Last Updated on 8 months by DiaryNiGracia
1. What is the ideal amount to invest in the stock market?
The stock market might be a fantastic location where you can invest your money and see long-term development. The amount required to participate in the Philippine stock market depends on several factors, so you probably have a few different inquiries. The suggested monthly investment amount in the stock market may be something you’re considering. Or you may wonder how much cash is needed to launch an account with an online broker. Maybe you’re even considering whether or not you can afford the costs involved with investing. First, the stock is a long-term approach connected to your long-term objectives in market investing. It’s not for quick and straightforward wins because you risk losing money due to market volatility rather than winning money due to the market’s overall performance. Additionally, you only wish to invest money. You can skip mid-term. It’s for mature investors because of judgment calls in the stock market. Stock market investing is not for the timid or those with low-risk tolerance. One of the riskiest assets in your portfolio is one whose stock prices can change based on the market and the public’s perception of the company.
The minimum sum of money required to open a trading account and the minimum number of shares needed to trade a stock determines the minimum necessary to invest in the stock market. The smallest number of shares that can be changed will depend on the stock’s current market price. The minimal number of shares that can be bought or sold, given a specific price range, is shown in the PSE’s Board Lot table. You can buy stocks for as little as Php 20. BDO Unibank Inc. is one of the known bank companies in the Philippines, offering a 0.25% share for Php 20. For instance, if you buy a stock worth Php 8,000 since it has reached its minimum amount required by the company, you will earn Php 20 monthly. Initially, it would be best if you found a broker. Then, you can open an account and deposit an amount of at least Php 1,000. You can start browsing through different companies you should consider investing in. As an investor, you must research and be mindful of your accounts and decide whether to buy or sell.
Anyone can afford the expenses of opening a brokerage account and investing in a stock. Opening a brokerage account is also simple. Despite the cheap fees, buying at least PHP 8,000 worth of stock is essential because there is a PHP 20 minimum commission. Given that each person’s financial situation is unique, it is challenging to determine the precise amount you should invest in the stock market. Nevertheless, investing a portion of your money each month is advised. Saving as least 15% to 20% of your salary is an excellent place to start. If you cannot invest so much, attempt to keep as much as possible while gradually increasing your investment. Diversifying your stock portfolio is crucial. You can diversify your portfolio by purchasing 10 to twenty (or more) stocks. Also, you would require PHP 80,000 to acquire ten stocks because buying at least PHP 8,000 worth of stock is recommended. You can still buy stocks if you don’t have PHP 80,000; you may have to buy fewer, at least PHP 8,000 worth of them. Then, as you gradually add additional equities, keep investing as much as you can each month until you have a balanced portfolio. It has always been more complex to invest in the stock market in the Philippines. Opening a brokerage account is simple, and the costs are very modest. You can begin purchasing stocks immediately if you have established a brokerage account. To open an account if you don’t already have one, click the link below. Start your investments now!
2. What are the truths about time and money in the stock market?
1. Market Timing is Impossible
For many years, naive investors have relied on market timing and for a good cause. The potential for maximum return arises from the notion that one can perfectly time their trades to correspond with the peaks and valleys of stock prices and broad market trends. But like with other things, good timing frequently results from chance and circumstance rather than deliberate planning (or a crystal ball).
2. Market Trend Favors Patience
Everything benefits from patience, but it’s beneficial when it’s a cornerstone of your investment approach. It is another market aspect that has shown to be resistant to change: fluctuations come and go. Market volatility rarely justifies rushing with your investments. By doing this, you often lock in losses on your assets and forfeit the chance to see things through when the markets pick up steam.
3. Never Chase the “Next Big Thing”
Hot stocks garner media attention, which leads less knowledgeable investors to invest in shares that may already be close to their peak value. By the time the alleged “next great thing” gets media attention, you’ve already missed your chance to join the bandwagon and get a sizable return on your investment. That has kept many investors from deviating from their plans to strike it rich one time, though. These investments frequently turn out differently than people had hoped. This does not imply that buying a hot stock is an obvious mistake. Many times, adding a few prestige holdings to your portfolio makes sense.
4. Volatility will always exist
While steady growth is undoubtedly best for most portfolios, there will be times when a bullish and bearish market exists, at least not for more than a few weeks or months. The reality is that mixed periods will occur frequently, and there are only so many warnings one can detect before volatility increases. Volatility is just a given if you’re managing your portfolio over the long haul. There will be many ups and downs, as well as periods that are mixed with both. Despite this, there are strategies to protect yourself from volatility because it only affects some investments or industries similarly. In actuality, several investment classes go against current market trends. These holdings can aid you in navigating the unavoidable volatility in your asset allocation mix.
5. Each Investment has risks
There are other worrying investing phenomena besides volatility. Every time you invest money, the risk is another unavoidable component. A stock’s value could drop, a hedge fund could lose money, or even a private investment in a company could lose money. There are few sure bets when it comes to investments; reducing risk often reduces your chances of earning an excessive return. There is no reward without risk. The difficulty with investing is choosing the perfect opportunity to generate a return on your capital that aligns with your risk tolerance level. The average mutual fund return is a small portion of what one could earn by shorting the right stock, even though mutual funds carry significantly less risk than options trading. It would be best if you aimed for an asset mix that combines steady holdings with a few riskier, higher-reward investments. By doing this, you can gain exposure to high returns without putting your portfolio value at undue risk.
6. Earnings drive stock prices
The underlying company’s earnings, earnings expectations, and uncertainty surrounding those earnings expectations can all be used to explain any long-term movement in a stock. Markets are affected by economic or political news to the extent that it is anticipated to affect earnings. You invest in companies because of earnings, also known as profits.
7. Valuations will reveal little about the following year
A variety of valuation techniques can be used to determine if a company or stock market is pricey or inexpensive. We won’t go into each one in detail here. While valuation techniques may provide some insight into long-term profits, most offer little insight into price trends for the upcoming twelve months. Things can get more expensive and less expensive over brief periods like this. It’s essential to keep in mind that prices can fluctuate significantly over time. Some people contend that valuations need to follow a mean-reverting trend.
8. No investment can guarantee profits
Investing in it always carries some risk, no matter how safe a stock may seem. The share price of a corporation could change for hundreds of different causes. Examples include the economy (local or worldwide), industry, business fundamentals, technical issues, new taxes and regulations, social and political concerns, and many other factors. Anyone promising a guaranteed return is either inexperienced or lying to you if they say it. The smartest thing in the stock market is you can lower risk by taking specific actions and deliberate, “educated” decisions.
9. Fear and Greed Control the Market
When everything is going well—the economy is strong, unemployment is low, the government is making wise choices, etc.—people get greedy and upbeat. We all want to accumulate the most wealth possible in the quickest length of time, after all. And this results in stock mispricing. The investor’s overwhelming desire (greed) makes it challenging to keep to the basics and sustain a long-term strategy. On the other hand, when conditions are poor, the economy is struggling, and the market experiences a loss for a long time, people tend to become overly defensive and think that the market and economy will continue to deteriorate forever. The market is driven by this greed and fear, which also affects most stock investors’ “decisions.” The truth is that it’s complicated to control your greed and fear to make a wise investment decision, even though most will not agree.
10. The executives of the company might fudge its profits
I hate to tell it, but business executives have been known to fudge their profits. One of the unpleasant truths of the stock market is this. Everyone desires to invest in a business that is expanding quickly. What other indicator of development could there be than a company’s earnings rising steadily? However, it puts a lot of pressure on the business executives to live up to those expectations once the market starts anticipating a fantastic performance from the company quarter after quarter. And if they don’t, they sometimes fudge the numbers out of fear that their stock price will drop.
3. What do you expect in webinars regarding stock markets?
Different organizations present webinars that have specific objectives in mind and things they intend to achieve through the webinar. These objectives typically involve increasing awareness of stock market. Every person who participates in a webinar does so for various reasons. And they are counting on the webinar host to deliver on those promises. Each webinar’s theme will logically lend itself to particular things the audience seeks. But generally speaking, webinars about the ins and outs of stock market are what should be expected.
Nobody wants to sign up for a webinar and sit still in front of a screen for an hour. But it occurs more frequently than you may realize. It should be engaging to make it more immersive and exciting. A webinar ought to seem like a welcome break in the middle of a busy day at work. They continue the conversation in the chat by asking questions, having the audience participate in a poll or survey, viewing videos, clicking to download resources, or watching videos. The audience will learn more and appreciate how the market works. It might come as a surprise, but we, as participants, desire the opportunity to share our thoughts and ask particular questions that we have. The audience can get the answers they were looking for, and speakers can learn about their specific worries by including a genuine question-and-answer period in the webinar. You can utilize the information here! In addition to the Q&A segment, speakers may also get people discussing on social media. Some webinar platforms include the ability to connect with social media sites, allowing users to post their queries and ideas in a public forum without leaving the webinar window. You can also start the webinar chat to help with questions and ideas.
These days, everyone is extremely busy, so if someone makes time in their day for professional development and attends a webinar, they are placing their trust in imparting knowledge that will be useful to them. This should also be your aim while preparing your webinar materials. Instead of presenting the same old material the audience has probably already seen, give them what they came for and delve into some fresh trends—putting out information about the what, why, where, and hows of the stock market itself because these are more valuable times. Presentations are always what will capture the attention of the audiences, as an audience point-of-view we wanted to learn how buying and selling of trades actually work. The majority of attendees are aware that webinars are a marketing technique. However, provide them practical answers and concrete steps we can take immediately to acknowledge more on the market because we have learned deeply about it. Participants will start to believe in the speakers as a source moving forward. At the end of the webinar, we should now have the basic information and keynotes about how the stock market works and how to be intelligent traders. Being able to attain the objectives given by the webinar is highly important as it will serve as their gained knowledge.
4. Why is stock market not for everyone?
One can gain money on the stock market in the short or long term. Only some people, however, are suited to making such investments. Some people may need help finding the concept of acquiring stock in a firm to be very appealing.
The risks a specific company faces are also known to stock owners. Suppose a firm is experiencing financial troubles, legal concerns, or other problems. In that case, its stock is likely to be impacted, decrease, and as a result, pull down all investors in the company.
Anyone planning to engage in the stock market has to understand that gains typically arrive after a long period. Additionally, even immediate profits are only sometimes guaranteed because bad business or economic news can swiftly reverse any advantages. This implies that a person must wait patiently for their investment to yield a return.
In the case of short-term traders, who strive to enter and exit the market based on what they perceive to be the most advantageous time to do so, this patience extends to market timing. This strategy assumes that the market can be accurately forecasted consistently, which is problematic because most financial experts think this is practically impossible.
Before choosing a stock, investors must conduct some research. Their target firm’s brief history, parent company, subsidiaries, and other affiliations, earnings movement, expansion goals, and management structure are just a few of the things they need to be aware of. These offer a person a reasonably accurate notion of how stable a firm is and assist in predicting the company’s future.
This means that owning stock in a corporation entails both risks and benefits. The stock market, however, is not the best investment option for those who lack perseverance, self-control, adaptability, and sufficient research assiduity.
Stocks make it simple to create a diversified portfolio that spans numerous industries. This can assist you in diversifying your whole investment portfolio, including stocks, bonds, and cryptocurrencies like bitcoin, thereby lowering your overall risk profile and raising returns.
Although there are good reasons not to buy stocks, the upside potential surpasses the danger for most people. Therefore, buying stocks is always a wise decision, even when the market is at an all-time high. According to studies, the time an investor stays in the market is more significant than market timing. Holding out to acquire equities at the ideal time might be expensive because most profits occur over a short period (a few days).
Stocks typically bounce back quickly following stock market crashes or 10% or more earnings losses. The likelihood of losing money decreases the longer an investor is in the market.
Although having some knowledge is always preferable to having none, it is essential for individual investors in the stock market to understand precisely what they are doing with their money. Successful investors are the ones who do their research.
An investor needing more time to conduct an in-depth study can consider hiring an advisor. Using an investment advisor is significantly more expensive than investing in something you need help understanding.
Another saying goes, “What’s obvious is wrong.” It implies that having little knowledge will result in you lemming-like following the herd. Investment success requires a lot of work and effort. Like a surgeon who is only partially informed, an investor who is only partially informed can make serious financial mistakes.
5. How can you be a SMART stock market trader?
1. Create a trading account
One uses a trading account to purchase or sell equity shares on a stock market. Previously, traders conducted manual trading by communicating their purchasing and selling decisions through hand signals and vocal conversation. Online trading, however, became accessible to the general public not long after the explosion in stock market electronic trading. You can now open a trading account with a registered stock market broker who trades on your behalf. Transactions are carried out using the Unique ID assigned to each performance.
It’s essential to research the reputation and credentials of the brokerage firm before opening both accounts. Additionally, the trading account needs to enable you to trade online in Futures, Options, Equity Shares, Mutual Funds, and Initial Public Offerings. Last but not least, it ought to have a secure interface and protocols to ensure that all your transactions are always safe and secure.
2. Learn for yourself
In your leisure time, begin to follow the market every day. Read up on overnight price movements on international markets as soon as you get up. Before you make your first order on the stock market, you must be familiar with trading words like buy, sell, IPO, portfolio, quotations, spread, volume, yield, index, sector, and volatility. To better comprehend the terminology used in the stock market and associated news, read financial websites or enroll in investment courses.
The stock market continually has ups and downs. Beginning stock traders frequently cause more harm to their accounts by expecting more significant returns at higher risks. Since risk cannot be avoided when trading shares online, low-risk, high-reward trading strategies ensure that profits are made while bets are kept in check.
Failing to plan is planning to fail. Anyone serious about succeeding, especially traders, must have a plan for their stock market investments and trading. Making wise investing decisions through your trading strategy is crucial. Choose the investment amount of time you want to hold the assets. In light of this, you can plan your buy and sell orders based on the cash limits and exposure you have established following the intended strategy.
3. Be able to analyze
Using corporate reports and non-financial information, such as industry comparisons and projections of demand for expansion of the firm’s products, financial analysis is used to conclude future share prices and the general health of a company. It is crucial to inquire, “What distinguishes this company from competing businesses? ” or “Is its market share sizable? A two-dimensional chart is used in technical analysis to depict the price change over time. It forecasts future prices using past share price data and volume charts. Making wise selections requires using both sorts of analysis.
4. Exercise trading
It is a good idea to use an online stock simulator to practice your skills with no risk. Participating in online stock market games can teach you about investment techniques. Most online simulations of the stock market are synchronized with stock prices and market indices, providing a realistic experience of trading stocks with fictitious funds. This makes it easier to comprehend how the stock market operates without the risk of losing money on stocks.
5. Management of Risk
Another distinct practice related to stock markets is risk management. Since investing in the equity market entails risk, a comprehensive risk management system ensures that investors’ interests are protected while enforcing any restrictions on corporate fraud. The system also makes it possible for the stock market to stay informed about altering trading practices and protect against potential market failures.
Learn the fundamentals of the stock market
Although stock trading isn’t as simple as it appears in movies, you may get started from the comfort of your home. However, before entering the trading market, you should know what you’re doing. Below is a list of standard terms you’ll encounter:
- Intraday trading: Before the market closes, you must square off any open positions in intraday trading or day trading. You can employ margins for intraday trading, which are funds the broker gives you to boost your exposure to the stock market. It enables you to buy/sell more stocks than you might typically do without making a more significant financial commitment.
- Delivery trading is purchasing stocks and keeping them for longer than a day to take delivery of them. You must have the money for your share market investments because it does not use margins.
- A bull market is a state with a broad trend toward increase. A general sense of optimism distinguishes this among investors and a belief that prices will continue to climb. During a bull market, stock values significantly increase. Before and after this time, a significant decrease in stock prices (usually 20%) is also noticeable.
- A bear market is a state with a broad downward tendency in prices. This is characterized by increasing selling activity and pervasive pessimism among investors who expect stock prices to fall. During a bull market, stock values significantly decline. Typically, the market is regarded to have entered the bear period if a loss of roughly 20% from the high is seen over many months.
- Long and Short Positions: If a shareholder has purchased and now owns the shares, that investor is said to have a long position. On the other side, an investor is said to hold a short position if they lend their ownership of these stocks to another party but do not own them. An investor is considered 500 shares long, for instance, if they purchased 500 shares of Company X. This assumes that the shareholder has paid the total price for these shares. The investor is said to be 500 shares short if they share 500 shares of Company X without actually owning them. This frequently occurs when an investor borrows shares from the brokerage company to deposit into his margin account to make the delivery. This investor must now pay 500 shares in the market to make a delivery at settlement.
7. Know your rights: Please ensure a broker is registered and its credentials back up any claims made before engaging in a relationship with them. Make sure you receive a “Statement of Accounts” for all money and securities settled each quarter and written confirmation of each deposit you make.
6. What will you do when the market rushes and you have money in stock market?
1. Sell off risky positions
Some investors liquidate their holdings in line with public opinion when they anticipate trouble. Savvy investors begin by liquidating riskier investments, such as those with novel business concepts, high beta, or a history of volatility. Others sell even the most stable businesses as insurance against losses. Experienced investors, on the other hand, don’t mimic the anxious investors who jump to sell everything and stand aside. Selling everything puts you at risk of missing out on significant rewards if the market recovers from its lows. Top investors avoid liquidating their entire portfolios by only selling the riskier holdings while holding onto safe investments in well-established businesses, like blue-chip companies.
2. Hoard money
When they anticipate a downturn, some of the best investors may hold onto their investments but refrain from making any additional investments. For instance, investors with many dividend equities can stop reinvesting and hold onto their cash as a safeguard against portfolio losses.
If the markets decline, hoarding cash enables you to withstand the storm relatively undamaged. Investors with money can hold off on making new investments until the market is right, even if their stocks see significant value declines. Gains from riding the market higher after a recent crash can help offset losses from holding onto stocks through the downturn.
3. Purchase Fixed Income Securities
When the markets appear unpredictable, investors may shift their money into fixed-income products. There are several varieties of fixed-income investments, including bonds. Bond prices often fluctuate in the opposite direction of stock prices, so as stock prices decline, bond prices increase. Bond prices may fall alongside stock prices in the case of a significant market slump. However, their yields should rise in response. Various debt securities, such as corporate, governmental, and municipal bonds, are available on the bond market. Large corporations issue corporate bonds as forms of debt. Different types of government bonds exist. Local governments issue municipal bonds, which frequently have tax advantages. Be mindful that significant fixed-income investments will depreciate if interest rates rise. As long as the issuer doesn’t default, each bond will always pay out a consistent amount, but prices fluctuate on the secondary market, where many investors purchase and sell bonds.
4. Buy, Buy, Buy!
In other words, a decline in market prices is likely to occur shortly while the markets are soaring and people are boasting about their earnings. Conversely, a sharp market upswing may be approaching if investors are uneasy and concerned about the current situation. The dollar-cost averaging tactic is one way to purchase equities in a bear market. This occurs when investors consistently add the same sum to their investments each month. They might only buy a small number of shares when share prices are high, but they will be able to purchase more when prices are low. This tactic lowers their average share price over the long term and may be a wise choice if (and most likely when) the market recovers. These purchasing tactics include some risk. Even while investing during a downturn frequently yields significant returns, there’s a potential that the market has yet to reach its bottom. However, compared to those who choose not to purchase during the market decline, you will enjoy more gains when the market eventually starts to recover.
5. During a market crash, do nothing.
If you have confidence in your current investment strategy and portfolio holdings, only alter your action if necessary. After all, you might have kept a market crash like this one in mind when you constructed your portfolio. People who sell in panic amid a crisis frequently regret their decision. Take those who left the ship in the spring of 2020, when the S&P 500 dropped more than 30% in a relatively short period. By the summer of 2020, when the pandemic rally had swiftly erased the early Covid market losses, they had already looked back on their decisions. And by the year’s end? They had lost out on gains of 65% since the crash’s bottom.
6. During a market crash, go shopping
Events like the emergence of Covid-19 or the revelation that the Federal Reserve will alter its monetary policy strategy frequently cause market crashes. An aggressive speculator who borrowed money to buy stocks may be obliged to make forced transactions due to rapid market drops, further emptying their stock holdings and starting a cascade of selling. However, the truth is that the market often crashes and presents opportunities, particularly for astute investors. You might be able to splash out on companies and ETFs you’ve been eyeing at significant discounts—or you might keep buying shares according to your usual investing plan.
7. Money-Cost Average, Even on the Way Down
The best strategy for going on a shopping binge while the market is volatile is to dollar-cost average your purchases. That entails frequent purchases for a certain amount of money, even when the market seems dangerous. By removing fluctuations in your average purchase price, dollar-cost averaging frequently lower it over time. Since you won’t be investing all of your money at one time when the market is at a specific price point, spreading out your purchases in this way lowers your risk. Hopefully, this has relieved you of the worry “what if the stock drops tomorrow?'” fear. If you are saving through a corporate retirement plan, money-cost averaging takes place automatically. Your brokerage account should include a function that allows you to automate your contributions if you’re investing independently, whether in a tax-advantaged individual retirement account (IRA) or a taxable investment account.
8. When the stock market is in a slump, look for dividends.
If daring, consider letting dividends guide your investment decisions during bear markets. Like banks pay interest to holders of savings accounts, many businesses annually distribute a small dividend yield to shareholders to share their profits. The companies that provide dividends tend to be more mature, and their share values are less volatile, even though dividends aren’t guaranteed and can alter. As long as the dividend is paid, some benefits will always be. This indicates that investing in dividends during market downturns might be prudent while share prices and returns may otherwise be declining.
9. Purchase bonds during a market crash
Government onds are typically considered the safest investment, even though they are distinctly unattractive and typically provide modest returns compared to stocks and even other bonds. However, given their track record of prompt repayment, owning certain government bonds can help you sleep better at night during uncertain times. Government bonds must typically be bought from a broker, which can be expensive and confusing for many private investors. However, many retirements and investing accounts include bond funds with a wide range of government bond denominations. However, it would be best if you didn’t assume that all bond funds are filled with secure government bonds. Some of them also have riskier business bonds.
10. In a crash, minimize your losses to save on taxes
In addition to freeing up funds that you can invest differently if you invest in a taxable account, you are also allowed to deduct your losses from your taxes. The tax-loss harvesting investing approach enables you to balance income with losses you realize, which could reduce your tax liability. To avoid what’s known as a wash sale, which occurs when you buy an investment that is too similar to the one you sold at a loss, it is best to consult a tax expert before implementing this strategy. Consider hiring a robo-advisor to handle your investment management.
7. What are the biggest mistakes in stock market?
1. Purchasing because the stock price is low
Buying low and selling high is a frequent stock market strategy. But one should remember that just because a stock’s price is low, it doesn’t necessarily mean it’s a good investment. Furthermore, just because something costs a lot doesn’t make it a terrible investment. Based on market cap and P/E, you should determine if the company is undervalued or overvalued at the current price before making a purchase. This calculation will indicate whether an investment is good or poor.
2. Observing a well-known investor
Many believe that their returns are inevitable by imitating a well-known investor. Therefore, exercise caution if you are one of these believers because there is no such assurance. Even if they are correct, you can’t be sure of their trading method, which means you could lose money by selling or purchasing at the incorrect time. The most excellent way to protect yourself is to observe but not imitate them.
3. Lacking sufficient research
Some people choose to follow the counsel of friends rather than going through the pain of doing their own research. Your friend might be right, but what if his theories and plans prove to be incorrect? While it’s beneficial to pick up new techniques from friends, if you want to succeed financially, you should always conduct thorough independent research.
4. Missing a chance in difficult circumstances
Some people avoid the market when circumstances are challenging, occasionally missing out on fantastic possibilities. Keep in mind that the economy goes through cycles. If there is a boom, there will also be a recession, which the crack will retake. Economic recession offers investment opportunities that can be withdrawn later. Under challenging circumstances, you should approach the market with fresh eyes and avoid following the herd.
5. Following the broker mindlessly
A broker is, after all, a human being who cannot predict the future. He might generally be correct, but only sometimes. While paying attention to your broker, you shouldn’t blindly obey him. Always ask your broker questions and get more information from him.
6. Acquiring shares of a stock in anticipation of and right before a dividend
A profitable company makes dividend payments to its stockholders. Although receiving dividends is positive, it’s not a good idea to chase them. A standard error that lots of people commit is to purchase a stock right before they expect it to pay a dividend. This happens because the price at which they are buying the stock reflects the expected reward, resulting in a higher purchase price. To avoid making this error, one should maintain a broad portfolio, some of which are likely to produce dividends while others aren’t. By doing this, you will see that you are managing a portfolio that includes more speculative assets and a mix of blue-chip equities, which frequently pay dividends.
7. Evading taxes and fees
Some people trade excessively and become overly involved in the market. They may be skilled traders, but they must account for transaction expenses. If your margin is minimal, there is a danger that your gains will be eaten up by commission fees and taxes, as each trade entails these costs. As a result, you should be aware of the fees and taxes and avoid letting them dictate how you trade. Although it is said that you can only learn from experience and get better with each trade in the stock market, you can save a lot of money by avoiding the mistakes mentioned above.
8. Knowing your risk tolerance
Stock market investing is only suitable for some. It is a risky investment, and the volatility it can experience can cause an investor to lose sleep. The value of stocks can change dramatically in an instant. Before choosing to join the market, investors should have a realistic grasp of their capabilities and readiness to accept losses. It may take several years for investors to fully recoup their investment if stock prices fall, so they should only allocate investable funds for stocks they won’t need soon. Investors should make sure their emergency savings are fully funded before making stock market purchases so they can meet unforeseen costs and avoid selling their stock holdings.
9. Purchase high and sell low
Emotions govern the amateur investor’s investment decisions. The stock fundamentals are the veterans’ primary concern. Investors often chase the market run-up because emotions can be complex. As a result, low entry prices are created, vulnerable to losses upon market downturn. Investors can select the most stable company on the market using fundamental analysis, which will provide them the assurance to hold the stock despite market turbulence.
10. If you don’t plan, you’re intending to fail.
It would be best if you had a plan whether you are a trader or an investment. It may be a short-term or long-term plan. The key is to decide what you want to accomplish for a specific horizon, such as what to buy and sell, how much, and other decisions. What set off your decision to alter your plan? What should you keep an eye on, given your time constraints? Most people primarily want to know what to buy, so they frequently join the consensus or hold the bag when the market sells off a stock. Have an exit and entry strategy at all times.
8. How can this pandemic help you in stock market?
Our manner of life has undoubtedly changed as a result of COVID-19. Lockdowns and social alienation have had a significant negative impact on economies all across the world. While other nations are easing restrictions and getting set to revive their economies, the Philippines is still under a protracted quarantine due to increased instances.
Businesses and institutions will continue to be closed or run with minimal staff as long as Filipinos are frightened to leave the house. As a result, our stock market is still down, and there’s a potential to continue to decline. Some investors were compelled to sell their equities at a loss to raise cash to weather this storm.
It’s common knowledge among potential investors that there is never a better time to begin investing than now. Generally speaking, this is accurate, but what if the “now” is during a pandemic? Should you do something or not?
1. Stock up on investible cash
Cash is still king during a crisis. But it would be best if you didn’t lose sight of opportunities to increase your bankroll. Additionally, we’ll always need to predict how long this epidemic will endure or whether another decrease will ever occur. Because of this, before investing, figure out how much money you have available to put into it. Your money should be kept in a savings account or a money market fund so that it may be invested immediately when you decide to get in. Your money will be “parked” in this manner for future use.
2. Learn how COVID-19 is impacting various industries and investor sentiment
The stock market is influenced by external factors in addition to company profitability, including but not limited to weather, political atmosphere, and the general health of the populace (in our case, it is managing the impact of COVID-19). It’s critical first to understand how each of them impacts the stock market’s performance.
3. Organize your investment plan.
It’s time to decide how you’ll start investing now that you’ve stashed your investable assets and researched the effects of various factors on the stock market. There are generally two approaches:
First, the all-in strategy. Imagine you have PHP 50,000 available for investment. The all-in approach refers to investing all of your money at once. The advantage of this is that if the stock market rallies, you can quickly realize more significant gains without worrying about future investments (such as forgetting to invest). The disadvantage of this strategy, as opposed to the one below, is that you might sustain a more considerable paper loss if the market declines.
The cost-averaging approach is the second. With this approach, you divide each investment into PHP 5,000 or PHP 10,000 and spread it over several days or even weeks rather than investing the entire PHP 50,000 in one go. The advantage of this method is that you can profit from future market declines, but the negative is that, in the event of a sharp stock market increase, your prospective profits will be lower than with the all-in plan.
4. Select a fund
You can choose from various equity fund categories, such as dividend equity funds, equity index funds, and simple equity funds. Each fund has a distinct approach and goal. Before choosing one, it is best to first learn about a fund’s attributes and see whether they fit your investing style. A fund’s website contains all of its information, which may be used as a reference by both new and experienced investors. Before fully committing to stock market investing, we encourage you to conduct preliminary research.
5. Possibility of earning more than the returns on bank deposits
Bangko Sentral ng Pilipinas (BSP) has been lowering policy rates and reserve requirements for banks since last year’s pandemic to boost lending and consumer spending. Interest rates have been falling to historic lows, which is anticipated to continue beyond 2021. Thus, people flush with cash choose to invest in stocks rather than putting their money in banks, which only give interest rates up to 2% annually. Stocks, in contrast, may provide a greater return (compared to the typical return on the Philippine stock market has been 6.40 percent in the last ten years).
6. Greater availability of listed shares
One benefit of the pandemic is the development of internet stock trading due to technological advancement. This increased market participation and provided more Filipinos with income alternatives, particularly those who had lost their employment or businesses due to the pandemic. Building your wealth through stock market trading is achievable even without leaving the comfort of your home, as more stock brokerage firms have gone online. It only takes a few clicks on your keyboard or clicks on your smartphone to invest in your favorite equities.
7. Prepared for a comeback
2021 is still a more decisive year than 2020 for the PSEi despite inevitable setbacks, such as the ongoing rise in COVID-19 cases that forced the government to revert to more restrictive regulations in Metro Manila and neighboring provinces. The introduction of the vaccination should boost investor confidence. However, because the crisis is only temporary, it is challenging for stock market specialists to predict when the rebound will occur.
9. Cite 15 lessons you can learn from the pandemic when your money is in the stock market?
1. Emergencies can occur
One obvious takeaway from the turbulent past year is that more people need to work to accumulate an emergency fund of at least one month’s worth of expenses. When faced with transitory shocks to your income, having an accessible emergency fund (held in an accessible form like a savings or checking account) can assist prevent the need for dramatic cuts in expenditure. An emergency fund can assist lessen the effects of short-term economic upheavals, but it cannot compensate for losing your job and going through prolonged unemployment. For instance, many households last year had members on leave for many weeks while their employers were required to close by the government. Additionally, those who faced longer-term unemployment frequently had to wait weeks for benefit payments to begin. In such circumstances, having several weeks’ worth of accessible savings can help prevent the need to make brutal spending cuts or take out expensive loans to cover necessary payments.
2. We are able to practice fiscal restraint
The pandemic has shown us that it is possible to practice financial restraint. Due to the constraints, we all had to reconsider how much we spent on life’s pleasures, such as travel and eating out. As we reflected on our excessive indulgences, we understood the need to budget carefully and set aside money. Building cash reserves from extra money spent on pleasantries gave me more assurance that I could handle life’s shocks. Many of us valued the additional funds to endure financial hardships such as job loss, lower income from budget cuts or caring obligations, and escalating medical expenses. Whether out of pure boredom or a greater appreciation of life amid constant Covid-related casualties, we also started thinking more about how we should spend our money. Experiences from life frequently act as a catalyst for altering financial routines and mindsets.
3. When others are afraid, purchase
When other people are afraid is when you should invest. We confronted dangers in 2020 that was unheard of in our lives. All of your defense mechanisms developed over evolution to keep you safe are activated when you are told you are in danger. Unfortunately, in long-term investing, none of these automatic responses are helpful—investors worry about their well-being and not just their portfolios. While it’s common to hear that “this time is different,” there are two elements most bear markets tend to have in common. First off, historically speaking, the best time to purchase equities is when the market is down at least 30%. When buying equities, you had to accept risk and uncertainty in exchange for higher anticipated returns. Second, even though each bear market has unique characteristics, they invariably have an end. To achieve the typical long-term return that draws most people to stocks in the first place, investors must be prepared to lose money occasionally—and sometimes a lot of money. Additionally, your chances of generating returns above-average increase if you can act as a buyer during moments of fear.
4. Control the risks
Understanding and managing risk is the most crucial personal-finance lesson from 2020. According to the TIAA Institute-GFLEC Personal Finance Index, this is one of the personal finance concepts that people are least knowledgeable about. Even though the risk is a constant in life, we frequently do not adequately protect ourselves from it. Do my family, and I have adequate coverage for potential health issues, especially those brought on by viruses? Do we have enough money to afford the deductible if we have a health plan with a high deductible? Have we protected if someone becomes disabled? Should our long-term disability insurance be altered or increased? Do we have life insurance to safeguard our family if the income earner passes away? These are challenging questions, but the pandemic serves as a helpful reminder that it is always better to be safe than sorry.
5. You need a will
There has never been a better time to emphasize the necessity of having a will for every adult. Nobody anticipated the magnitude of the tragedy that occurred last year on a global scale. And people don’t want to consider the possibility of passing away one day, which is why they frequently kick the can down the road. However, 2020 has taught us all to prepare for the worst.
6. Your own financial situation reflects your morals
Many people have restored the link between their finances and the things that matter most to them:
- Their time management.
- How the family’s finances support their domestic life.
- How their careers have enriched their lives, what their investments support, and what they fund.
The events of 2020 served as a reminder of the fundamental reasons behind their financial life—their “why.” Personal finance does not exist in a vacuum; it is determined by the things most important to us. People were reminded of their values last year, and it also aided in identifying what was unimportant. Individuals believe that all the specifics surrounding finances and money should ultimately serve the common goal of enabling us all to live the lives we desire. That has a practical impact on our choices about our sources of income, how we use our resources, and how we make investments.
7. Flexible retirement plans are necessary
More people are feeling the need to put off retiring as a short- and long-term financial fix due to the Covid-19 pandemic. And that serves as a reminder to many would-be retirees of the value of not having rigid retirement plans and expectations.
8. Things won’t always be bad or good
It’s a significant error to extrapolate the recent past too far into the future. Recency bias is one of our main weaknesses as humans because of this. We learned a valuable lesson from last year in both directions. Early in 2020, optimism predominated as the market reached record highs. Compare that to March, when it appeared that things would never improve. Investors would have done well in both situations to avoid assuming the recent past will last indefinitely. Because they believed things would only worsen, several of the investors we met with in March intended to make significant adjustments to their portfolios. This is why the cornerstone of almost everyone’s investment strategy should be a diversified portfolio that you can stick with regardless of the state of the market.
9. You ought to employ a three-bucket approach
Every investor should always have an investment plan and strategy that can withstand events like what we have experienced, as the Covid-19 recession has once again demonstrated. As investors reevaluate how they should invest their money, a three-bucket strategy is a prudent course of action. Worth of expenses in short-term assets, including cash or short-term bonds, should be included in a short-term bucket. There should be an intermediate-term bucket for money that won’t be needed for two to five years, such as core bond funds. Money that won’t be required for at least five years should go into a long-term bucket, which can be used to buy stocks. With this strategy, investors can be ready for any short-term risks, like recessions caused by the coronavirus, without compromising the integrity of their portfolio.
10. Stay Invested
The turbulent market of last year made it even more crucial to maintain your investment. Near the conclusion of the first quarter, it seemed as though the financial markets were doomed. Market declines of over 10% have been seen on several days. Many investors sold their stocks in a panic, expecting the worst. The markets have since recovered, and anyone who tried to time the market and chose to be more cautious is likely feeling remorse.
10. How to make stock market trading fit your salary?
Trading is sometimes perceived as a job with a high entry barrier. However, this is different in the economy of today. Now, even with little to no money, you may trade for a living if you have ambition and persistence. Fantastic, right? It is, and those who want to invest the time to learn have a ton of possibilities at their disposal. Various trading vocations with shallow entry barriers have emerged due to technological advancements and rising exchange volumes. Sometimes there is no need for personal resources. In other situations, you’ll only need a small amount of capital to get going. Because worldwide markets are so interconnected, there is always open trading time somewhere in the world, and many of these markets may be accessed very easily. This implies that everyone can trade, even those with full-time jobs or kids at home. You need to locate the perfect market and opportunity for you. Trading may be highly challenging, but it is a complex business. Because there are so many possibilities, anyone can enter the market, but you are ultimately responsible for your success. Additionally, trading can become a full-time career opportunity, a part-time job, or just a way to supplement your income, depending on your path. People frequently believe that only full-time traders with elite backgrounds and extensive degrees work for investment banks. Another prevalent misconception is that trading requires a lot of money and time that can be spent. You undoubtedly require contacts or a distinguished educational background that sets you apart to work for an investment bank or enter a significant institutional trading floor. However, in this post, we’ll concentrate on how the typical person, with either a lot of trading expertise or very little, might enter the market and make money.
Trading from home is the first possibility—and probably the simplest, given how adaptable and quickly it can fit into regular life. However, one of the most capital-intensive markets is home day trading in equities. This is because a trader who has been identified as a pattern day trader is required to maintain a minimum equity requirement at all times. The trader will not be able until the minimum equity level is restored, day trade if their account balance drops below this threshold either by depositing cash or securities.
Therefore, prospective traders should be informed of their various possibilities, such as markets with lower entry and capital requirements. Such a choice is provided by the foreign exchange (forex) or currency markets. With leverage, accounts can be opened for a small amount that can control a significant amount of capital. Since this market is open every day of the week, it gives those who can’t trade during regular market hours an alternative.
The market for contracts for difference (CFD) has also grown. A CFD is a digital contract between two parties in which ownership of the underlying asset is not involved. As a result, profits can be realized for a small portion of the asset’s ownership cost. Similar to the FX market, the CFD market offers substantial leverage, allowing traders to enter the market with lesser sums of capital. A CFD can also be used to trade stocks. Although the stock is never owned, by replicating the movement of the underlying equities or indexes, the contract enables gains and losses to be realized via speculation on them. High leverage comes with a more significant risk, but without a lot of capital, a trader can still enter this market with minimal difficulty. Before engaging in any trading activity, it is imperative to educate yourself on the dangers involved and create a solid trading plan; however, when using high leverage, this is of utmost importance.
Due to their training programs and affordable cost structures, proprietary trading firms have grown quite appealing. Working on a trading floor might be attractive if you prefer something else to trade from home. An employee, not a contractor, a day trader often works for a proprietary trading firm. They only receive a portion of the earnings generated by trading whatever the firm is involved in, with no pay or benefits. The trader is given business capital (or leveraged capital) to trade (the firm partially manages the risk). Trading for a company relieves part of the pressure a trader feels, even though maintaining personal discipline is still crucial.
Even though some businesses permit traders to conduct business remotely from their homes, working for a company may require you to attend office hours. Free training, being around other successful traders, exposure to cutting-edge trading concepts, significantly reduced fees and commissions, access to capital, and performance monitoring are some advantages of working with a trading firm.
People with a history of initiative and some schooling in their prior sector are frequently accepted by proprietary trading firms. This is possible because the company can keep an eye on a trader’s risk and discharge individuals who aren’t performing well with very little total damage to the company.
In a business like this, compensation depends on performance and typically takes the form of a percentage payment of your net profits after fees. Depending on the company’s structure, specific licensing may be necessary. Even if it’s not required, passing the Series 7 certification will increase the number of companies you can deal with. Find a firm that fits your needs, personality, and situation because each one runs slightly differently. Part demand that you use some of your own money. You may see what is accessible by searching for a list of proprietary trading firms.
The next stage is crucial after determining which trading strategy suits you best. If trading from home is your primary interest, you must choose the markets based on your resources and preferences. The next step is to create a thorough trading plan—a business plan because trading is now your business—and choose your trading strategy. Next, investigate several internet brokers and contrast the services they provide. Find a mentor or someone who can assist you. The time has come to begin trading.
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