Basic Investment Principles In The Stock Market – Part 3

Posted by Zigfred Diaz on December 19, 2009 under Finance | Be the First to Comment

In part three of this four part series we will be discussing the next four principles of stock market investment. Previously, we discussed about the first three principles of investment. Number one principle is that the stock market is just another vehicle of investment. Secondly, you must realize that investing in the stock market is a like roller coaster ride. The third principle involved answering the question on what type of investor you are. If you wish to view the entire article in its entirety, visit my blog.

4.) More cash more profits, but you don’t need a lot to start investing. – Investing in the stock market does not require you to have millions or hudreds of thousand of pesos. My personal estimate is that you need P 20,000.00 to start trading.This is what I started with. But even if you only have P 10,000.00, you can already start trading. However that amount may be too small in my opinion. To drive the point of the above principle lets say you bought shares of Jollibee (JFC). Jollibee shares cost only 51.50 today. The board lot (the minimum amount of stocks that you could invest in) is only 100. If you calculate, you only need P 5,150 (51.50 x 100) to be “part owner” of the Philippines’ number fast food chain company. Lets pretend that after 1 year the per share value of the Jollibee stocks you bought already cost P 100.00 per share, you have gained P 5,000.00 more. Imagine the profits you are making ! How much more could you have made if you invested in 200 shares ?

5.) You must be consistent in investing – If you start small make sure you do not stay that way. Discipline yourself to invest a certain amount of your income to the stock market in order to pump in more capital so that your portfolio may grow. For the past month now I have slowly added to my investment, I did not just stop at P 20,000.00. Make investing a habit.

6.) Minimize your losses, Maximize your profits – The loss is only on paper if your stock goes down. The actual loss occurs when you sell your stock at the “losing” price. The best thing to do therefore is to never ever sell at a loss. This is the reason why it is very important that the money that you invest in the stock market is considered as surplus money, not your emergency fund. If you invest your savings or emergency fund, you will be forced to withdraw sell your stock at a loss if you desperately need the money. To maximize your profit you must utilize profits you gained from the sales of stocks and the dividends you receive to buy more shares of stocks.

7.) The stock market is not a get rich quick scheme – In all investments always take note of the principle that money takes time to grow. Those Investments that give you very high rate of return in a very short period of time are most likely investments that make other people rich, not you. Most likely it will take several months or even years in order for you to really profit in the stock market, especially in the Philippine stock market. There are times that it will just take weeks or days to really make a killing. However these are rare occasions. This usually occurs in cases like when there is a consistent bull run or that there is an unusual drop or climb of prices in a short length of time for various reasons.

Would you like to know more about investment strategies ? Visit the blog of Zigfred Diaz where he blogs about several interesting topics such as investments, money management, business, making money online and Stock market investing

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