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Do It Yourself Investing
Stock Investing can be learned - even by me!
There is a lot of money in the stock market. There’re also a lot of risks. The question is, can anybody just go in from the cold and make a lot of money in the stock market? Seasoned and well meaning investors might say “no, you can’t” but if you really want to give it a try, I would say, why not?
The truth is I came in from the cold. I wanted to invest in the stock market for the longest time and I thought that the only thing I needed to do was put my money in and I would be a rich guy in no time at all! In short, I was totally ignorant of how this thing is done.
How come I am espousing do-it-yourself investing?
It is because of stories like the one I heard in a bank sponsored investors dialogue at Greenbelt 1 in Makati sometime back which says: “If you had invested One Hundred Thousand Pesos (P100, 000.00) in DMCI 30 years ago, that money would now be worth P37-M!
From 100K to Thirty Seven Million Pesos! Now, that was beyond imagination!
And did you hear how many employees of Microsoft who held company stocks became millionaires when it went public in 1986? Reports said 12,000 of them hit it big, and 3 of them even made billions!
No wonder Bill Gates still remain the richest man on earth.
So, should you go into stocks?
Do you have any idea how you can make your money grow that exponentially? If you do, forget stocks. Get into your groove and take the crown from the world’s richest individuals. After all, after donning the crown for a little while, the world’s most successful investor, Warren Buffet, slid back to number three.
If you feel a bit less confident that you will become the next Mark Zuckerberg or Jack Ma or Bill Gates or Steve Jobs, it might just help a little if you dabble in stocks.
But really, what do you do if you don’t have a hundred grand and all you’ve got is your lifetime savings of a couple of hundred dollars (or even pesos)?
My answer: Go to stocks! Study the market and take your chances. Follow what they always say:
Save for it.
Don’t use the money that you will need in the near future.
Use only the money that you can afford to lose
(Note: “Etc.” stands for everything you need to do to learn how to do it right.)
That was how I got started and that is how I am still doing it. The first time I wanted to go into stocks I couldn’t find any broker that will accept an investment lower than a Hundred Thousand Pesos, or around Two Thousand Five Hundred USD.
I didn’t have that kind of money so I thought I will try to find a way to do it on my own. I didn’t know how to begin. I didn’t know anything about investing. I started with what I know. I can read, so I started reading.
I read and I read and I read…
Then one day, on the internet, I found a broker offering online trading. And guess what? It says I can start investing in the market with as little as 125 USD! That is, if I will do everything on my own! Of course, I will have to register with them for free and they will have to be my online broker. They make commissions on my trades but only a fraction of what I would have to pay them if I ask their live traders to do it for me.
Fair is fair right?
Finally, I can start fulfilling my dream of investing in the stock market and hopefully, eventually, becoming rich. I was ecstatic! Now, if only I know how to go about the whole darn thing!
But the beauty of it all is that I have found an opportunity, a way to go into the stock market. I will not be the one to waste an opportunity like that so I immediately took stock of what I got – which amounted to practically nothing.
I have the equivalent of 125USD in our local currency, but that was all. I have zero knowledge in equities and if I just jumped into the fray, carelessly, I will lose even my 125. That was a given.
So, what did I do? I tried my very best to learn! And I guess, you could say, I got lucky. I came in at a time when the bull market was raging and I made 70% profit on my initial investments.
But believe me, you wouldn’t want to trust luck if you are in this market. It could be very fickle. I went in 2007 and made all that profit in less time than I could ever imagine, but everything was taken back, and then some, in 2008 when the Bears took over.
If you are coming in from the cold, you better warm yourself up with a lot of knowledge.
What is nice about knowledge (as opposed to luck) is that you can gather a lot of them even (or especially) during the worst disasters.
If there is one thing you need to know before going in...
So, okay, you really need help to get started. Then, here’s a little help:
Once you’ve found your online broker, don’t pull the trigger just yet. I mean, do not buy just about any stock that take your fancy. It is not like shooting a shotgun. Take time to learn something about the stocks that you plan to buy. Ask yourself a few questions like what the experts suggests:
Is it really from a good company?
Does it (company) have a history of success?
Is it run by competent individuals?
Will their kind of business last?
When you buy a stock of a company, you are practically putting your money into their business, so your money better be in good hands - not in some kind of false pretense that sell impossible dreams!
There are many things that one has to learn about the stock market. But if there is just one thing that you can learn, for whatever reason, before plunging in… then let it be the ability to pick the stock of a good company.
From there, you can improve on your criteria for choosing the right stocks. You can select growth stocks, value stocks, dividend paying stocks (and what have you) but you have to start from somewhere and that should be somewhere that will still be there when things go so terribly wrong, and will remain to be there after the smoke clears.