Wednesday, January 30, 2013

Tips When Investing In The Stock Market

I am writing to follow up my previous post related to the jargons of stock investingIf you think that investing in the stock market is for you and you are ready to give it a try, make sure that you know how to go about with this particular investment. The stock market can be lucrative especially if you invest for a long time. However, it can also be volatile because the price of the shares varies not only every day but also every hour. I have collected some tips below for those who want to invest in the stock market.

  • Do your share and practice due diligence. As with anything related to money, it is important to practice due diligence by researching on the stock market first. There are lots of resources online (including this blog, of course) if you want to learn the art and science of stock investing. There are also videos online that teach viewers how to invest in the stock market under the local setting. Although I hear some people say that investing in the stock market is like gambling in the casino, I believe that it will  be like gambling if you don’t know what you are dealing with. So invest in your financial intelligence first before anything else.
  • Set up your emergency funds and savings first. Before you invest in the stock market, make sure that you have already set up your emergency funds and savings first. The golden rule in making any investment is to spend only your EXTRA money. It is bad habit to put off saving for your emergency fund for the stock market or in any kinds of investments. Let’s say for example you have invested 30,000PhP in the stock market but you don’t have anything in your emergency fund, if you encounter an emergency situation, chances are that you will pull out your money from your investment to pay for that emergency. Where will this leave your finances? In the gutters, I’m sure.
  • Determine what kind of investor you are. There are different kinds of investors and it is crucial that you know what kind of investor you are before deciding to invest in the stock market.  Stock market investing is not for everyone and you have to be an investor who is aggressive, patient and emotionless when it comes to your investments. Investing in the stock market requires you to make calculated risks all the time and if you think that investing in the stock market is something that makes you loose your sleep every night, then you are better off looking for other investments that will fit the type of investor that you are. To give you an idea on what kind of investor you really are, you can take an investor risk profile exam which is available online.
  • Don’t put your eggs in one basket- diversify! Okay so you can also diversify your portfolio when investing in the stock market. The stock market is made up of different kinds of companies that make public offering for their stocks. These companies occupy different niches or industries. You have companies that belong to the mining sectors, services, banking and finances, real estate, entertainment and education to name a few. These industries perform differently and investing your money in two or three companies under different industries allows you to take advantage on the fluctuating trends of the market. For example, if you invest your stock in companies from the real estate  as well as the banking and finance sectors, your portfolio will not be too affected if either one of the company perform poorly.  
  • Get a reliable stock broker. When it comes to money matters, people are a bit skeptic about trusting other people. Getting a reliable stock broker is your key to become a successful stock market investor as well as protecting your investments. In this digital age, it is important to look for an online broker because they provide a good trading platform where you can see the history of your trades and the performance of your investments. Make sure that your online broker offers customer support to answer all of your inquiries.

If you notice, I did not include having a lot of money for the initial deposit in the list. The good news is that you can start investing in the stock market with as little as 5,000PhP and you can build your investments by subscribing regularly. 

1 comment:

  1. The best tip that is useful is to value a stock based on its future growth and not is its past performance.


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