Photo taken from Market Watch
The stock market is not as hard as how people think it is, but just like getting in to a business or any other investment, it is also not something you enter into without sufficient preparation.
Investing in stocks isn’t just for those who possess advanced financial knowledge or those who have the luxury of time to monitor the market every day. Through stocks, you can beat the negative effect of inflation on your money, something that your savings account cannot do for you. However, it does not go up in a straight line. Regardless of what situation you are in, we encourage you to stick to your financial plan and leverage on the opportunity that you can make your savings grow.
As an investor, you should not be scared of the risk attached to each investment, but your goal should be to study the risk, see if it fits you, and find ways to work around such risk. For starters, here are a few tips on how you can get started in stock investing.
Study first. Before putting a single centavo, know all the things you need to know about investing in the stock market. You would need to know why there is a stock market; how you can possibly make or lose money in stocks; the risks that come with this kind of investment; and why stock prices move up or down. As an investor, you must surround yourself with measurable strategies that should determine whether you should buy the stock or not. Today, the two most commonly used techniques in making stock investment decisions are Fundamental and Technical analysis.
Fundamental Analysis is a method that determines the current worth of the stock, and identifies how the market values it. The company’s fair value is taken into consideration when buying or selling its stock. For example, say the projected fair value of XXX Corp. at the end of 2018 is PHP 7.81. Looking at its current price at PHP 6.81, this could be a good entry price, since you could potentially increase the value of your stock by a full peso or 20% in a year.
Technical Analysis is a method that focuses on the price and volume pattern of a stock within a certain timeframe ranging from days to years. The history of price movements is charted and stock price patterns are identified. These trends are considered when buying and selling a stock.
Simulate a trial. Before investing your hard earned cash, open an online trial account to simulate buying a stock and see how it goes. If you feel that you have gained a certain level of confidence from your simulation, then that’s when you can open a real account, this way, you build confidence step by step.
Open an actual online trading account. Open a real account and fund it with money that you have specifically intended to put for stocks. Make sure that you are investing money that you don’t plan to touch for at least 10 years and money that will not make you lose sleep at night if things turned out below your expectations.
Rank your top companies of choice. There are over 200 plus stocks in the Philippine Stock Exchange. If you are employed or you are running a business, it would not make sense to watch all the stocks out there because it will take too much of your time. Research and only watch companies that are profitable, significantly growing, undervalued, and are only at the start of its uptrend. Based on technical analysis, force rank them from 1 to 10 – the top 1 having the biggest upside.
Start with your first trades. After selecting your top company it’s time to put things into action. Your goal when you are starting is not to earn so much at first. But rather to develop your craft and build a winning strategy that you can use for the long term. Start with a significantly smaller amount that will protect you from possible emotional swings should the stock move up or down. A lot of people who get burned in stocks are those who get blinded by the idea of getting rich by just one trade and often don’t see the associated risks. Your goal is not to be profitable one time-big time; but to earn repeatedly year in and year out until you hit your financial goals.
Track your progress. Take the time to assess your investment decisions. Buy and sell using your parameters in line with both the fundamentals and technical knowledge in trading stocks. If you are satisfied with your gains and percentage of winning trades, increase your allocation then utilize your whole stock portfolio as your skills and confidence develop.
As the stock market remains erratic with cycles that come and go, there are plenty of opportunities that active investors can take advantage of with the use of proper skills and tools. Whether you are a seasoned stock market trader or a newbie in this field, investing in the stock market is a continuous learning process.
People easily quit when they experience a loss in their trades or when they don’t get their expected returns but that’s part of investing. Remember that your goal is not to play a perfect game but rather to maximize your gains, minimize your losses until you reach financial freedom.
Be informed, study, attend relevant trainings and seminars, find people you look up to and get them as your mentors. These practices will speed up your learning and also prevent you from going through the mistakes that some of the best industry leaders made.
We are inviting you to attend the Philippine Business School’s Stock Market Masterclass where we will help everyone regardless of financial background to understand the essentials of investments in Stock Market that will enable you to take control of your investments through knowledge and education. The key is not to go into a trade blindly, because we believe that a well-informed investor is ultimately a successful investor.
Disclaimer: This course is provided for informational purposes only and should not be construed as an offer to buy or sell a particular security.
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