Principles Of Investments In The Stock Market - 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.) The key to growing your investment is consistency - Don't be contented to stay small. Aim high ! Aim to play with the big players. You must have the discipline to slowly but consistently invest a part of your income to the stock market. By doing this your portfolio will grow since you have more capital to invest. I did not just stop at P 20,000.00, I slowly added to my investment. Consistent investment 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. - 23305

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

Rule Of 72

By Zigfred Diaz

An Overseas Filipino Worker (OFW) started to work abroad. Having worked for several years there at the age of 29 had a total savings of P 100,000.00 (Philippine peso)

In order to preserve his P 100,000.00, he decided to place it in the bank, since this is the only vehicle of investment that he knew about. The bank manager was delighted that the OFW opened an account with them. He even recommended that the money be placed in a time deposit account enabling the OFW to earn more than the ordinary savings account.

So the money remained in the time deposit account until the OFW reached the age of 65. At that time, he then went back to the bank to withdraw the P 100,000.00. He was amazed when he learned that the P100,000.00 had already grown to P 400,000.00. He was quite happy with the growth of his money. He then withdrew the money from the bank, enjoyed life 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 ?

Under the rule of 72, in order to determine how many years it takes for your money to double you only need to follow this very simple equation: 72 / interest = No. of years it takes for your money to double

For this certain OFW, his money will double every 18 years. This is simply solved by applying the rule of 72 which is computed as follows: 72 divided 4 % per annum = 18 years. This means that if you add 18 years from the time he deposited his money, the P 100,000.00 will double to P 200,000.00 when he reaches the age of 47. After 18 more years when he reaches the age of 65, his money will already become P 400,000.00.

So what does the bank do with that P 100,000.00 ? Well, they take the OFW's money and invests it at mutual funds, the stock market, the money market, government bonds, corporate bonds and even consumer loans etc. averaging a 12 % return per annum. Using the Rule of 72, the OFW's P 100,000.00 will double every 6 years. (This is computed as follows: 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 ! - 23305

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, financial management, business, making financial online and Stock market investing

Basic Investment Principles In The Stock Market - Part 1

By Zigfred Diaz

A lot of people have asked me on whether they should invest in the Philippine stock market. Most of those who asked also wanted to know how to start doing it. I do not know if they are really serious about investing or if they are merely curious about it since it has been given emphasis lately considering its very positive performance.

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.

The point I am making is that you should understand the basic principles first before you will be successful in the stock market. It is true that fortunes are made on the Stock market, however there are also stories of people loosing a large amount of their money. Other who just dive into the stock market without knowing the basic principles of investment quit after some time, telling themselves that the stock market does make any money for anybody.

Before discussing the details on how to invest in the Philippine stock market we must first have a good grasp on the basic principles of investment in order that we might possibly succeed and enjoy trading. There will be ten principles that will discussed. The first one will be discussed here. Other points will be discussed in the articles to come. Please visit my blog if you wish to see the article in its entirety.

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.

You must understand that the stock market belongs to an investment category called "Capital Markets." Capital Markets are divided further into several categories. Here alone, there are several investment vehicles wherein you could place your money. Examples of these investment vehicles aside from the stock market are real estate, pension funds, bonds, insurance, different types of savings and time deposit accounts. It is of vital importance that you know this fact because knowing the different types of investment vehicles under the Capital markets will help you evaluate whether or not you should invest in the Stock Market considering that there are other vehicles of investment.

I reiterate that each vehicle of investment has its own advantages and disadvantages. I did not to place all of my eggs in one basket. Most of my investments are in the Capital Markets though. This includes bonds through mutual funds, the stock market, insurance, pension and deposits. - 23305

About the Author:

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

Reasons For Investing In The Stock Market - Part 2

By Zigfred Diaz

In my previous article, the first part on the advantages or the reasons why you should invest in the stock market was discussed. Three points are highlighted, mainly potential for greater returns, part ownership of the company you are investing and belonging to a special group of people. This is the second part of this two part series. Check out my blog should you wish to view the article in its entirety.

4.) The stock market is still the one of the best investment - While it is true that investing in the stock market has its up and down moments, in the long run investing in the stock market is still one of the best investment vehicles out there. Stock market returns fluctuate from year to year. In 1986 we have the recorded highest return rate at 224 % and negative 41 % as the lowest return rate in 1997. Yet despite the markets up and down if you hold on to your money (Holding period of about 20 years) on the long term, the average return for investing in the stock market is 24 % to 28 % per year so in short you it is not possible to incur any loss if you are a long term investor.

5.) Increases your financial knowledge and forces you to learn. - If you dozed off in your high school or college days economics class before, you might loose all your hair right now just to force yourself to try to understand what inflation means. You start to begin reading the business news regularly and try to give importance to major news headlines as this will have an impact on the behaviour of the market. You will be forced to understand words that you never understood before. You will become more smarter and wiser more than ever as are forced to keep on increasing your financial and investments knowledge.

6.) Helps you more to become internet savvy. - It has been said that the development of mankind is divided into several ages. First we had the "stone age", then came the iron age and then the bronze ages etc. Afterwards we moved up to the industrial age. Currently we are said to be in the "information technology age." In this age, knowledge is power. This is not just considered as an adage. Rather this is the essence of the information age. Engaging in online trading will surely help you understand what this means. During the time that I was in college I wanted to invest in the stock market. The reason for my curiosity was because I always see in the movies how the traders are shouting buy or sell. However I did not invest during that time because of three reasons. First I lack the information. Secondly, I do not have the capability and thirdly I do not have the money to invest.

With the advent of the internet age, information is everywhere through the World Wide Web. Add to the fact that you can now trade online. With this opportunities that come into play, it was now possible for me to trade in the stock market. I monitor the news online, I buy and sell online, I transfer money to my accounts online and best of all it is now possible to trade globally and invest in other stock markets around the world with the use of your computer. Although this is an entirely different arena but the stock market trading principles still come into play.

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. - 23305

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, financial management, business, making financial online and Stock market investing

Basic Investment Principles In The Stock Market - Part 4

By Zigfred Diaz

In this article we will be discussing the last three principles of investment in the stock market. In the past articles we have already discussed the first seven principles. If you want to see the entire article, visit my blog.

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.

Attend seminars on stock market investments. There are several brokerage firms that conduct free seminars for newbies in stock market investing. Last year, CITISEC Online did a 2 day free seminar. I took the time to attend that seminar. This brokerage firm is one of the most innovative, active and well managed brokerage in the Philippines. The information you will learn in the seminars is very helpful. Continual study is required if you want to succeed in the stock market. Once you stop learning you stop to succeed.

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.) You must know your current events - A lot of factors can affect the stock market. You should read the news paper as this may give you a clue on what direction the market may take. More importantly you should read the business news as this may give you an idea as to which stock you should buy. I read the Philippine Daily Inquirer everyday in order to have an idea where the market is headed.

10.) Don't delay today is the best day to start - Experience is the best way to learn. You may start small but the most important thing is that you start right away. Put off procrastination. Study how to go about it without rushing, but don't delay. If you already know the basics about investments start buying your first stock. Making your first profit from your first sale is truly rewarding. - 23305

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