Stock Market - Basic Principles - Part 3

By Zigfred Diaz

This is the third installment on the discussion about basic principles in stock market investing. In the previous articles, we discussed about the first three principles of investment. First, the stock market is just another vehicle of investment. Secondly, investing in the stock market is a roller coaster ride and thirdly, you must determine what type of investor you are. We continue with the next 4 principles in part 3 of this 4 part series. If you wish to view the entire article, please visit my blog.

4.) More cash more profits, but you don't need a lot to start investing. - Investing in the stock market does not require you to have millions or hudreds of thousand of pesos. My personal estimate is that you need P 20,000.00 to start trading.This is what I started with. But even if you only have P 10,000.00, you can already start trading. However that amount may be too small in my opinion. To drive the point of the above principle lets say you bought shares of Jollibee (JFC). Jollibee shares cost only 51.50 today. The board lot (the minimum amount of stocks that you could invest in) is only 100. If you calculate, you only need P 5,150 (51.50 x 100) to be "part owner" of the Philippines' number fast food chain company. Lets pretend that after 1 year the per share value of the Jollibee stocks you bought already cost P 100.00 per share, you have gained P 5,000.00 more. Imagine the profits you are making ! How much more could you have made if you invested in 200 shares ?

5.) Be consistent in your investment - Start small but do not stay small. You must have the discipline to consistently invest a certain amount of your income to the stock market. This way you can have more capital thereby growing your portfolio. Over the years, I have slowly added to my investment. I did not stay at P 20,000.00. The act of investing should become your habit, and I say it is a good habit to develop.

6.) Minimize your losses, Maximize your profits - The loss is only on paper if your stock goes down. The actual loss occurs when you sell your stock at the "losing" price. The best thing to do therefore is to never ever sell at a loss. This is the reason why it is very important that the money that you invest in the stock market is considered as surplus money, not your emergency fund. If you invest your savings or emergency fund, you will be forced to withdraw sell your stock at a loss if you desperately need the money. To maximize your profit you must utilize profits you gained from the sales of stocks and the dividends you receive to buy more shares of stocks.

7.) Want to get rich quick ? Don't even think about investing in the stock market. - The stock market is not a get rich quick scheme. You should never ever expect to get rich overnight here. Investments always takes time to grow. If you hear about investments that give you shocking rates of return in a very short length of time, beware of those ! In the stock market, especially the Philippine stock market, it may take you several months or even years before you could say that you have made it big time. On certain rare occasions, there will be a time that it will only take weeks or days perhaps wherein you can make a killing, but again these are only rare occasions. This might occur when there is a consistent bull run or when there is an unusual going up or going down of prices within a certain period. - 23221

About the Author:

Would you want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he blogs about several interesting topics such as investments, money management, business, making money online and Stock market investing

Basic Investment Principles In The Stock Market - Part 1

By Zigfred Diaz

People have been asking me lately if they should invest in the Philippine stock market or not. Majority of them also wanted to know how they should start. I am not sure if they are really serious about it. They could just be curious considering that it is all over the news that the stock market's performance is very positive.

The fainthearted has no business investing in the Philippine stock market or the stock market in general. A true investor always has expectations as to how much he will earn from a certain investment. Normally this is measured in terms of how much money will grow at a given time. (This is commonly known as interest per annum) Now that the Philippine Stock market is in its highest level for some time now, people think that they should get themselves involved. Sad to say most do not even have a grasp of the basic principles involved neither do they understand how the system works. This is not to imply that you have to be an economist before you should consider investing.

What you should understand is that you must know the basic principles involved first before you can achieve a level of success in investing in the stock market. Fortunes are made on the Stock market. But take note that huge losses are also incurred. Those who just plunge into the stock market without a grasp of the basic principles of investment end up convincing themselves that the stock market is no good at all, does not make them any money and finally quit after some time.

Before I would even begin to tackle the ins and outs of the how to invest in the Philippine stock market you should first understand the basic principles of investment in order that you might enjoy trading and possibly succeed in the stock market. I will be discussing ten of them. We will discuss the first one here. The other points will be tackled on coming articles. If you wish to see the entire article please visit my blog.

1.) Its just another vehicle of investment - The stock market is just another vehicle of investment. There are other investment vehicles where you could invest your money. They have their advantages and disadvantages. One vehicle of investment is not more superior than the other. However this will not be discussed in detail here.

In economic parlance, the stock market is categorized as belonging to the "Capital Markets." Even in the Capital market category there are different types of investment vehicles. You have several alternatives here. Aside from the stock market, you could place your investment in pension funds, bonds, insurance, real estate, time deposit accounts different types of savings. It is important to know this because it will help you determine whether or not you should invest in the Stock Market considering that there are other alternative vehicles of investment in the Capital markets.

Bear in mind that each vehicle of investment has their own advantages and drawbacks. The secret here is not to place all of your eggs in one basket. Even if most of my investments are in the Capital Markets, I diversified by placing investments in the stock market, bonds through mutual funds, pension, deposits and insurances. - 23221

About the Author:

Are you willing to learn more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, money management, business, making money online and Stock market investing

How The Rule Of 72 Is Used By The Banks To Rob You

By Zigfred Diaz

There was once an Overseas Filipino Worker (OFW) who worked abroad for several years. At the age of 29 his savings already amounted to P 100,000.00 (Philippine peso)

Since the only investment vehicle he knew about was putting his money at the bank he went to the bank and deposited his P 100,000.00. The bank manager gladly accepted the money and even recommended that he put it at a time deposit account so that it would yield a higher interest rate at 4 % per annum.

So he placed his money in the time deposit account and waited until he reached the age of 65. At the age of 65 he went back to the bank and asked to withdraw the P 100,000.00 in his time deposit account. Lo and behold his P100,000.00 already became P 400,000.00 because of the interest. So he withdrew his money from the bank and lived happily ever after.

Do you think this is a "live happily ever after"? Has this OFW "wisely" handled his money? Are you sure he is maximizing the full potential of his money or has somebody become more richer because of his ignorance ?

To fully understand this, take note of the Rule of 72. In order to know how many years it takes for your money to double you only need to follow this rule which is simply stated as follows: 72 / interest = No. of years it takes for your money to double

Since the OFW deposited his money in a time deposit account, at 4 % per annum, his money will double every 18 years. (72 divided 4 % per annum = 18 years.) Since he deposited P 100,000.00 at age 29 add 18 years to that and his money will become P 200,000.00 when he reaches the age of 47. Add another 18 years to that and he reaches the age of 65 wherein this time his money becomes P 400,000.00

The bank on the other hand takes that P 100,000.00 and invests it at mutual funds, the stock market, the money market, government bonds, corporate bonds etc. averaging a 12 % return on the P 100,000.00 that the OFW placed under time deposit. Under the rule of 72, that same amount of money will double every 6 years. (72 divided by 12 % interest = 6 years)

After 36 years of waiting, the OFW claimed his P 100,000.00. You wouldn't be surprised why the bank manager willingly and gladly gave him back the P 100,000.00 plus the interest of P 300,000 amounting to a total of P 400,000.00. No sweat, they already made more or less a total of P 6,400,000.00 from the OFW's P 100,000.00 deposit. Now you tell me if that isn't hi-way robbery !

If you want to be wealthy and be a better steward of your money then think like the bank! Make the Rule of 72 work for you ! - 23221

About the Author:

Would you like to know more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, money management, business, making money online and Stock market investing

Reasons For Investing In The Stock Market - Part 2

By Zigfred Diaz

Last time we discussed about the advantages or the reasons why you should invest in the stock market. We talked about the first three which are, potential for greater returns, part ownership of the company you are investing and belonging to a special group of people. This is the concluding part of this 2 part series. If you wish to view the entire article, check out my blog.

4.) It still one of the best vehicles of investment - Even if the stock market has its up and down moments, investing long term in the stock market will still give you one of the highest returns making it one of the best vehicle of investments ever. Returns in the stock market fluctuate yearly. For example, in 1986 the Philippine stock market recorded the highest return rate at 224 %. On the other hand the lowest rate of return was in 1997 at negative 41 %. However the average return (within 20 years) is still somewhere from 24 % to 28 % per year. This means that the long term investor always wins in the long run.

5.) Investing in the Stock Market forces you to become financially literate, more aware of your environment and inspires you to learn. - When you invest in the stock market you are forced to read the business news and place significant meaning on major news headlines. News to you does not only become something to be discussed in the coffee shop but something that has an impact since you know it will affect how the market will behave. You will be compelled to understand terms that you did not even dream of understanding. You will become twice smarter than you were as you will keep on learning and reading in order to expand your knowledge. If you slept through your economics class before, your eyes will be wide open when you try to figure out what inflation means. You will be inspired to learn.

6.) Investing in the stock market will help you know what it means to harness the power of the internet - The progress of man is divided into several ages. We had the "stone age" the iron ages, bronze ages etc. then we moved up to the industrial age and now they say that we are in the "information technology age." In the information technology age, knowledge is power. For many of us that term is considered just an adage. But with online trading you will know what that means. Since I was in college I really wanted to know what it is like to invest in the stock market. I was just amazed when I see traders in movies, shouting buy or sell. But I did not invest back then mainly because of three reasons, lack of information, lack of capability and most of all lack of money.

In today's internet driven economy, information can be accessed easily through the world wide web.Trading is made much more easier with online trading facilities. As this opportunities are presented to me, I made it a point to start investing in the stock market. Now I do all of my trading activities online such as monitoring the news, buying and selling of stocks and transferring money to my accounts. Perhaps I will someday move into global stock market trading. Despite its complications, the principles in stock market trading is still somewhat the same.

7.) Help in nation building - The most noble objective and advantage as to why you should invest in the stock market is probably this one. Companies want to get listed in the stock exchange to raise more capital for their business in order that they could expand. Business expansion is translated as more jobs, more taxes for the government and more economic activity. This in effect moves the nation forward and helps build the nation.

Certainly these compelling reasons make a valid argument as to why you should invest in the stock market. - 23221

About the Author:

Would you want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he blogs about several interesting topics such as investments, financial management, business, making financial online and Stock market investing

Stock Market - Basic Principles - Part 4

By Zigfred Diaz

This is the final part of the series on principles of investment in the stock market. The last seven principles was discussed in the past articles. We will be discussing the last three principles in this article. Visit my blog if you want to see the whole article.

8.) Take time to study- Investing in the stock market requires that you should take time to study what it's all about. You can't expect to succeed if think that you can just place in your money and hope that it will somehow grow by itself. Studying a lot of books and materials on the stock market will certainly help. When I first started investing I searched for materials in the internet regarding the stock market especially the Philippine stock market. I bought the "investor's primer" from the Philippine stock exchange. This is a great material for those who are new to the Philippine stock market.

Attending seminars on how to trade in the stock market can further add to your knowledge. Some brokerage firms conduct free seminars for those who are new investors. Last year I attended a 2 day seminar by CITISEC Online. They are one of the most active, most innovative and well managed brokerage firms in the Philippines. The information that you learn in the seminar will certainly help you in your quest to succeed in the stock market. Continuous study is required if you want to be successful in investing in the stock market. Do not not stop learning.

You should read all the materials and attend all the seminars you can to further expand your knowledge You should not give up when there are terms you could not understand. For example reading this article alone may give you a headache since there are words that you can't relate to. Words such as "points, "Philippine Stock Exchange Index (PSEi), "Blue Chips" or "Bull run" may sound foreign to you. What is worse is that you don't even understand what a stock is. It does not matter. I started out not knowing what some of these things are.

Stuff like these are never taught in school. I only learned them by reading and having a hands on experience in trading. I highly suggest that you watch the movie "Pursuit of Happyness" This is a story about one man's struggle to learn the stock market. Years later he made millions through stock trading. This movie is based on a true story and is sure to inspire you!

9.)Know what is happening in the world around you - There are several factors that affect the stock market. Be aware of the news that is making headlines in the news paper. For sure this will give you a hint on the direction that the market will take. Never skip the business news. It is here where you will be given an idea as to which stock you should buy. I prefer reading the online version of the Philippine Daily Inquirer in order that I may know where the market is heading.

10.) Now is the best day to start - Some people say that experience is the best teacher. I agree, experience is the best way to learn. It does not matter if you start small at first, the most important thing is that you start immediately. Never procrastinate but don't rush immediately without first studying the basics. When you have already learned the basics of investments, start buying your first stock. The most rewarding thing in your career as a stock market investor is when you have profited from your first sale. - 23221

About the Author:

Would you like to know more about investment strategies ? Visit the blog of Zigfred Diaz where he blogs about several interesting topics such as investments, money management, business, making money online and Stock market investing