Guest Post: How you can start investing in the stock market

Sunday, November 25, 2012

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I don't always come up with posts that makes a lot of sense. Primarily because my intended audience is always just myself, hubby, and our children (when they are old enough to get embarrassed by my posts hee hee). I also would like for my son and daughter to have an idea what their mom 'sounded' like back in the day.

So, sometimes it amazes me why certain demographics (don't get me wrong they are still a very few) outside my family bothers to read my musings at all. Okay, so now to my point. You may not want to read this little blog BUT I urge you not to let this one pass.

My husband is my guest blogger. And he will talk about something that might change your outlook when it comes to your finances. No strings attached just pure unadulterated sharing for the sake of passing on something good. Read up. ;)

Note to hubby: I hope you can do more of this to add more sense in this blog. Haha. As always I am prouder of you than anyone else in this earth could ever be.


How you can start investing in the stock market


Introduction

I believe that the fear of the unknown is what prevents many Filipinos from investing in the stock market.  I think the two most common misconceptions about the stock market are: (1) too technical for ordinary people to understand and (2) too risky to put your money in.

It has become my personal advocacy to reach out to as many friends as I can and introduce them to stock market investing.  I started with it when I came across Bo Sanchez's book "My Maid Invests in the Stock Market... and Why You Should, Too!"  Catchy title right? 

But first let me just get these things out of the way: I'm doing this for free and I won't get an income out of this (well probably a little if you use the affiliate link I provided at the end).  I just want to make people aware of this option on how to grow money.  Also I'm subscribed to Bo Sanchez's teaching on stock market investing, so what I'm telling here is just my interpretation of that.  His teaching made a lot of sense to me, and my purpose is to just relay the message.

So how can you get started?  Read on.

What You Need to Get Started

First you need to understand and appreciate the following simple concept, discipline, and attitude in order to do stock market investing:

  1. Compound interest
  2. Consistent, regular setting aside of a portion of your income for stock market investing
  3. Knowing the difference between stock market trading and stock market investing
I’ll discuss items 1 and 2 first, and then proceed with item 3.

Compound Interest and Consistent Saving

Albert Einstein once said, “Compound interest is the eighth wonder of the world.  He who understands it, earns it ... he who doesn't ... pays it.”


Did you know that that P50 can become P50 million and make you insanely wealthy because of compound interest?  Consider the following tables:


Above are different investment vehicles.  You need an investment vehicle to grow your money. 

Some people put their money in banks under a time deposit account, like in table (i).  As you can see, the initial P50 becomes P50 million because of compound interest, but it takes 469 years.  However, smarter people put their money in, e.g., government-issued bonds (table(ii)) or invest their money in the stock market (table(iii)).  They use a faster vehicle to grow their money.

The investors in the tables above ONLY made a one-time investment of P50 and let compound interest do its work.  But are you only capable of such a similar move? 

I’m sure you can do better than putting in a P50-savings once in your lifetime right?  You can instead put in P50 every year, yes?

But you can do better than P50!  Why not put in P100?  Why not put in P1,000?  Why not P2,000?

And of course you can do better than a once-a-year saving!  Why not instead of putting in P2,000 every year, you do it every quarter?  Or why not do it every month?

Let’s say you decided to put in P2,000 every month which makes P24,000 per year.  Using the rate in table (iii), see computation below how that very doable effort can bring you faster to a wealthy status:


Which is what drives the next point after compound interest – consistent and regular setting aside of a portion of your income.  It doesn’t matter how much you can set aside (but if you can set aside more, you can reach your wealthy status faster).  What matters is that you do it regularly.  If your age now is 40 it’s possible you still have another 42 years ahead of you, and if you start investing now, you will be P56 million richer by 82!

Knowing the difference: Stock Market Trading vs. Stock Market Investing

To earn from the stock market, as you may have heard, you need to buy low and sell high.  Both stock market trading and stock market investing essentially subscribe to this principle, but they differ in the time period wherein this principle is being applied. 

Stock Trading or Active Trading

In stock market trading, the buying and selling activities happen in a span of a month, weeks, days, or even hours.  Trading within these short time spans often necessitates a lot (really a lot!) of effort and makes use of very complex statistical analysis and forecasting tools.

Figure 1: Stock Market Trading
Figure 1 is as sample stock price movement.  The green bars mean that the stock price is in an upward movement, while the red bars mean that it is in a downward movement.  So to be able to use the “buy low, sell high” principle, stock market traders try to place a stock purchase at each of the bottom-most portion of the red bars, hold a bit, and then sell at each of the top-most portion of the green bars.  
   
In media portrayals, those involved in stock market trading enjoy very high returns or suffer very big losses.  To beat the market, they pour over a lot of data analysis on the fluctuations in stock prices.  They are celebratory when they beat the market or suicidal when the market beats them. 

I think this kind of media portrayal is what scares most people from being involved in the stock market. 

Stock Market Investing or Passive Investing

In stock market investing, the buying and selling happen in a span of several months, a year, or several years.  Short-term fluctuations do not matter and so one does not need to put in a lot of effort in predicting when to purchase or sell a stock.  

Figure 2: Stock Market Investing

Using the illustration above let’s assume that you don’t have time in closely monitoring the stock prices and decided to just passively purchase shares at regular intervals.  Let’s also assume a very unlikely worst case scenario wherein you placed all of your purchases at each of the bottom-most portion of the red bars.

If you average out all of these stock purchases in a span of several months or years, you still earn if you decide to sell in the end.  This is called “cost-averaging.”  The important thing here is there should be consistent stock purchases at regular intervals. 

As you can see, you don’t have to predict when the stock prices will fall at its lowest or rise at its highest (that is a very complex science).  You just have to pick big, well-managed companies that are very likely to maintain its profitability (can you imagine Ayala, SM, or PLDT not being profitable?).  Then you just do a piggy-back ride on their profits by buying stocks from them.

Parting words

Before you get to pick the right companies where you can buy your shares from, you should have a broker that will serve you with your stock market investing needs.  I use the online stock broker COL Financial wherein I have an account.  For details, visit this link: https://www.colfinancial.com/ape/Final2/home/open_an_account.asp

Understanding and appreciating the three items I have described above is I think already 90% of the strategy that you need to apply in stock market investing.  My goal in this write-up is to convince you that you can do stock market investing.  I hope I was able to do that.  This is the basic level – knowing that you can do it.

On a side note, I have and still am subscribed to Bo Sanchez’s Truly Rich Club which is where I get directions on how I can maximize further my stock investment earnings.  In this on-line community, members regularly receive stock updates that include which good companies to buy, when to buy, until when to hold, and when to sell.   This is the remaining 10% of my strategy.  You can visit http://bosanchezmembers.com/amember/go.php?r=19813&i=b0 for details.

Elijah 2nd Birthday: Jollibee Kiddie Party

Thursday, November 22, 2012

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This blog post has been delayed for over two weeks. I cannot even begin to describe how hectic our schedules have become. I am eight months pregnant very round belly, chasing after a now very curious and assertive toddler. You can just imagine. But I cannot let the season pass without talking about my son's 2nd birthday party. When he's twelve and he asks me what was his birthday like at least I have a reference hehe.

I cannot believe it's been a year since I organized Eli's Rockstar themed 1st birthday party at Centerstage (read about it here). The second birthday party was more low key. Party planning took only less than a week. For one, I had lesser suppliers to think about this time and I really had no actual theme I needed to stick by. I just knew I wanted the color scheme of orange, blue, and green.

Lower maintenance but equally fun nevertheless. The important thing is I felt the overflowing love for our baby boy. I mean that's what parties are all about right? To celebrate the precious gift that is the celebrant. I am really thankful to everyone who came to the party. It was simple and people went home happy. Thank you for your time, and precious gifts.

Here are photos to give you an idea on how the event went:


Photobooth courtersy of Fotostyle
Affordable and very professional. Party proper started at 11am
and they were at the venue as early as 9am. I loved the quality of their outputs.
(Thanks ninang Cookie and kuya Keith for your gift!)



Candy buffet: courtesy of Kendi Cart
This was a hit among kids and adults.
I highly recommend these guys as well. Sulit for the price.
(Thanks ninang Belet for this! =))

Another shot of the candy buffet.
Simple design just the way I like it.


Balloon centerpieces c/o Smile Party Events & Balloon Decor.


Balloonderitas and Balloon Pillars
also from Smile Party Events & Balloon Decor

We got the Jollitown cake from Jollibee.
Their supplier is Red Ribbon. This was a mocha cake. Yum!

Snap watches given as souvenirs for kids (gift of my mom).
The rest of the prizes I bought from Landmark and SM.

Daddy Jp and the very pregnant me.
Eli hated having his pictures taken!
Outfit me: Dress by Forever21, Cardigan from my friend Jen.
Outfit daddy: FUBU shirt, some jeans. =)

This was what the venue looked like.
Quite spacious in my opinion and easy lang magkita kita ang mga tao.
However, when the guests started pouring in (about 90 persons)
it became a bit crowded also. But it's all right in my opinion.


This was during the prayer.

Daddy and the birthday boy looking at his guests.
Outfit Eli: shirt by Mossimo kids, short pants by Moose Gear

Just because I love pictures of other people taking pictures of other people.
Haha.
 
Opening remarks by daddy JP.

The party wouldn't be complete without Jollibee's
signature balloon popping game.
Thank you tita Tanya and ninong Mon for being so competitive.

We did not have that many kiddie guests kaya the games was for the
kids at heart instead. The games were lively and fun.
Especially if nanood ka lang hehe.


One of the rare times na nagpakuha ng picture ang birthday boy.
With daddy and his lolo Oca.

Again competitive ang games ng adults.
Akala mo Olympics diba?

Since the girls lost they had to dance with Jollibee
to the tune of... "Gangnam Style" of course!
(Note to Eli: you probably won't remember what Gangnam Style is
but during your second year national anthem yan sa mga parties!)

Eli and 2nd cousin Enzo.
Eli just adores Jollibee.


I bought these non toxic bubble toys so that the kids had something
to play with when they are bored.

Here are the kiddie guests.
Aren't they all cute?
(Look at Jollibee naka beautiful eyes sa likod hehe.)

See? Love nya talaga si Jollibee.


I think he wants to take home Jollibee.

Sulit the Jollibee party just for this adorable picture.

I was saying to Eli:
"Anak, say good bye na to Jollibee because we can't take him home."

Kudos to the mascot assigned to us.
Super hardworking and kwela. I think he stayed for more than an hour.

He performed three songs!

Blowing of the cake. Mainit na ang ulo ng birthday boy.

I just love this candid shot!
Ayaw nyang paalisin si Jollibee LOL. =)


Kudos to the staff of Jollibee Sheridan. I know we had some issues at the beginning during the booking process but your guys made up for it in many ways.
 
Just send me a message if you have any questions on the suppliers I booked.
 
=)

 

Hooray for Two!

Sunday, November 11, 2012

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Hi Eli, you are 2 today! You hear that? Those are 2 wonderful years of getting to know you and discovering ourselves as your parents. From day 1 I just resolved into loving you in every way I know how. That is rejoicing every ordinary days that I get to be your mom and take care of you. Your dad though, was such a discovery.

I knew from the moment we married that he’s going to be a great dad. But he even surpassed my high expectations. Ever since you were born I see him becoming more and more devoted to you. I see you holding hands while sleeping and it’s enough for my crazy little heart to overflow with joy. He loved giving you massages (and you love receiving those), he reads stories to you that sometimes bores the two of you but you listen along anyway, you sing silly songs with daddy of lyrics and notes that only your souls understand.

So you see, every day has been filled with quiet contentedness like this. Oh, I can’t even begin to just express how happy you made us. But know for sure that we love and adore you unconditionally. We can’t wait to travel the world with you. To bring you to your first Disneyland adventure (HK perhaps? Or Tokyo or Paris if mommy and daddy gets lucky). To witness you take your first elephant ride. Or build your first snowman. For you to experience and see the world as your playground. Where you will work hard on your passion and at the same time have the best fun with things that excite you.

One more thing I am so excited to see you one day (and that’s happening really soon) as a big brother. With a little sister to care for. With a little sister to fight the world for. And a little sister to be with no matter what.

You made us better persons. You made me appreciate more the man that is your dad. You have expanded our world so much.

I love you sweet, silly, little boy. Someday soon, you will choose to build a family of your own but until that day happens we’ll cherish every moment that we have with you.

Love, Mom.
PS: I hope you enjoyed your simple party yesterday although you hated having your picture taken. Today, we'll go to the zoo to see animals that you are just so fascinated at. We love you and happy birthday. :))