Stock Market for people with jobs
Part 1
The stock market is a good multiplier of your current income but like any type of business; you cannot just jump and starting investing without knowing the basics of stock market and without a concrete strategy or business plan otherwise you are doomed to fail.
What is the Stock market?
The Stock Market is a market in which you can buy or sell stocks of publicly listed companies (eg Jollibee, SM, Meralco, etc.) If you buy a stock of a company, it means you are buying a share of ownership in the company. That also means you will be a part owner of the company.
How do you make money from the Stock market?
Dividends – as a part owner of a company, if the company makes money so will you thru dividends or pay-outs based on your # of your share ( eg. 1000 share X Php 1.00 dividend payout = Php 1000 before taxes). Most companies give stock dividend at least once a year.
Capital Gains – this are gains in the value of the shares of your stocks thru time. It can only be realize when you sell your shares.
Why do I invest in the Philippine Stock Markets (PSE)?
As a Nationalist, I love the Philippines. I believe in the potential of the Philippine Economy hence every time I invest in PSE, it will infuse liquidity in Filipino Companies that can be used for expansion, projects and employment of Filipinos. I invest for my country and countrymen. It is the most Nationalistic way to make money.
Demographic Dividend - according to the United Nations Population Fund (UNFPA), is “a boost in economic productivity that occurs when there are growing numbers of people in the work force relative to the number of dependents.”
3. Philippines Economy is the fastest growing in Asia. (below is the headline taken from CNN website)
How much do I invest?
Since I have a Job, I allocate my income in this manner.
If I make 10,000/month, I would invest 1,500 / month in stock market; if I make 100,000/month then I would invest 15,000 / month. This is a simple formula I teach everyone including my students and staff. I believe we are creatures of habit hence if we start investing 15% of our salary per month, we will get used to the process of investing. This will shift our frame of mind from consumers to investors, thus it will be mutually beneficial for you and your country.
Is there risks in investing in the stock market?
Every type of investment has risk. In the stock market, risk are divided into 2 type:
Inherit risk/unavoidable risk – always remember that PSE is connected to the stock market of the world. Whenever there is a global event, it will ripple into the PSE thru market volatility. This can be remedied by long term investment horizon (5-10 years). Eventually the stock market will always recover.
2. Avoidable risk/risk due to ignorance – capital loss due investing without a strategy, investing without research and investing on hearsay.
What are the strategies for stock market investing?
(Common Stock Market Strategies will be discussed in Part 2 of this series)