If you are looking for an investment vehicle with moderate return and low initial buy in or investment then putting your money in the Philippines stock market may makes sense for you. Just like any type of investment, there’s always a risk. When it comes to stock trading, there is no black book that will tell you what you should do or where you should invest in. If you decide to go this route, consider “the most sensible way for most people to invest in stocks.”
1. Create a Trading Plan
Basic human emotion is perhaps the greatest enemy of successful investing. By contrast, a disciplined approach to trading – whether you’re a long-term investor or a day trader – is absolutely key to profits. You must have a trading plan with every trade. You must know exactly at what level you are a seller of your stock – on the upside and down. Better still, place stops with each buy order, because once the market begins to move, the world becomes a very different place.
2. Never buy “information”
In every industry, there are thieves, scammers and con artists. Investment scams are everywhere and it would take you an ample amount of time to test them. I’d rather use my valuable time learning how to trade than looking for hot tips, recos and newsletter which may or may not be correct. Besides their cost, there is the problem that they are liable to tempt you into buying, and scare you into selling, much too often. If you don’t have time, patience and interest in learning the trade, please lang, utang na loob, dont invest in stocks!
There are plenty of free, online resources that you’re better off tapping into. I recommend PSE’s edge.pse.com.ph (you can look at annual reports, charts of performance, and earnings estimates) and News channels to learn about up to date business news in general.
3. Diversify with care
I’m sure you’ve heard someone tells you, never put your egg in one basket. Think about it: 3 or 5 companies simultaneously failing is pretty unlikely. I think of 3-5 stocks is the sweet spot for stock market newbies. There’s such thing as over-diversification that you need to avoid. If someone tells you to buy, more than 5 stocks at an early stage, tell them to f*** off. Lagyan ng “po” sa dulo para magalang pa rin.
You can try diversifying by stock, sector, market cap, even timing. There are only about 200 plus listed companies in Philippine stocks exchange, too few compared to other countries.
4. Invest — don’t speculate
It’s one thing to take risks in low-priced stocks you hope, over time, may solve their problems and quintuple in value. … But it’s quite another thing to jump in and out of stocks (or options or futures) hoping to ‘play the market’ successfully.
Keep it simple, “Buy value and hold it. Don’t switch in and out. Don’t try to outsmart the market.”
5. Don’t time your investments
Even for an experienced trader, timing the market a very challenging task. Why (as a beginner) should you? Half of the time, you’ll just realize you were wrong but already too deep to dig yourself out of it. As investor Warren Buffett likes to say, “You only find out who is swimming naked when the tide goes out.”
It is precisely when the market looks worst that the opportunities are best; precisely when things are good again that the opportunities are slimmest and the risks greatest.
6. Continue learning
As you probably know, when it comes to stock investing, there’s no shortage of methods, strategies, plans, and theories to make money. Some strategies are untested; some are proven. None of them are absolute or work all of the time. What you will find here are many of the best known and most effective stock investment theories. These are the fundamentals you need to know before you go any further. This is just the beginning.
