Why you should invest in the stock market

(Editor's note: This article was written by MoneyMax, the Philippines’ foremost online platform for comparing financial and telecom products and services, for ABS-CBNnews.com. Find out more at MoneyMax.ph.)

MANILA, Philippines - Investing in stocks is one of the most effective ways of making money work for you. Though it involves more time, it doesn’t require you anything but to invest and watch your money grow.

Stocks are shares of ownership in a corporation. Once you invest your money, you will be a shareholder and will get a portion of the company’s earnings or shares.

The stock market is a place where stocks are bought and sold. Here in the Philippines, the Philippine Stock Exchange (PSE) is the corporation that governs the Philippine stock market.

Here are general rules:

• Invest as early as possible. Take advantage of the price appreciation over a greater period of time.
• Invest regularly. For greater returns, regularly add a significant amount to your capital every month, or every year - just make it a habit.
• Invest long-term. Don’t withdraw your shares as soon as you see your profit – the longer-term, the better.
• Diversify your investments. “Do not put all the eggs in one basket” as they say. Allocate your capital to a number of companies in different industries so as not to put too much risk in one area.

How to start investing?

1. Choose a stockbroker. Call PSE or research for legitimate stockbrokers. Compare and choose the best that suits your needs and budget.

2. Open an account. Did you know that you don’t need millions of pesos to be a stock investor? You can start investing in stocks at the lowest amount of P5,000.

3. Be in constant communication with your agent. Aside from representing you in the stock market, a stockbroker can also offer you services such as access to market reports/studies, on-time delivery of important documents, and practical advice on your investments.

Here’s an infographic to let give you more information about stocks:

source: www.abs-cbnnews.com

3 common mistakes in stock investing

MANILA, Philippines - Investing in stocks can be a little tricky.

On ANC's On The Money, Henry Ong, director of the Registered Financial Planners Philippines, revealed three common investing mistakes. He also shared some tips on how to avoid them.

Common mistakes

1. When people try to time the market.

"They try to use a lot of charting. In theory, you can do that. You can buy at this point and sell at this price. But in reality it doesn't follow because markets involve a lot of emotions, it can change. That's one mistake because when people always try to time it, the effect would be frequent trading and it would lead to a lot of losses, expenses and fees that would be involved in trading," Ong said.

2. When people follow and buy on recommendations.

"Some people just don't do their research, they just follow the broker's advice or joining social media discussions about how good a stock is... I think these are very good sources of info but that should not be the sole basis of making a decision. To seriously invest, you should do your own research and validate these claims," he said.

3. When you get too attached to a stock.

Ong said it's not good to "fall in love" with a stock.

"Even when it's losing, you don't want to sell it. Sometimes, it becomes emotional, instead of getting objective when it comes to investments. In investments, sometimes, when a stock is falling and if you think the stock is going to fall deeper, you have to make a decision to cut your losses because as a rule, when the stock is losing 7-8% then that's the best time to cut your losses," he said.

Make a plan

To avoid these mistakes, Ong emphasized the importance of having a plan.

He noted there are two types of emotions in the stock market - fear and greed. "If you invest, you will be easily influenced by what is happening in the market, so if you don't have a plan, you won't have the discipline of knowing when to buy or sell," he said.

He suggested coming up with a strategy and knowing your investing style.

"Is your investment style more of growth investing or value investing? Or is it contrarian investing? Once you have the strategy, you have to stick with it," he said.

Another thing to consider is your risk appetite. "In investing, you have to determine how much you are willing to lose," he said.

Ong also emphasized the importance of setting benchmarks, which will serve as a guide to determine if the stock is performing above to below the market.

"You have to come up with your own target regardless of the benchmark... Decide how much you want to make," he said.

Asset allocation, he said, is one way to minimize your risk. You have to decide how much of your total portfolio will be invested in different instruments such as stocks, bonds or real estate.

Asked if he has a "winning strategy" for investing in stocks, Ong said: "You much have a plan, a target how much you want to earn and where are you going to use the money."

source: www.abs-cbnnews.com

Thinking of investing in stocks? Here are some tips

MANILA, Philippines – To be a successful stock trader, you must first get into the mindset that you won’t simply get rich through trading stocks, a financial analyst said.

Andrew Stotz, the president of CFA Society Thailand, said there is a good reason why most of the world’s 500 richest people listed by Forbes are not stock traders.

“What you find is that the people who get rich in this world get rich from building successful businesses. That’s where real wealth is generated. It doesn’t come from the stock market,” he told ANC’s “On The Money.”

Stotz cited American billionaire Warren Buffet, who ranks high among the world’s billionaires, as a business owner “who only uses the stock market as a place to buy and sell.”

Investing in the stock market, Stotz said, is about protecting your wealth while also trying to get a decent return.

“If you can go into investing by realizing ‘I’m not getting rich from this,’ now you have the right mindset to invest. If you go in thinking I’m going to get rich from this, that doesn’t happen,” he said.

According to Stotz, the 5 major factors that determine return are inflation, dividends, growth in book value, possibility share price dilution, and the “dream factor.”




“Take any stock and let’s say last year people were willing to pay 10 in price for one in earnings. A year later they’re willing to pay 15 in price for one in earnings. What has changed? That inflation in the PE or other metrics is what I call the ‘dream factor,’” Stotz explained.

He warned, however, that when price-to-earnings ratio gets higher than 15 times, then the stock trader should realize that the “dream factor” can turn into a nightmare.

“The amazing thing about the stock market is that it’s so complex, you can never develop a rule. There is no rule that consistently works so you have to be aware of shifting sands,” he said.

“When investing in stocks, we ought to rely less on predicting the future. Know where we are today and where the market has been in the past. Predicting the future gives you a false sense of security,” he added.

source: www.abs-cbnnews.com