Stock Market – Basic principles – Part 3 of 4

Stock Market – Basic principles – Part 3 of 4

by Zigfred Diaz

In part three of this four part series we will be discussing the next four principles of stock market investment. Previously, we discussed about the first three principles of investment. Number one principle is that the stock market is just another vehicle of investment. Secondly, you must realize that investing in the stock market is a like roller coaster ride. The third principle involved answering the question on what type of investor you are. If you wish to view the entire article in its entirety, visit my blog.

4.) While investing in the stock market does not take a lot of cash however having lots of it will obviously have an impact on how much you earn. – It is true that you don’t need hundreds of thousands of pesos or millions to invest in the Philippine Stock market. For me personally you only nead about P 20,000.00 to start trading. This was the initial amount I began with. You don’t exactly need P 20,000.00, you can even start trading if you have P 10,000.00. But personally, I believe that is too small an amount. To show you what I mean let me cite Jollibee (JFC), one of my favorite stocks as an example. Jollibee shares cost only 51.50 per share as of today. In order to invest in a stock you need to purchase a minimum number of shares which is called the board lot. The board lot for Jollibee is 100. If you do the math you will only need P 5,150.00 (51.50 x 100) to be a stock holder of Jollibee Food Corporation. Let us presume that a year after you purchased the stock it climbed to P 100.00 per share. This means that you have gained P 5,000.00 more. However if you had invested 200 shares you could have gained much more.

5.) Be consistent in your investment – Start small but do not stay small. You must have the discipline to consistently invest a certain amount of your income to the stock market. This way you can have more capital thereby growing your portfolio. Over the years, I have slowly added to my investment. I did not stay at P 20,000.00. The act of investing should become your habit, and I say it is a good habit to develop.

6.) Maximizing profit at the least possible losses. – Everytime you see that the price of your stock went down, relax, the loss is only on paper. Actual loss is only attained when you sell your stock at the “losing” price. Therefore never sell at a loss. It should be emphasized that the money that you put into the stock market should not be taken from your emergency fund. It should by “surplus money.” Putting in your emergency savings will result in you selling your stocks at a loss if you need the money badly. The gains you recieved in the stock market such as sales from stocks and dividends should be utilized to purchase more stocks to maximize your profits.

7.) Want to get rich quick ? Don’t even think about investing in the stock market. – The stock market is not a get rich quick scheme. You should never ever expect to get rich overnight here. Investments always takes time to grow. If you hear about investments that give you shocking rates of return in a very short length of time, beware of those ! In the stock market, especially the Philippine stock market, it may take you several months or even years before you could say that you have made it big time. On certain rare occasions, there will be a time that it will only take weeks or days perhaps wherein you can make a killing, but again these are only rare occasions. This might occur when there is a consistent bull run or when there is an unusual going up or going down of prices within a certain period.

About the Author:

Want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, financial management, business, making financial online and How to invest in the Philippine stock market

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