Salve Says: A beginner's guide to investing in stocks

The stock market is fraught with risk, so it is important to arm yourself with investing smarts before you part with your hard-earned cash.

When you buy a share in a company, you become a part owner without worrying about running its daily operations.

You make money when the company earns a profit. However, you also lose money when the company does.

You can make a profit from the stock market by selling your stocks when the market prices them higher than when you bought them, Marvin Germo, a registered financial planner told ANC's "On The Money."

Share prices fluctuate every trading day depending on how the company performs. When there's negative news about a company, like when it reports a loss instead of a profit, its share price can go down.

An investor can also earn through dividends, which the company pays existing shareholders at specific periods.

"If you're a person who wants to be more passive, you want to get dividends, the more shares you accumulate, the more blocks you get, later on, the more dividends you will get also," Germo said.

The first step in investing in equities is to open a brokerage account and choose the right stock broker, said Salve Duplito, resident financial adviser of "On The Money,"

A directory of stockbrokers is available on the Philippine Stock Exchange (PSE) website.

Duplito said investors should find a broker whom they trust and works for a well-managed brokerage house that will allow them to transact easily online, which can be cheaper.

source: www.abs-cbnnews.com

Is now the right time to invest in stocks?

MANILA - Recent news about stock prices falling in the Philippines and also overseas is being touted as a good opportunity to buy stocks as prices are low. Is this sound advice? What is the perfect time to buy stocks especially for a first timer?

Before investing in stocks, there are three important things you need to understand about the stock market.

First, stock prices of fundamentally sound companies generally rise in value over the long term, which means over a period of several years.

However, there will be fluctuations in prices as the shares are traded daily. Over that period, though, the price fluctuations will even out, meaning the dips will be cancelled out by the spikes in prices, with an upward trend emerging. Of course, there will be exceptions to this rule, such as companies that go bankrupt, mismanaged companies, and the like.

Second, stock prices may move irrationally especially in the short term.

There is a tendency for investors to react emotionally to news that may affect share prices. For instance, news about a terrorist attack or changes in interest rates may cause a sudden fluctuation in prices.

This is why there are days when just about everything on the ticker board is red. There are also developments that may just affect share prices of specific companies such as lower than expected profits reported on a given date. Eventually, after emotional trading dissipates, share prices will become more reflective of the value of the stock.

Third, no one really knows when a stock has reached its bottom and is about to reverse.

Analysts have a myriad of tools to estimate how a given stock will behave, and when a given stock price or the index will reverse.

However, these are just tools, much like the tools used by the weathermen to predict the weather, so make room for wrong calls on the part of analysts. Just the same, it is important to listen to what analysts have to say before making your buying or selling decision, as they are finance professionals with access to the information and tools that you need.

Considering these, here are five tips to help guide you in buying stocks in these uncertain times:

1. Take a long-term view.

This cannot be overemphasized. The stock market is not for those out to make quick money. It is also not for those who cannot take on some risk. Be ready to hold stocks for a period of 3 to 5 years. If you feel that you cannot take a long-term horizon, then try other investment funds which are better suited to your requirements.

2. Do your homework.

Before buying any stock, know more about the business behind it to understand its long-term growth prospects. You may also wish to look at its earnings performance, how frequently it gives stock or cash dividends, and analysts’ recommendations.

3. Be patient.

Stock investing is not for those with a short-term investment horizon, which is why patience is key. Don’t rush to sell off a stock if you feel it is not moving as fast as you’d like it to go—this is a move best left to professional traders who work more closely with the market and better understand the impact of fees on trading. Note that it can take up to a couple of years for a stock to reach its target price range.

4. Accumulate stocks steadily over a period of time.

To make the most of market fluctuations, invest in stocks steadily over a long period of time. This will allow you to buy during down parts of the cycle, thereby averaging down your buying costs.

5. Consider mutual and index funds.

If you do not have the knowledge or the patience to invest in stocks, purchase mutual or index funds instead. The professional fund managers will choose stocks and buy and sell them at the time they deem most appropriate to ensure that you realize the most value.

In sum, there is really no right or wrong time to buy stocks if you take a long-term view, which is the ideal time horizon for investors in equities. However, as with any buyer, you would certainly like to buy when prices are low or are declining so that you can average down your costs. If you have money to invest, and do not need this very soon, you may wish to consider adding to your portfolio during downturns.

source: www.abs-cbnnews.com

China mulls allowing individuals to invest more abroad

SHANGHAI - China is considering relaxing limits to allow individuals to invest overseas in stocks and property, the central bank said, which would potentially unleash a flood of money if the government loosens strict capital controls.

The country keeps a tight grip on outflows of funds due to worries capital flight could disrupt the economy and weaken its control.

The People's Bank of China said it was studying letting "qualified" individuals invest abroad in industry, property and financial products through the Shanghai Free Trade Zone, according to a statement released Friday.

"These policy initiatives are another important step toward complete capital account liberalisation," Zhou Hao, a senior economist at Commerzbank in Singapore, was quoted by Bloomberg News as saying.

China's premier free trade zone in the commercial hub Shanghai was set up in 2013 with the promise of a range of financial reforms, but foreign investors especially have expressed disappointment over the pace of change.

Chinese citizens are now only allowed to convert the equivalent of $50,000 from the domestic yuan currency under an annual quota, state media said, which creates a limit on overseas investment though many evade the barrier.

Individuals are allowed to legally invest in stocks in Hong Kong, a special administrative region of China, through a special link with accounts on the Shanghai stock exchange.

The central bank announcement, which gave no timetable for the move, followed a top-level Communist Party meeting which discussed the country's development plans for the next five years.

China also wants the yuan to join the International Monetary Fund's "special drawing rights" basket of currencies and is pursuing reforms to help gain the coveted status.

In August, the central bank suddenly devalued the yuan, allowing it to lose nearly five percent of its value over a week, in a move which raised alarm over the state of the world's second largest economy.

source: www.abs-cbnnews.com

Investing for beginners: 5 steps to get started on stock investing

MANILA, Philippines - With the Philippine Stock Exchange index hitting new highs, many Filipinos are now realizing the advantages of investing their hard-earned money, versus simply parking it in a savings account or time deposit.

If you’re new to the investing game, you’ve probably wondered if you should be putting some of your savings in the stock market to take advantage of the trend.

Investing in shares of stocks or equities is one way to increase your wealth, but note some have also lost it overnight.

Stocks can grow in value, providing you with returns that may be higher than what you can get from putting your money in savings instruments or the money market. However, that is just half of the story — stock investing also comes with a measure of risk and if you are not careful, you may lose some, if not all of your capital.

Here are five steps to get you started on investing in equities:

1. Assess yourself.
Before you begin to invest in stocks, it is important to know what you need and want, and to determine if equity investing is for you.

Here are some questions to ask yourself:

What are your financial goals?

Before investing on anything, know your financial objectives vis-à-vis your current financial assets and your life stage. This will give you an idea as to how to craft your investment strategy. The investment strategy of a 50-year old retiree with real estate, money market placements, and insurance plans will obviously be very different from a 21-year-old who has just received his first bonus. Once you have an investment strategy in place, then you can decide on what investment vehicles are best for you, including equities.

What is your appetite for risk?
Stock investing, it must be stressed, is not for everyone. Equities carry risks, and the money you put into shares of stock is not insured by the government. Therefore, if you are not in a position to lose part or all of your investment money, stocks may not be a suitable option for you. Equities are best for those who are willing to take on a degree of risk in exchange for larger gains.

What other investments do you have?

Investing in equities should be seen in the context of your entire investment portfolio, with a goal to diversify your holdings in order to manage your risks.

What is your time frame?

Studies have also shown that equities tend to grow in value over a long period of time. Stocks are best for those without time pressures to deal with.

Do you have the time and the capacity to manage your stock portfolio?

Stock investing requires understanding how the market works, as well as the companies whose shares you intend to buy. If you do not have both, then you should look for a broker to help you manage your stock transactions.

2. Find a stockbroker.

The Philippine Stock Exchange has a list of brokers that you can refer to. There are also brokerage houses that allow you to do online trading, which some find to be a more convenient way of handling transactions. Some banks also offer stock broking services. Brokers differ in the range of services they offer, as well as in the minimum investment amount that they require.

The larger brokerages servicing institutions and high-net-worth individuals typically offer research services on top of trading, while smaller ones can simply offer trading services. Ideally, your broker would take the time to ask you about your investment goals and ask about your appetite for risk.

3. Open a trading account.

Your selected broker will give you a list of requirements to fulfill. Make sure you understand its conditions well. Take note of transaction fees and other rules, like how to transact. If you will use an online trading platform, take the time to familiarize yourself with how it works.

4. Monitor your investments.

Periodically monitor the movement of the stocks in your portfolio. Closing prices may be monitored online, on TV and in business newspapers. Keep yourself informed of any dividend announcements, which may entitle you to cash or additional shares of stock.

5. Evaluate your investment strategy regularly.

Does it still dovetail with your financial goals? From time to time, you may wish to continue to add to your stock portfolio, or if it is time to allocate some funds to other investment platforms, based on changes in your personal circumstances and goals.

One last but very important point: Do not think of stock investing as a form of gambling.

While you might have heard of people who have amassed a fortune overnight over a single stock, this is the exception and not the rule. Investing in stocks and in everything else requires an understanding of your goals, patience, and a lot of ground work. This point will be the common thread in this series of four articles on how to get started on investing in different financial products.

source: www.abs-cbnnewws.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

Dollar Cost Averaging: Should You Buy Stocks Over Time To Save Money?

You’ve heard of dollar-cost averaging before, but you’re not sure it’s the right thing to do. Right now, you just buy investments as you see fit and when you can afford to invest money. But, your broker is putting a bug in your ear to save money over the long-term by making regular purchases. Should you?










The Pros:

• It’s Affordable – This is a big one. Most people find that dollar-cost averaging is an affordable way to invest in stocks. With dollar-cost averaging, you choose three parameters. First, you decide how much money you want to invest. Then, you decide the frequency you want to invest. Finally, you decide for how long you want to invest. So, for example, you might choose to invest $500 (the amount) every month (the frequency) for 12 months (the time horizon). This makes it easy to make a budget and stick to it. You just add the dollar amount to whatever you’re spending right now and it’s sort of like investing on autopilot.
  
• It’s Convenient – There’s not a heck of a lot to think about once you’ve decided on the three parameters. You just keep investing every investment period until you’ve invested all of the money you previously decided to invest.

The Cons:

• Lump Sum Investing Might Improve Your Returns – One major drawback with dollar-cost averaging is that you’re not taking advantage of cheap stocks when they’re cheap. In fact, the whole idea is that you pay an average price for the stock over time. This is supposed to optimize what you pay so you don’t have to guess at what the cheapest price is. 

• But, this tries to shortcut an important premise in value investing. Namely, that your job, as an investor, is to buy cheap stocks and then hold them until their intrinsic value has been achieved. If you’re dollar-cost averaging, you can’t do this. All you can do is get an average price. It muddles your returns.
  
  
  On the other hand, if you invested lump sum amounts, you would be able to realize the full profit on a good investment.
  
• There’s More Fees – Because you’re making regular purchases over an extended period of time, you’re going to rack up more fees with your broker. That’s good for the broker, but not so good for you. You can use sites like BrokerStance to help you navigate the mine-field of online brokers so that you can hopefully avoid the ones that are out there to maximize their earnings off of you, but most brokers are of the opinion that dollar-cost averaging is “smart.” At the end of the day, all it really does is lower your total return. That doesn’t sound so      smart, does it?

What Should You Do?


You’re looking for a broker that has your best interests at heart. There’s a lot you can do to make sure you end up with someone you like and that’s good for you.

First, try to work with an online broker. These brokers offer the same service as traditional brokers, but they charge lower commissions. Find one that also offers additional assistance – some of them will do it at no additional charge.

Ask about the broker’s investment philosophies. This could clue you into how the broker will steer you in regards to investing strategy. While many brokers do recommend dollar-cost averaging, some don’t. Some brokers are focused more on helping you find long-term plays that will pay off in a big way.

These brokers are value investors and are more concerned about getting you into a stock at a good price instead of getting you into a stock over time.

Can Dollar-Cost Averaging Ever Be A Good Idea?


Believe it or not, there are times when dollar-cost averaging makes sense. Usually, it’s when you’re hunting for the bottom of the stock’s price but you don’t know where it is. If a stock starts to fall, in price, you want to buy it at the moment it rebounds and not a second too late. But, this can be an almost impossible task.

Dollar-cost averaging allows you to get close to an ideal price, especially if the stock is falling slowly and is expected to make a recovery soon. Keep in mind that this strategy works well when you expect a major recovery in a company’s stock price – you’re paying commissions on every trade you make. So, the recovery has to be enough to make the entire investment profitable.

Jarryd Harden has years of experience working in finance. He greatly enjoys blogging about his insights into smart investing and money management.

source: 20smoney.com