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Why You Should Invest In The Stock Market – Part 1
Posted by: | CommentsIn my previous articles, I gave a comprehensive introduction on how to invest in the Philippine stock market, particularly talking about the basic principles that each prospective investors should understand. In this article we are going to discuss the advantages of investing in the stock market.
As I said mentioned previously, the stock market is just another vehicle of investment. You might be wondering what is the reason why you should invest in the stock market? Is there an advantage in investing in the stock market ?
The question could probably be best answered by the following. Be advised that the examples given refer to Philippine based companies and currency. Should you wish to view the article in its entirety please visit my blog.
1.) The expectation of great returns – In 1997, the price of Globe Telecom Inc. (GLO) stocks was only P152.00 per share. You would only have spent P 1,520.00 to buy the minimum board lot of 10 shares. Now the price of globe has increased ten times more. It is pegged at P 1,620.00+. Meaning, the value of those shares that you bought at 1997 would be P 16,200 right now. This means that on the average you get 30 % return per annum. This is far more advantageous than putting your money in time deposit accounts which only give you less than 4 % per annum. This is just an example of what the financial experts are saying that when the stock market goes up, it really goes up. Returns could reach as high as 200 %+ per annum or even more. This is really expected, especially if you invest long term. It is interesting to know that the Philippine stock market is expected to be in a bull run for the next 2 to 3 years. If there is a time to get involved in the stock market, now would be the best time to do so.
2.) You become “part owner” of the company that you are investing in. – You might probably be thinking of franchising a Jollibee outlet. However doing so would cost you somewhere between 20 to 25 million pesos add to the fact that you have to put in time and effort to run the store. Why not buy stocks of Jollibee instead of franchising a Jollibee outlet in order to own your “own” Jollibee. You get to own 100 JFC shares (Jollibee Foods Corporations – JFC) for only P 5,000+. In so doing you “indirectly own” the more than 1414 stores in the Philippines and 175 in other countries including Red Ribon, Chowking, Deli-France, A popular fastfood chain – Yonghe King in China and popular teahouse chain from Taiwan called Chun Shui Tang including Jollibee’s pilot restaurant “Tio Pepe’s Karinderia.” Now that is so cool! The next time you eat at Jollibee you could proudly say to your friends and relatives that you like to eat there because you “own” part of it. You more be more prompt in paying your telephone bills if you own stocks of PLDT or Globe telecoms.
3.) Being part of a “Special group” -
Every time I am asked to join a multi-level marketing scheme, I want to know when the company started. I believe that if the company started a long time ago, I will have lesser chance of recruiting other people since most people that I know has already been recruited.
But investing in the stock market is not multi-level marketing. It does not matter whether the market is saturated or not. But it’s good to know that we are among the first to exploit the market’s potential.
Statistics released by the Asian Development Bank shows that as of 2005, only 600,000, out of the of the country’s 87 million population, invest in the stock market. If you do the math that is only 1 % or roughly around 0.7 % Most of the market players are from the Class A and B segments.
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, financial management, business, making financial online and Stock market investing
Principles Of Investments In The Stock Market – Part 2
Posted by: | CommentsThis the second part of the series on the discussion of principles of investment in the stock market. This is the continuation of a four part series. We previously discussed the first principle. This involves realizing that the stock market is just another investment vehicle. You must realize that there are other vehicles of investments before you decide to invest in the stock market. In this article the next two principles will be discussed. Please visit my blog if you want to view the entire article.
2.) Investing in the stock market is a roller coaster ride – The advantage in the stock market is that when it goes up, big profits are often made. But when it drops fast, big losses are made also.
The general strategy is to sell when the market is up and to buy when the market goes down. About two years ago when I started investing, the Philippine Stock exchange index was only about 2000 + points. I’ve seen it go up to 2500 points and slide back to the 2000 level in the middle of 2006. It slowly and steadily climbed up to the 3200 level in the 1st quarter of 2007 and dropped in a very short period of time during the last days of the 1st quarter of 2007. It climbed steadily to a high of 3700+ points in July 2007 but slid back below 3000 points a month after. By October 2007 it climbed steadily to its highest at 3800+ points. A month after it dropped to 3600+ points.
The point here is that it is really a roller coaster ride. Profits and losses are made during those up and down moments of the market.
3.) You should determine what type of investor you are – Are you a long term investor or a short term investor? This is a very important question that each serious new investor should consider. This affects whether you should buy or sell a certain stock.
If you are a long term investor, meaning that you hold your stocks for 5 to 10 years or more it means that you believe in the company that you are investing in and that you have extra money for other things because you can afford to put in your money for a long period of time.
One of the main benefits of being long term investors is that you do not have to worry about monitoring the day to day technical analysis. There is no problem if the stock is held for a long period of time since what is considered is the strong fundamentals of the company. On the other hand, short term investor,who decide to cash in within a months time to 6 months time, will have to monitor the day to day market activities to ensure that they are making a profit.
Short term investors have also to consider if they can afford to put in their money for a long period of time however the time element is not as long as that of the long term investor. This is so because during the short period wherein you buy and sell stocks, you might incur losses during this time so you may decide to wait longer a little bit more.
Most of the stocks I hold are considered as medium and long term investments. This is because when I started out I determined to be more of a long term investor. There are stocks that I hold that I consider as short term investments. However majority of the stocks that I hold are considered as medium to long term investments.
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
Why You Should Invest In The Stock Market – Part 2
Posted by: | CommentsLast 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.) 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.) 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.) Helps you understand the importance of being online and getting instant “knowledge” in this age of information technology. – Man has gone a long way from the stone age, the iron age, bronze age up to the industrial age. Now we have moved one more step ahead as we are right now in the “information technology age” where knowledge is power. Trading in the stock market by means of utilizing information technology certainly gives meaning to the adage that “knowledge is power.” Years ago when I was still in college I wanted to know what it is like to invest in the stock market as I was intrigued by what I see in the movies when traders shout buy or sell. Unfortunately, I did not invest back then because of the lack of information, capability and most of all the lack of capital to do so.
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.) 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.
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