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Top 3 Things To Consider When Investing In The Stock Market

risk-tolerance

Stock market can be the most rewarding and profitable business of all. However, this could also be the worst investment ever if not managed well. So before you start, it is a must to know the things to consider before you invest.

No matter what happens, don’t quit. Because being a loser sometimes is part of the learning process.

Before leaping on this vehicle, it is vital to have these 3 things considered if this investment suits your interests and needs.

Self-assessment is vital in every business decisions. Knowing thyself is the ultimate step before anything else. Read the Introduction to Stock Market.


Risk Tolerance

Will I be scared if ever my investment depreciates? What if my Php 10,000 investment is now worth Php 8,000 after few weeks?

Would I suffer hypertension or a heart attack? Funny but some people are too scared to invest. They could never afford to lose.

Winning, at all times, is their inclination not knowing that “playing safe” is the RISKIEST decision. Price fluctuation is common and NORMAL in the stock market.

The cause of this erratic price change is due to the economic factors affecting the industry.

Economic factors could be expansion of the company, population growth (which can affect greater number of customer base), higher employment rate, GDP & GNP increase, development of a certain location and many more. 

There are countless factors that affect the stock prices.

For example say, a real estate company has acquired hectares of lot in the city. With this acquisition, they build a condominium where it has 300 units and is now worth Php 500 Million.

With this activity, it is expected that stock prices of this company will increase since a newly-opened business could generate higher income potential.

Nevertheless, disastrous loss can still be avoided. And one of the ways to do this is to invest in BLUE CHIP companies only (read the post on how to minimize risks in stock market). 

Blue Chip companies are solid, stable companies which exist in the market for many years and they are REALLY profitable companies. So stable that we can say they will still exist in the next 10 years. Common examples are Ayala Corporation (AC), SM (SM), Globe Telecommunications (GLO), Cebu Pacific (CEB).

It is therefore important to assess ourselves and ponder on these questions.

  1. How much am I willing to lose?
  2. Will I be strong enough to accept loss?

If you are confident with your answers then you may proceed to the next step.

Investment Needs

Unlike any other businesses, stock market is designed to be a long-term investment.

By long term, we mean you will be investing for many years and you will reap the fruit (profit) only after 5 to 10 years. Too long? Indeed, it is.

In investing, religious periodic cash outlay is a VITAL requirement for you to achieve financial growth. Periodic, in such a way that you will invest every month or every quarter depending on your commitments.

So if you have child and you’re planning for your child’s college tuition, stock market is a perfect investment.

By investing a small chunk of your income every month, it will continually grow after 10 years which can be reaped for your child’s education.

Also, if you’re 30 years old right now and you want to have an early retirement at the age of 40, then stock market is really for you.

Stock market is not for people who want to earn immediate income like 1 to 2 years.

While you can profit within this duration, optimal profit cannot be realized. Why? Because companies tend to grow every after 3 years, on average.

Although there are other ways to earn in the stock market like trading or “short-selling”, investing is still the safest. I will make a separate blog for Short-Selling so better subscribe for updates.

Guide questions:

  1. Am I planning to have a sufficient money after 10 years that banks cannot offer?
  2. Do I want to have a significant increase of my investment for long-term?

If your answers are yes, you may proceed to the next step.

Other Priority

Investing in the stock market is the easiest investment by far!

You can do other things, your priorities, and still invest in the stock market. And I can attest to this.

Whether you are employed full-time or you have a business, you should really consider investing in stocks.

My main income is active income. This comes from my employment as an engineer. Since my energy and time is focused on my job, it is hard for me to have my own business.

That is why I consider investing in the stock market.

What I do is I only invest every month and watch my money grow. Via online transfer, I am investing every month straight from my ATM.

I don’t have to go to the bank to deposit and I don’t have to call to the broker for advice.

It’s easy as getting wet in the rain. And I don’t even have to monitor my stocks! I believe in the company where I invest and I’m not afraid to lose.

So if you’re someone who has another priority and commitment yet still wants to have a massive financial growth (in due time), stock market is the best investment.

Guide questions to ask yourself:

  1. Am I so busy with something that I couldn't leave this time, yet I still want to have an investment?
  2. Do I want to have a residual income (dividends) aside from my active income (job)?

If your answer to these questions are yes, then get your ass off and invest now :) 

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