4 Things You Need to Consider Before Investing in Stocks

Investing in stocks can be a thrilling offer. However, you can’t just jump into the bandwagon without proper preparation. To help you out, here are 4 basic considerations for stocks investing.

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1. Educate yourself.

Knowing what you’re getting into puts your fears and hesitancy aside. Read as much as you can about the different stock market class types, PSE listed companies, and about the stock market in general. Reading the “Business” section of a newspaper will also help you pick up some important stock market lingo.

2. Get a mentor.

Your mentor could be your stockbroker, brokerage firm, financial coach, or a stock investing expert. Take Bo Sanchez and Warren Buffet as great examples.

Enlisting the help of a mentor will help you avoid making damaging mistakes, know what stocks to pick, when to sell and hold, strategies, and other helpful tips, which your mentor learned from years of investing.

3. Know your risk tolerance.

As we all know, the stock market tends to be volatile in nature. There’s a possibility you’ll win big, but there’s also that looming possibility that you might lose big, too. Some are okay with this while others cringe at the thought.

Are you afraid of losing money? If so, make sure to invest only the amount of money that you’re more than willing to risk. Meaning, you’ll still be able to sleep soundly at night despite acquiring losses.

4. Pay attention to current events and trends.

It really pays to be updated with the latest happenings in your country and all over the world. External factors, such as wars, oil price hikes, and “bearish” economic climate (bad economy), have significant impact on stock market performance. Knowing these things will help you “anticipate,” so you can make better decisions on how to manage your portfolio.

For instance, there are still a growing number of Filipinos going abroad to work. And you know us Filipinos, we can’t live a day without communicating with our loved ones. Thus, it’s only reasonable that you buy shares from companies in the services industry, like Globe and PLDT.

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What Are The Types of Stock Market Indices?

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As I’ve promised in my previous article, today, we’re going to talk about what I’ve learned so far about the different types of stock market indices. So, if you’re ready, let’s briefly go over them now.

If you could remember, I said that the PSEi, or Philippine Stock Exchange Index, is the main index used by the Philippine Stock Exchange (PSE). It basically tells us how our economy is doing. Is it performing great, so-so, or really, really bad?

The PSEi is composed of 30 companies, which were chosen based on a set of conditions. Just this month, September, the PSE kicked out Meralco and Belle Corp. from the list and replaced them with the LT Group (Lucio Tan Group) and GT Capital Holdings because they failed to meet the said conditions.

The Philippine Stock Exchange Indices

Besides the PSEi and All Shares Index, the PSE also has six other sector indices that they maintain. The indices are computed within only a few seconds through electronic means, so investors and traders could see their movements minute by minute.

• Holding Firms Index – A holding firm refers to a parent company that owns majority of the shares of a subsidiary company, thus the former have more control over the latter.

• Financials Index – This is the main pointer for the performance of banks and other financial entities, such as Banco de Oro Universal Bank (which my friend also jokingly refers as Banco de Offline), Bank of the Philippine Islands, and Metrobank.

• Industrial Index – Some companies included in the list are Aboitiz Power Corporation, Chemrez Technologies, Inc., and Alsons Consolidated Resources, Inc.

• Mining and Oil Index – This is one of the sectors that are doing really great for the past few years, though only a few companies are actually listed on the PSEi. Two of these companies are Philex Mining Corporation and Lepanto Consolidated Mining Company.

• Property Index – Examples are Ayala Land and Robinsons Land Corporation.

• Services Index – Examples are ABS-CBN Corporation, Cebu Air, Inc., APC Group, Inc., Globe Telecom, Inc., and Philippine Long Distance Telephone Company.

That’s it for today about the different types of stock market indices, folks. That wasn’t so hard, right? Before you go, don’t forget to leave a comment.

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Check Out 6 Basic Ideas on How to Invest in Stock Market

How to invest in stock market—asking the same question? Good for you! To help you get the most out of your hard-earned money and time, check out the following ideas on how to invest in stock market wisely.

Source: http://godisheart.blogspot.com/2013/04/knowing-is-not-enough-we-must-apply.html

1. Before considering any types of investment vehicles, like stocks, it’s important that you keep your finances under control. Meaning, avoid accumulating bad debts and put aside enough money every pay day for investing.

2. To protect your money and guide your decisions, you need to do your research homework first before buying shares from a company. Some of the best sources of information online are Forbes, Bloomberg, Market Watch, and Financial Sense.

3. After, your next step is to choose a reputable stockbroker (individual or company). How do you know which ones are reputable? One way to know is to consult PSE’s (Philippine Stock Exchange) list of good standing brokers. If you have the time and patience, you could also become your own broker or trader.

4. Opening an account is quite easy to do and non-time consuming (as compared to opening a bank account). Once your brokerage account is activated, you can immediately start buying and selling your shares. If you want to sell or buy, you just need to place your order with your broker (most probably through phone).

5. As I’ve said before, don’t invest 100% of your money in stocks. Always remember to diversify your investment portfolio, which could include mutual funds, properties, businesses, precious metals, stocks, and bank savings account.

6. If possible, get a mentor. There are many out there. But personally, I get my regular updates about stocks investing from Bo Sanchez, a sought-after Catholic preacher, author, and motivational speaker.

Someone once said: “Your decisions, not your conditions, determine your destiny!” The same idea applies to your financial life. If you want to get out of the rat race, get rid of your faulty mindset, adopt healthy beliefs, and start taking charge of your finances.

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Crucial Ingredient to Any Investment Success

In my previous article, I talked about the first “Law of Process” from John Maxwell’s “21 Irrefutable Law of Leadership”. In phase one, it stated that “I don’t know what I don’t know”, which basically talks about everyone starting in a state of ignorance. In this blog, I’m going to follow it up with the second phase which is “I know what I don’t know”.

In knowing what you don’t know, you are allowing yourself room to think. You see, most of us carry this thing we called ‘brain’ all day, every day, every minute of every second. But, most of us don’t actually make the best of our biggest asset. I guess, most people think that by just following some guru online about a certain investment and how it makes ‘lots of money’ is enough.

“In order for you to grow, you need to go” (John C. Maxwell). To experience change, you need to change your roads. It’s like getting an overhaul. Tweak a little something here and there. And the first step is always to choose to “grow” so you can “go”.

In this Newbie journey, I find myself in a constant battle against trying to be good or trying to be better. I mean, there’s actually nothing wrong with both options, right? Wrong. There is that 1 % difference that gives out a huge result. The latter chooses to go the extra mile. The road to change comes with difficulties, road blocks and yes, discipline. But the rewards are far greater if you choose to be better.

Having to do with any form of investment takes process and patience. You can never separate both. There is much to knowing than just reading books and listening to experts. Keep challenging yourself. Start feeding your courage and starve your fears.

I hope this article was helpful to you. If you want to know more on how I got into stocks and make efficient decisions, check out here.