Wednesday, March 23, 2011

7 Rules of Stock investing


I know I have mentioned this rules already but I want to reiterate it for the benefit of new stock investors in the Philippines.

Again these rules are our personal rules me and a bunch of my stock investor friends keep on reminding ourselves in our quest to be financially free. I hope these will also benefit you as you step into this vehicle or means of achieving financial freedom.

1. Only free cash



Most people believed that only the rich with tons of money can invest in the stock market. In reality you only need a minimum of 5,000.00 pesos to invest in the Philippine Stock Market using an online stockbroker. Now we only say invest only your free cash because it would be miserable to pull out what you have invested when the need for cash arises. And the worse is when you pull out your investments the stocks you are holding have a market price below your average cost thus ending at a loss. 

2. Don't be ashamed to ask

In the stock market information plays a big part. Knowing what is a stock, what is the companies current situation, what is the trend, what is the entry point and the likes. As you ask you must be able to acquire knowledge which you can use to guide you as you do your stock investing activities. Learn from your mistakes and research or analyze why you did not get your stock purchase or why is the stock at a low level.

3. Pocket your profits, moderate your greed

No one can really tell when will the stock market will go up or down. Thus one has to set until where you are willing to accept profit so that when the stock price reaches that level you sell your stock and keep the profit. Most of the time people keep on waiting and waiting for the stock to be high and when the stock price suddenly drops they wont be able to sell their stock at the desired price thus ending selling their stock at lower profit or worst at a loss because the stock went down abruptly.

4. When in doubt don't buy


Always do your due diligence or research before buying. Don't buy because your neighbor says so. Always research about the stock you wanted to purchase. In relation to this don't be afraid to ask people who knew and also invest in stock. Most people ask opinion from people who are not investing thus they make wrong stock picks. Educate yourself. In the very first part it would be very hard since everything to you is new. The terms will make your nose bleed and your brain freeze and you might think you are talking to an alien who have advanced intelligence when you talk to someone who has been successful in investing. They are the mentors and though they themselves are mentors they too do research. So when doubtful about a stock that you want to purchase do your research first before  buying.


5. Set aside emergency fund for personal use and another for bargain buying


Again in relation to put only free cash in stock investment, one has to set aside emergency fund to avoid pulling out your investment at a loss. Also set aside free cash for bargain hunting. Often times the market goes into what we call a healthy correction. When this comes prices go down to correct itself from being saturated. This is the best time to buy specially blue chips since most will have a lower price due to saturation. Those who own the stock before are now selling thus in order to sell they have to lower their asking price. It is also the best time to cost average for the stocks that you have been holding.


6. Trade at your own risk


Again as we said nobody can say when will the stock go up or down thus you should be accountable for your own stock bids and not blame somebody else when you make bad buys. You might buy a stock today and it could be possible that the next day the stock will be down and the other day and still the next week. Even if a mentor or a person with a good track record at stock investing said so and you relied on his word you should not put the blame on them when you made a bad stock buy. It could be that they are in a different but advantageous position thus they are able to make profit out of it and you on the other hand loss.


7. Share your blessings


Always set part of your blessings to give back to charity. Giving makes that sense of abundance because you can give a portion of what you earn. When you think abundance it creates that feeling of fulfillment and it would make you feel not limited thus you also make your bids as if you are a millionaire and big time investor.

 

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