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.) You must realize that investing in the stock market does not take a lot of money but if you really want to make an impact on your portfolio you have to place in a substantial amount. - You don't need millions or hundreds of thousands of pesos to invest in the Philippine Stock market. You only need at least P 20,000.00 to somehow play it out. I started out with only this amount. In fact you can invest if you only have P 10,000.00 but for me that is too small an amount. For example Jollibee (JFC) shares cost only 51.50 per share as of today. The board lot (which is the minimum amount of stocks that you could invest in) is 100. 51.50 x 100 = P 5,150.00. This is the only amount you need to be a stock holder of Jollibee. Let's say in 1 year time Jollibee stocks climbed to P 100.00 per share, you have gained P 5,000.00 more. But if you had invested 200 shares you could have gained more than just investing in 100 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.) Maximizing profit at the least possible losses. - Every time you see that the price of your stock went down, relax, the loss is only on paper. Actual loss is only attained when you sell your stock at the "losing" price. Therefore never sell at a loss. It should be emphasized that the money that you put into the stock market should not be taken from your emergency fund. It should by "surplus money." Putting in your emergency savings will result in you selling your stocks at a loss if you need the money badly. The gains you received in the stock market such as sales from stocks and dividends should be utilized to purchase more stocks to maximize your profits.

7.) You must realize that the stock market is not a get rich quick scheme - Don't ever expect to get rich overnight in the stock market. In all investment scheme always remember that money takes time to grow. Investments that give you unbelievable rates of return in a very short period of time are mere scams. The stock market, especially the Philippine stock market takes several months or even years in order for you to really profit. There may be times that it will just take weeks or days perhaps but these are rare occasions like when there is a consistent bull run that is going on or that there is an unusual drop or climb of prices in a short period of time. - 23212

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

Stock Market Basic Principles - 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.

Investing in the Philippine stock market is not for the faint hearted. As an investor you must have expectations as to how much you are going to earn for a certain vehicle of investment. Such is expectation is measured in terms of how much your money will grow at a certain period of time. (Most usually this is measured in interest per annum) Because the Philippine Stock market is in its all time high for several months now, people think that they should join the band wagon. They do not even understand the basic principles involved nor do they understand how the stock market works. I am not saying that you should be an economist before you should invest in the stock market.

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 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.) An alternative vehicle of investment - The first principle is that you must realize that the stock market is just another alternative vehicle of investment. There are other investment vehicles in which you could invest in. Each vehicle of investment is unique and one is not more superior than others. Each of them has their own advantages and disadvantages. This will not be discussed in depth 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.

As I said each of them has their own advantages and disadvantages. What I personally did is not to place all of my eggs in one basket. I have invested in most of the Capital Markets including the stock market, insurance, pension, deposits, and bonds through mutual funds. - 23212

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

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

By Zigfred Diaz

Once upon a time an Overseas Filipino Worker (OFW) started working abroad. At the age of 29 he had already saved a total of 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 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.

So tell me, is this a "live happily ever after" story or not? Do you think this OFW has "wisely" handled his money? Did he really maximize his money's potential or did he just made others more richer ?

The rule of 72 gives us the answers to the above questions. This rule determines how many years it will take your money to double. The rule is expressed in this very simple equation: 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)

So when the OFW went back to the bank after 36 years and claimed his P 100,000.00 the bank manager gladly gave him back his P 100,000.00 plus the interest of P 300,000 amounting to P 400,000.00. After all they already made P 6 million pesos out of the OFW's P 100,000.00. Now isn't that hi-way robbery?

Think like the bank if you want to be more wealthy and a more better steward of your money ! The Rule of 72 works ! Make it work for you ! - 23212

About the Author:

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 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.

Do the best you can to read all the materials out there and attend all the seminars if possible. Do not give up just because you encounter terms that you could not understand. For example when you went over this article you would probably scratch your head since there are terms that are difficult to understand. Terms such as "points", Philippine Stock Exchange Index (PSEi), "Blue Chips" or "Bull run" may sound foreign to you. Add to the fact that you don't even understand what a stock is and how it works. So what ? When I first began I did not even know what 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.) 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. - 23212

About the Author:

Would you want 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

Previously the advantages or the reasons why you should invest in the stock market was discussed. In the first part of this two part series, we discussed about the first three reasons why you should invest in the stock market those are, potential for greater returns, part ownership of the company you are investing and belonging to a special group of people. We continue by discussing the next 4 reasons in part 2 of this 2 part series. Should you wish to view the entire article, check out my blog.

4.) One of the best if not the best vehicle of investment - In 1986 the Philippine stock market recorded its highest return rate at 224 %. The lowest return rate was recorded in 1997 at negative 41 %. The average return in 20 years time however ranges from 24 % to 28 % per year. It can therefore be clearly seen that while it is true that investing in the stock market has its up and down, in the long run long term investments in the stock market still yields a greater return. Hence it can be concluded that the long term investors always benefit and that the stock market is still one of the best vehicles of investment.

5.) Helps you become more financially literate and inspires you to increase that knowledge - Investing in the stock market forces you to go over the business news. It also helps you give significant meaning to the major news headlines. News for you is not something to be discussed in chit chats, but rather you view it as something that will have an impact on how the market behaves. You are forced to understand words that are foreign to you. You will become more sharper intellectually as you are motivated to keep on reading. If you dozed off in your your economics class in high school or college, this time you will be pulling your hair apart just to figure out what inflation means. you will be motivated to become a life long student.

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.) Helps build the nation - Investing in the stock market helps build the nation. Most stock market investors may not realize this but this is one of the most noble objective and advantage of investing in the stock market. Companies who are listed in the stock exchange intends to infuse more capital into their business in order that such capital might be further used for expansion. Business expansions would mean more people are hired for work. The government also benefits as more taxes are being paid. This further translates into more economic activity which in the long runs helps build the nation.

For sure these reasons certainly make a convincing argument as to why you should invest in the stock market. - 23212

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