments with uncertain returns, often driven
by market speculation. Companies like AbaCore Capital Holdings and DITO
CME Holdings Corporation are popular speculative stocks.

2. Give at least 2 factors that affect market price of stock.
 Interest Rates: Higher interest rates can lead to lower stock prices as borrowing
becomes more expensive, reducing company profits. (e.g., Philippine banks' stock
prices may decline when the Bangko Sentral ng Pilipinas raises interest rates).
 Supply and Demand: If more investors want to buy a stock than sell it, the price
will rise, and vice versa. (e.g., When Globe Telecom announced new
infrastructure investments, increased demand from investors raised its stock
price).

3. What an investor should do to minimize the risk in stock investment.

 There are a lot of potential risks associated with investing in a specific company’s stock
or equity. Some of these include business risk, which refers to uncertainty and potential
financial loss due to factors like changes in leadership, poor management, and
competition. Downside risk estimates the potential decline in investment value due to
market-related factors such as supply and demand, economic conditions, investor
sentiments, and company-specific events. Economic risk refers to financial losses caused
by macroeconomic factors like recessions, interest rates, and currency fluctuations.
 A real-life example of business risk in the Philippines is ABS-CBN Corporation’s
shutdown in 2020. The company, one of the country’s largest media networks, failed to
secure a franchise renewal from Congress, leading to a halt in its free-to-air broadcasting.
This regulatory issue significantly impacted its revenue and stock value. Investors who
closely monitored government policies and the risks tied to media companies could have
 anticipated the issue and adjusted their investments accordingly. To minimize business
risk, investors should thoroughly research a company’s financial health, management
effectiveness, and competitive position before investing. Regularly monitoring earnings
reports and industry trends can also help investors make informed decisions and avoid
companies facing significant internal challenges.
 Downside risk is evident in the Philippine Stock Exchange Index (PSEi) market crash
during the COVID-19 pandemic in 2020. Stocks in sectors like airlines, hotels, and
tourism plummeted due to lockdowns and travel restrictions, causing significant losses
for investors heavily concentrated in these industries. Those who diversified their
portfolios into more stable sectors, such as healthcare or consumer goods, were better
positioned to absorb the impact. To minimize downside risk, investors should avoid
putting all their funds into a single high-risk sector. Diversification across stocks, bonds,
and commodities helps spread risk. Using stop-loss orders can also limit losses by
automatically selling a stock when it drops to a predetermined level. Staying informed
about market trends and economic indicators allows investors to adjust their portfolios
before major downturns occur.
 Economic risk was highlighted when Philippine Airlines (PAL) filed for bankruptcy
in 2021 due to the economic downturn caused by the pandemic. High fuel prices, low
passenger demand, and the depreciation of the peso made it difficult for PAL to sustain
operations. Investors who monitored economic trends and airline industry performance
could have mitigated their losses by shifting to more resilient investments, such as utility
or technology stocks, during periods of economic uncertainty. To minimize economic
risk, investors should adopt a well-balanced investment strategy that includes a mix of
assets that respond differently to economic conditions. Investing in defensive stocks, such
as those in healthcare and consumer staples, can provide stability during economic
downturns. Keeping an eye on key economic indicators, such as interest rates and
inflation, can help investors make proactive adjustments. Additionally, maintaining a
portion of the portfolio in cash or liquid assets provides flexibility during uncertain
economic periods.

4. Differentiate Bullish and Bearish markets.

 A bull market is a period of strong economic activity where stock prices rise,
investor confidence is high, and businesses thrive. During this time, there is increased
consumer spending, lower unemployment, and overall economic expansion. A good
example of this in the Philippines was in 2017, when the Philippine Stock
Exchange Index (PSEi) surpassed 9,000 points due to strong corporate earnings,
economic growth, and increased foreign investments. Sectors like real estate,
banking, and consumer goods experienced significant gains, reflecting the country’s
economic strength. In a bull market, the best approach is to buy stocks early in the
trend and hold them until they peak. Growth stocks, technology companies, and
cyclical sectors tend to perform well, and investing in equities carries lower risk due
to favorable market conditions. However, the challenge is that if I enter too late, I
might end up buying at inflated prices, which increases the risk if the market corrects
itself.
 On the other hand, a bear market is characterized by declining stock prices, low
investor confidence, and an economic slowdown. Businesses struggle, consumer
spending decreases, and unemployment tends to rise. A clear example of this
happened in 2020, when the PSEi dropped below 5,000 points during the COVID-
19 pandemic. Lockdowns and economic uncertainty led to a massive downturn, and
industries such as tourism, airlines, and retail suffered major losses. During a bear
market, I have to be more cautious when investing. Defensive stocks, like utilities and
consumer staples, become more attractive because they tend to remain stable despite
economic downturns. Some investors turn to short selling or invest in fixed-income
securities to minimize their losses. If I were to invest in a bear market, I would need
to focus on fundamentally strong companies that are undervalued but likely to recover
over time. However, timing is crucial because prices might continue to fall before
rebounding. A bear market presents opportunities for long-term investors, but
patience and careful analysis are necessary.
 Between the two, is it good to buy in a bear market? The answer depends on the
investor’s strategy. While a bull market is generally safer due to rising prices and
strong economic conditions, a bear market offers a chance to buy stocks at lower
prices, potentially leading to higher returns when the market recovers. However,
 investing during a bear market requires confidence in the company’s long-term
growth and the ability to withstand short-term losses. If I decide to invest in a bear
market, I need to ensure I am selecting strong, well-managed companies that can
survive the downturn. Overall, understanding the characteristics of bull and bear
markets is essential in making informed investment decisions. By recognizing
market trends and adjusting strategies accordingly, I can manage risks and maximize
potential returns effectively.

5. Explain the significant role of stock exchange in an economy.

 The stock exchange plays a crucial role in the economy by helping businesses grow,
creating job opportunities, and allowing investors to earn profits. It serves as a
marketplace where companies can raise funds by selling shares to the public. When
businesses get more capital, they can expand their operations, improve their products,
and invest in new technologies. This growth leads to more job opportunities and
higher economic activity. At the same time, the stock exchange provides investors
with a way to earn money by buying and selling stocks. When companies perform
well, stock prices increase, giving investors profits through capital gains or dividends.
 For example, a company like Tesla used the stock market to raise funds by selling
shares to the public. With the money it raised, Tesla was able to expand its
production, develop new electric vehicle models, and invest in battery technology. As
the company grew, it hired more employees, boosting job creation and contributing to
economic growth. At the same time, investors who bought Tesla shares benefited as
the stock price increased over the years.
 The stock exchange also helps the economy by providing liquidity, meaning people
can easily buy and sell stocks whenever they need cash. It also acts as a barometer of
economic health because rising stock prices usually indicate economic growth, while
falling prices may signal economic problems. Governments and businesses monitor
the stock market to make decisions about policies and investments.
 To conclude, the stock exchange is important because it connects businesses with
investors, creates jobs, supports economic growth, and helps people manage their
 finances. A strong stock market can lead to a strong economy, benefiting both
companies and individuals.

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