Investing for Beginners: Introduction to Stocks

I often hear coworkers who thought their job prospects were getting dim as they get older say that they will just start their own business if they lose their job. It’s their contingency plan. Running a business that they can call their own was their dream they would tell me. They seem to think that seeking a job for older people may seem difficult but there would be no one to stop them from starting their own livelihood.

If it was just that easy, I would be one of them. I would plan to have a business when I’m older. But I have experienced the difficulties of starting and running a business myself not to believe that fantasy. The statistics of businesses folding on their first year tells us that not everybody is made to become a successful business person. 

What’s the Alternative?
But that shouldn’t stop us from investing our money on companies that we think have bright futures. We may not actually be running the business but we can be part-owners if we buy shares of their stocks. Owning stocks is another way of being a part-owner of a corporation that is publicly listed in the stock market.  

Being a part-owner, we can make money through the dividends that these companies distribute to their stockholders. We could also earn from the gains that can be realized when the stock price goes up.

Risks and Rewards
Investing in stocks, however, is relatively risky compared to other financial instruments such as corporate bonds, government securities and deposit accounts. Stock market fluctuations are unpredictable in the short-term. That’s why those who invest in stocks are usually in it for the long run. Because over the long-term, historical data have shown that the returns on investing in stocks are much higher than any other financial instruments.

In the Philippines, stocks of publicly listed companies are bought and sold in the Philippine Stock Exchange (PSE). As of today, there are 245 listed companies to choose from in the PSE based on their website. (pse.com.ph) 

How Can I Start?
But how does one start investing in stocks? And what percentage of my savings should I invest? Is there a strategy I can follow to be successful in investing? Which stocks should I consider investing in?

Buying stocks in the stock market is not like buying bread from the supermarket. Not everyone just goes to the stock market to perform their own transactions. There are qualified stockbrokers who would do the transactions for buyers and sellers of stocks. These stockbrokers provide their services for a fee. They can also give the investor some advice from their experience about which stocks are promising. 

There are also service firms that provide market analyses and stock assessments for investors. They can manage your investment fund and give you recommendations based on their studies of where the market or any particular company’s stock price is headed.

How Much to Invest
There’s really nothing to stop you from investing as much money you have but it would just be foolish to invest everything in the stock market. There is no single formula to say how much of one person’s savings should go to stocks. Each person has a different financial condition than the other. A prudent assessment should be made based on these conditions to see how much he or she is capable of investing. 

Financial planning is a great help to analyze how much can be invested but not everyone is very good at it. That’s why this blog is here to help by sharing valuable knowledge on personal finance and financial planning. Nevertheless, the conservative advice that the PSE advocates is to invest only as much as 25% of your savings in the stock market and nothing more.

Blog Widget by LinkWithin

 
Design by Free WordPress Themes | Bloggerized by Lasantha