Smart Pinoy Investor: How to make stocks a source of your wealth

Below is a helpful post by Ricky So from his blog rickysogood.com.

It's a good article tackling the most common questions and concerns about starting investing.
It's also a good starting point if you've been thinking of inviting your friends and relatives into the stock market. As you know, some of these people may actually just have to be presented with some sound guidance before they can give their first shot.

Read on and grab some ideas into making more fellow Filipinos become smart investors.
Let's all take our part!

Have fun investing (for a better Philippines)!
Omeng

Photo credit

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Stock Investing - A Source of Wealth

When I talk about getting wealthy or achieving financial freedom, a lot of people will be interested, all ears are on me. However, if I start talking about stocks, I seldom see a receptive face. It is natural to be receptive to the topic of getting wealthy or building wealth, this is our life long pursuit anyway. While there are so many ways of getting wealthy, one effective way to grow wealth is thru stock investing.

But, the fact about stock investing is that very few Filipinos appreciate it. Despite the stellar rally of the stock market in 2009 until 2012, very few opened an account with a stock broker. Out of more than 90 million Filipinos? Why is this so? Perhaps there are a lot of reservations against it. Unfortunately, not everyone know that one identified source of wealth creation is thru stock investing.

Below are some of the reservations I encounter about stock investing:

“I don’t know anything about stocks.”,
“It is so complicated?”,
“It is so risky.”,
“I don’t have so much money to invest.”, etc.

You want to learn stock investing? It is easy to learn if you want to, there are free and paid seminars to attend and there is an available literature about it. Especially, in this day and age of computers, accessing information is very easy. There is a primer available at the PSE website, www.pse.com.ph. Also, simply ask around.

Complicated? Not really. Buying stocks is like buying anything of value, a commodity, a shampoo, food product or even a property. It requires some evaluation of sort before buying. Isn’t it that you look at price of the goods you will buy, then, look at the ingredients and nutritional facts before actually paying for it? That to me is called evaluation or analysis. Apply the same into stock investing.

Risky? This depends on how you look at it. I haven’t seen an investment that has no risk! If there is such, it is most likely a scam. An investment without risk that promises good returns is a scam. The so called risk aversion of many has put themselves into being victimized by such schemes. However, there are some people who still look for these types of schemes. If you are pessimistic, you will see the risk as a negative. But, if you are optimistic, you will see the return of the risk you are dealing with. Remember, most wealthy people took the risks and are optimistic in what they do.

Lack of Money? Stock investing can start with as small as Php5,000.00 contrary to the popular belief that it requires huge capital. Moreover, the said amount can buy shares of 3 to 4 companies listed in the Philippine Stock Exchange (PSE) or the local stock market.

The real concept is getting into stock is like getting into a business. We know for a fact that another source of wealth is getting into business. But, this business of stock investing is like “partnering” with the existing businesses. Some of which, you currently patronize. Say, Jollibee, how much do you think you have spent dining with them? You patronize their products and services, most birthday parties are held in their premises. So, you are actually contributing to the profitability of Jollibee by patronage. You can see that their business is viable and will last a long time and conquer new territories. I bet you want to own a Jollibee franchise. You can, by simply buying Jollibee stocks, and you become a part-owner, they call it a stockholder. In 2002, Jollibee shares traded at about 15 pesos. Today, it is trading at about 100 pesos. An almost 500% gain over 10 years isn’t bad. Notwithstanding, the cash dividends they declared annually.

Don’t go out right now and buy Jollibee shares. This is only an illustration and a sample to prove my point that stock investing is a viable wealth building idea. Remember, learn it first.
We Filipinos are trained to be employees and at the latter part of our career or during the mid-point when we have earned a substantial amount , we shift to business. I say, being an employee isn’t bad, but, being into business while being employed is a much better idea. How? One way is by simply investing in stocks while building a career. Learning this only upon retirement is a risky situation.

Stock investing is another source of wealth. Its beauty lies in its simplicity and complexity. So simple because you buy and sell paper or financial assets called common or preferred shares. Simple because, you need not monitor it closely unlike having your own business, as a matter of fact, somebody else is managing the business for you. You can monitor it anywhere thru online trading platforms of some stockbrokers. You can start with a small amount. You can build it up over time by investing regularly. On the other hand, its complexity provides challenge and when learned, it becomes a lifetime edge and a skill that is widely valued.

As a closing, perhaps, you will say, stock investing is not for me. Maybe……… but, this I will say, “Kapag ayaw, maraming dahilan; Kapag gusto, may paraan.” Becoming wealthy is a choice and rarely a chance. To me, I have chosen stock investing as THE option.

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