Investment 101 :How to invest in stock market the easiest and most convenient way

        Perhaps you may be thinking that stock market investment is only for rich people or for those who have a wide knowledge about how stock market works. I had the same impression before. Though I had a  very small idea how it works but it did not really  cross my mind to invest -----not until I attended a 2- hour seminar on long -term stock market investment. I was so amazed that I can be a stock holder of a gigantic company in the country just by investing 5,000 monthly, quarterly or even annually. So  right  there and then I started my initial investment at Ayala  Land, Inc. The rest, as they say is history.

And that is what I am going to share with you since I believe God gave me this knowledge not just for  myself but for others as well. This is my simple way of  serving Him.

So lets get started!

 Let me begin by defining the most commonly used terms in stock market :

 STOCK MARKET
     A place where shares of publicly listed companies are bought and sold. In the Philippines, It is the Philippine Stock Exchange that governs the local stock market

STOCKS
     Shares of ownership in a company. So for instance, you purchased 100 shares of PLDT, then you become a part-owner or share holder of that company. In layman's term, "nakibakas ka sa puhunan  ng PLDT" for them to have more money to expand the business instead of them borrowing from the bank.

BROKER
     One/company  that acts as an agent or middleman for buying and selling of stocks and in return they get commission for each transaction.

DIVIDEND
     The share in the profits of a corporation which is paid to the stockholders out of the unrestricted retained earnings.In other words, if the company is earning they declare dividend and give it to all stock holders ( dividend amount multiplied by number of shares).This is the other way to earn in stock market.

I am not going to make your nose bleed for now so I won't add more terms,at least for now!

SO WHY STOCK MARKET INVESTMENT?

History would tell that investing in quality stocks yields greater returns compare to other investment vehicles.This is really a sound investment especially that Philippine economy is doing quite well in the past few years.In the US there is a big percentage of Americans  investing in stock market.But in the Philippines, it is a long way to go. But more and more Filipinos now are into this kind of investment. We used to have that notion that investing in stock  market is only for rich people-----not anymore. Even
an employee earning a minimum wage can invest in  stock market.There is now a wide education in the country teaching people to save money and invest in this vehicle.It only took me 2 hours of my time for  the seminar on basic long term investment in stock
market.So you can definitely do it yourself.

HOW DOES IT WORK?

 There are two types of stock market investment:

     1. Trader - A market trader is someone who has a wide knowledge about this investment tool.He knows how to play with it, easily anticipates when the price goes up or down. If you are this type, you need to closely monitor the market every single day. Don't worry we are not going to tackle this, at all.

      2. Investor - This is the easiest one.And this is what my friend and I  have been doing for quite a  while now.We don't care about the market if the proices goes up and down, even if the economy is good or bad.Why? becuase we are doing it long term like 10 to 20 years (so if you start at the age of 22, by the time you reach 40, you are alreay millionaire).All  you've got to do is to REGULARLY buy shares monthly, quarterly or annually with the same amount like 3,000 to 5,000.It should be CONSISTENT and
LONG TERM. The bottomline is we are doing cost averaging (I will site an example later).THe good benefit of this is it develops descipline since you know there is an investment that you should  save  money for on a regular basis.


HOW TO EARN ON THIS INVESTMENT?

It's pretty simple! 

 First things first, you need to have a broker to  transact for you.In my case I attended a seminar conducted by the top stock broker in the country so  they became my broker eventually.After you open an account with your broker, you are now ready to buy shares.The price per share depends on the prevailing price on that trading time you are buying it.  For instance, you have deposited 5,000 to  buy shares of Ayala Land for 25.00 per share on that day.This means you can buy 200 shares.Then you do the same process REGULARLY (monthly, quarterly or  anually). That depends on your budget.

 Your money will earn in 2 ways :

       1. Price appreciation  - This is the increase in  market price of the stocks you bought. So lets say you bought the share for 25.00 in January and in December you need the money and decide to sell it and on that day the price is 30.00 then you earn 5.00 per share so If you have accumulated 1000 shares then you have gained 5,000.

      2. Dividend - Periodically, companies declare  dividend to its share holders.That means the company did well in the current period so they are sharing the profit.So For example, they declared 0.20 cents per share dividend, and you accumulated 5,000 shares. So that means you get 1,000.

THE POWER OF COST AVERAGING  ( The secret why rich people become richer)

Peso cost averaging is defined as investing a FIXED amount at a regular interval like monthly, quarterly,  etc.For example, 3,000 every 3 months.

To illustrate, lets say you have decided to invest  3,000 a month in stock market and the price keeps on going up and down everytime you buy shares:

MONTH      INVESTMENT        PRICE PER SHARE        # OF SHARES BOUGHT

 January          3,000                               20.00                                               150 
 February        3,000                               22.00                                               136                                            March              3,000                              23.00                                                 130                     
April                  3,000                               21.00                                                142             
May                   3,000                               21.00                                                142
 June                 3,000                               22.00                                                 136        

 TOTALS       18,000                              N/A                                                   836         


So If you are going to sell your 836 shares of stock in  June with the prevailing price of 22.00, that would  be a total of  18,392. You earned 392.00.

 Analysis: 

 The above illustration proves how effective cost  averaging is. You don't care if the price goes up or down on the day you buy stocks for as long as you CONSISTENTLY buying on a REGULAR basis, then your  money grows. So Imagine if you do it long term like  10-20 years. You can enjoy your retirement.You can  even retire early if you start investing in you 20's.That is the principle of cost averaging.You let your  money work for you.It makes your money grows while you are sleeping or having a vacation.

 TIPS : Make sure that you invest in the big companies  that will stay in the industry for decades.That minimizes risk. 

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