Investing in stocks feels like a serious and daunting task especially when you're just a beginner who wants to get started. If you're determined to make your savings grow in the hopes of financial independence, well you're on the right track! Learning to start investing in stocks takes courage and plenty of patience to familiarize yourself with terms like "mutual funds," "individual stock," or "share of stock." But raising your financial literacy is an excellent place to kickstart your stock investing journey.
Below is a guide for beginners on stock market investing. Let's start with the basics. What are stocks? Stocks represent a measure of ownership in a company. When you buy stocks or buy shares of a company or corporation, you become part of its stockholders or shareholders. When the company performs well and grows, over time, you enjoy returns on your investment. Of course, if the company suffers a loss, you also lose your investment. What is the stock market? When after thorough research you decide to get shares of stock from XX company, where would you go to invest your money? The stock market is where stocks are bought and sold to investors. In the Philippines, we have the Philippine Stock Exchange, or PSE, which is one of the oldest stock exchanges in Asia. When companies want to expand and need funding, they sell a part of their ownership to the public via the stock market. How do you earn money when you invest in the stock market? 1. Capital Gains When the company that you invested in grows, more investors would want to buy stocks or shares from it. This demand would raise the stock price. This puts you at an advantage as an early investor because other investors would want to invest and be eager to pay you a much higher price for your shares. The money you earn when you sell stocks is called capital gains. 2. Dividends Profitable companies who rake in profit share a portion of their earnings to their stockholders by paying dividends in the form of cash or free additional shares. Did you know that in the Philippines, PSE investors generally receive dividends once or up to four times a year? While everyone's investing goals is to earn profit and grow wealth, all investments, including stock investments, are still subject to how strong or weak the economy present economy is. This is why holding multiple stocks or diversifying your stock portfolio helps reduce the risks of a volatile economy. Best Ways for Beginners to Start Investing in Stocks A good starting point for rookies is to put money in an online investment account which can be used to buy shares or stock mutual funds. You can also start investing for the price of a single stock share when you open a brokerage account. A brokerage account allows you to buy and sell a variety of investments from mutual funds to stocks. This is an excellent way to invest money if you're saving up for the future or a big purchase. When investing in individual stocks feels to advanced for you, you can considering investing in mutual funds or unit investment trust funds. Not sure where to start? Seeking the expertise of a financial advisor is also an option if you want someone to align your investment goals and manage your portfolio. Below are more useful tips to consider before you begin investing. 1. Increase your financial literacy. In short, deep dive into the world of finance and learn about the ins and outs of the stock market. Researching the strong companies and best stocks to buy, studying financial statements, disclosures, and strategies, knowing the best time to buy and sell, and learning how to diversify your portfolio, are all ways to get educated about stock investment. 2. Create your own investing strategy. You cannot reach your investing goals without a solid plan. Do you seek to earn from stock price appreciation or dividends? Do you see yourself trading stocks long-term or short-term? Some investors are proactive traders who can buy and sell stocks within a day, week or month. Others are long-term investors who purchase stocks and hold on to them over a long period before selling once they reach their target. A recommended strategy for beginners who choose to invest in stocks is the Peso Cost Averaging, wherein you invest a fixed amount on profitable companies at regular intervals (monthly, quarterly, semi-annually, or annually) for a long period of time (usually between 5 to 10 years). This is a good strategy for those new to stock market basics and looking to minimize risks by purchasing shares at different prices. It also helps build the habit of investing by adding or investing money at regular intervals. If you're looking to invest long-term, buying blue-chip stocks is also a good option since they are from topnotch companies in the Philippines. Strong players to invest in the Philippine Stock Exchange are Ayala, Aboitiz, BDO, BPI, DMCI, Megaworld, Robinsons, etc. 3. Open a brokerage account and begin investing. Once you've done your research, you need a stock broker to assist you in buying and selling shares or stocks. Stock brokers are those who participate in trading and can be an individual or a company accredited by the PSE and Securities Exchange Commission to purchase and sell shares on behalf of investors. As mentioned before, beginners who what to venture into the stock index for the first time are recommended to invest through online stock brokers. Online trading platforms offer real-time stock market information, stock research reports, and easy portfolio management. Once you've set up your brokerage account, you can now start trading stocks through it. Remember to add money or invest an amount that you would be willing to risk. Be mindful that the stock market does not guarantee fast and equal returns. Compared to before, beginners in stock investing have plenty of access to information. You just have to be patient in immersing yourself in finance and make sure to strategize well. It's never too late or too early to start investing in order to maximize your gains from the stock market.
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January 2024
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