How to read a Price Graph

source: http://www.att-trade.com

A stock's price graph is one of the tools a stock trader or investor needs to understand to make that decision to buy or sell.

Price graph is a historical data showing the price movement of a stock. In technical analysis price is the driving factor that makes an investor or trader buy or sell. Stock investors and traders have different techniques in their stock picking. Some buy when the stock price is below their valuation, some buy when the stock is about to go north, and some buy when the stock indicates a downtrend.

You might ask how in the world did they know that? They are able to do that by interpreting the price graph.

Again let me re-iterate that nobody can predict stock movement; only a probable trend can be made based on what is the current market demand-supply level.

Let us use the below price graph and other graph of CHIB as our example.

Most charting software has three to four graphs. The above is take from Citiseconline's charting in there website.


The graphs in the above picture are:
1. Price graph
2. Volume graph
3. MACD
4. Stochastic


Now let us focus on the Price graph

Legend:
SMA3 - Simple Moving Average 130 days
SMA2 - Simple Moving Average 65 days
SMA1 - Simple Moving Average 32 days
CHIB - Stock Code


Simple moving average as the name says is the average price of the stock for the specified number of days. So in the legend SMA1 is nearly the average for a month, SMA2 is for 2 months, and SMA3 is for nearly 5 months.


Why are these important?


These are used as indicator meaning they give an idea where is the direction of the stock. It also defines where are the possible support and resistance. I know these words seems gibberish, click here and here to know more.

Now you know that the 3 SMA's are the average of the stock's price for a certain period, compare such averages to the current price. If the Current price is above all it indicates that the stock going stronger thus it surpasses its average prices. This means the stock's price is trending up thus a good time to profit when you already have the stock. You can hold the stock for a while or as you wait for it to reach your estimated target price(which you can set by using some stock computation tool). Sell when the stock has reached your target price.

On the other when the current price crosses below the averages it means its price is trending down. If you have bought the stock lower than the current price it could be a good chance to take profits. But if you have bought it while it was above the average it is the best time to cost average. 


With this knowledge also remember that you have to verify such price trend. This could be verified in the Volume graph. The volume graph indicates the activeness of the stock. If the current price crosses the averages upward but there is no increase in volume then such movement is not verified thus it could only be that the stock is being played or such price uptrend is just circumstantial.


Other indicators are always included for further verification. MACD or Moving Average Convergence Divergence indicates whether the stock price has a bigger or smaller price change while Stochastic indicates whether the stock is overbought or oversold.

Again nobody can predict the exact movement of the stock; only probable outcomes. The price graph is a guide but no matter what happens it is still your call as an investor or trader to chose sell or buy button.


(I would like to thank my mommy Krissy for the volume verification, Tatay John316 for lessons on when to buy and sell, and Johnny Rocky for his explanation on the moving average)

Investing word of the day: Overbought

source:  http://www.topstocks.com.au/asx_stock_forum.php

You may have read this word in all stock analysis or forum and probably wonder what it is.

Here is a definition I pulled out from Investopedia.com

1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.

2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.

When a stock is in demand, as evidenced by the growth in volume, prices tend to rise to balance the demand-supply dynamics. In times that the demand for such a stock rises abruptly  supported by a sudden increase in volume and rise in price, the stock is said to have reached its upper level thus it is said to be overbought and the tendency is for those sellers to sell their holdings to take profit. 

 source: http://www.babypips.com/

This is seen in the the Stochastic indicator when the line breaches the 80 level mark. If the stock is overbought it will soon drop and this alerts holders of such stock to sell to profit from their holdings once it crosses down the 80 level mark. Since most of the stocks are in the hands of former sellers, demand for the stock goes down thus a need to sell at a lower price than the previous price to sell the stock.

Investing word of the day: Overbought

source:  http://www.topstocks.com.au/asx_stock_forum.php

You may have read this word in all stock analysis or forum and probably wonder what it is.

Here is a definition I pulled out from Investopedia.com

1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.

2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.

When a stock is in demand, as evidenced by the growth in volume, prices tend to rise to balance the demand-supply dynamics. In times that the demand for such a stock rises abruptly  supported by a sudden increase in volume and rise in price, the stock is said to have reached its upper level thus it is said to be overbought and the tendency is for those sellers to sell their holdings to take profit. 

 source: http://www.babypips.com/

This is seen in the the Stochastic indicator when the line breaches the 80 level mark. If the stock is overbought it will soon drop and this alerts holders of such stock to sell to profit from their holdings once it crosses down the 80 level mark. Since most of the stocks are in the hands of former sellers, demand for the stock goes down thus a need to sell at a lower price than the previous price to sell the stock.

Investing word of the day: Rally

I got this article from investmentterms.net

Rally, in stock market refers to a sudden, significant rise in price of a particular security or in the total market. This can especially happen after a continuous period of falling prices. Suppose the stock market has dropped in the morning, and the investors consequently make haste to purchase companies at lower prices, then the stock market is said to have rallied.

It is caused due to a huge sum of money that enters the market, bidding the prices up. The magnitude or length of a rally is dependent on the depth and volume of buyers, as well as the amount of selling they do. Thus if there is a greater number of buyers but less investors intending to sell, there is likelihood of a large rally. If the number of buyers matches the number of sellers, the rally most likely will be of a short tenure with the price movement being minimal.

Rally is a period of sustained increase in stocks, bonds and prices of indexes. This type of situation can take place either during a bull market or a bear market.

Bear market rally

source:http://www.zealllc.com/

A bear market rally refers to a rally that occurs after a great amount of downward trend. A bear market rally apparently is an indication of the markets making recovery. In other words it is turning around to a bull market. However this might signify a temporary trend. Because of the inherent unpredictability associated with this rally, it is also sometimes termed as a sucker rally. Many people are misguided into investing seeing the upward trend only to be deceived shortly, when markets do fall.

Bull market rally

source: http://blogs.reuters.com/globalinvesting/
This is a sustained, prolonged period of rising investment prices, faster than the historical average. One of the significant periods of bull market rally in the U.S. was in the early 1990s.

Investing word of the day: Rally

I got this article from investmentterms.net

Rally, in stock market refers to a sudden, significant rise in price of a particular security or in the total market. This can especially happen after a continuous period of falling prices. Suppose the stock market has dropped in the morning, and the investors consequently make haste to purchase companies at lower prices, then the stock market is said to have rallied.

It is caused due to a huge sum of money that enters the market, bidding the prices up. The magnitude or length of a rally is dependent on the depth and volume of buyers, as well as the amount of selling they do. Thus if there is a greater number of buyers but less investors intending to sell, there is likelihood of a large rally. If the number of buyers matches the number of sellers, the rally most likely will be of a short tenure with the price movement being minimal.

Rally is a period of sustained increase in stocks, bonds and prices of indexes. This type of situation can take place either during a bull market or a bear market.

Bear market rally

source:http://www.zealllc.com/

A bear market rally refers to a rally that occurs after a great amount of downward trend. A bear market rally apparently is an indication of the markets making recovery. In other words it is turning around to a bull market. However this might signify a temporary trend. Because of the inherent unpredictability associated with this rally, it is also sometimes termed as a sucker rally. Many people are misguided into investing seeing the upward trend only to be deceived shortly, when markets do fall.

Bull market rally

source: http://blogs.reuters.com/globalinvesting/
This is a sustained, prolonged period of rising investment prices, faster than the historical average. One of the significant periods of bull market rally in the U.S. was in the early 1990s.

Investing word of the day: Rally

I got this article from investmentterms.net

Rally, in stock market refers to a sudden, significant rise in price of a particular security or in the total market. This can especially happen after a continuous period of falling prices. Suppose the stock market has dropped in the morning, and the investors consequently make haste to purchase companies at lower prices, then the stock market is said to have rallied.

It is caused due to a huge sum of money that enters the market, bidding the prices up. The magnitude or length of a rally is dependent on the depth and volume of buyers, as well as the amount of selling they do. Thus if there is a greater number of buyers but less investors intending to sell, there is likelihood of a large rally. If the number of buyers matches the number of sellers, the rally most likely will be of a short tenure with the price movement being minimal.

Rally is a period of sustained increase in stocks, bonds and prices of indexes. This type of situation can take place either during a bull market or a bear market.

Bear market rally

source:http://www.zealllc.com/

A bear market rally refers to a rally that occurs after a great amount of downward trend. A bear market rally apparently is an indication of the markets making recovery. In other words it is turning around to a bull market. However this might signify a temporary trend. Because of the inherent unpredictability associated with this rally, it is also sometimes termed as a sucker rally. Many people are misguided into investing seeing the upward trend only to be deceived shortly, when markets do fall.

Bull market rally

source: http://blogs.reuters.com/globalinvesting/
This is a sustained, prolonged period of rising investment prices, faster than the historical average. One of the significant periods of bull market rally in the U.S. was in the early 1990s.

Investing word of the day: Blue Chip stock

 source: http://beginnersinvest.about.com/
 
You probably heard this already specially if you are playing in casinos but for newbie stock investors  I got this definition from Wikipedia:

A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. Blue chip stocks pay regular dividends, even when business is faring worse than usual. The term is derived from casinos, where blue chips represent the greatest value among the many colors of chips.

The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at USD$200 or USD$250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he intended to return to the office to "write about these blue chip stocks." Thus the phrase was born. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks. In contemporary media, Blue Chips and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.

There is no specific criteria or standard that is generally followed but I got this guidelines from EconomyWatch
 
1. Revenues: Companies with revenues higher than that generated
    by industry peers.  

2. Earnings: Companies that have been generating healthy earnings 
    on a consistent basis.

 

3. Dividends: Companies that pay regular dividends to common 

    stockholders, even if their performance has been unsatisfactory in

   a particular period. Moreover, the dividend payout is raised at 

    regular intervals.
 

4. Balance Sheet: The balance sheets are robust and their debt 

    liabilities are not extensive.
 

5. Credit Rating: Their credit ratings in the bond and unsecured  

    debt markets are high.
 

6. Size: The market capitalization of these companies is higher than 

    that of other companies in the same industry.
 

7. Product Portfolio: They have extensive and diversified product 

    lines. They also have a wide global presence.
 

8. Competition: They are cost efficient, with high distribution 

   control and excellent franchise value, all of which contribute 

   towards their competitive advantage.

Investing word of the day: Blue Chip stock

 source: http://beginnersinvest.about.com/
 
You probably heard this already specially if you are playing in casinos but for newbie stock investors  I got this definition from Wikipedia:

A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. Blue chip stocks pay regular dividends, even when business is faring worse than usual. The term is derived from casinos, where blue chips represent the greatest value among the many colors of chips.

The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at USD$200 or USD$250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he intended to return to the office to "write about these blue chip stocks." Thus the phrase was born. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks. In contemporary media, Blue Chips and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.

There is no specific criteria or standard that is generally followed but I got this guidelines from EconomyWatch
 
1. Revenues: Companies with revenues higher than that generated
    by industry peers.  

2. Earnings: Companies that have been generating healthy earnings 
    on a consistent basis.

 

3. Dividends: Companies that pay regular dividends to common 

    stockholders, even if their performance has been unsatisfactory in

   a particular period. Moreover, the dividend payout is raised at 

    regular intervals.
 

4. Balance Sheet: The balance sheets are robust and their debt 

    liabilities are not extensive.
 

5. Credit Rating: Their credit ratings in the bond and unsecured  

    debt markets are high.
 

6. Size: The market capitalization of these companies is higher than 

    that of other companies in the same industry.
 

7. Product Portfolio: They have extensive and diversified product 

    lines. They also have a wide global presence.
 

8. Competition: They are cost efficient, with high distribution 

   control and excellent franchise value, all of which contribute 

   towards their competitive advantage.

Investing word of the day: Blue Chip stock

 source: http://beginnersinvest.about.com/
 
You probably heard this already specially if you are playing in casinos but for newbie stock investors  I got this definition from Wikipedia:

A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. Blue chip stocks pay regular dividends, even when business is faring worse than usual. The term is derived from casinos, where blue chips represent the greatest value among the many colors of chips.

The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at USD$200 or USD$250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he intended to return to the office to "write about these blue chip stocks." Thus the phrase was born. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks. In contemporary media, Blue Chips and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.

There is no specific criteria or standard that is generally followed but I got this guidelines from EconomyWatch
 
1. Revenues: Companies with revenues higher than that generated
    by industry peers.  

2. Earnings: Companies that have been generating healthy earnings 
    on a consistent basis.

 

3. Dividends: Companies that pay regular dividends to common 

    stockholders, even if their performance has been unsatisfactory in

   a particular period. Moreover, the dividend payout is raised at 

    regular intervals.
 

4. Balance Sheet: The balance sheets are robust and their debt 

    liabilities are not extensive.
 

5. Credit Rating: Their credit ratings in the bond and unsecured  

    debt markets are high.
 

6. Size: The market capitalization of these companies is higher than 

    that of other companies in the same industry.
 

7. Product Portfolio: They have extensive and diversified product 

    lines. They also have a wide global presence.
 

8. Competition: They are cost efficient, with high distribution 

   control and excellent franchise value, all of which contribute 

   towards their competitive advantage.

How did I start in investing?

source: http://www.debtfreeadventure.com/

I have forgotten that I have been babbling about stock investing and online stock investing for sometime now without sharing how did I start about investing.

Let me share with you a long story of my financial freedom quest and the reason behind it.

My consciousness about the importance of money really started when I was in college. When I was young money was not a problem since it is not my duty to worry about it. Also being and studying in the seminary has taken that away even if I know my mom and dad worry about the tuition(yes some seminaries are not free so if you can donate or sponsor a seminarian please do so). The moment I entered college I learned how money really affects each and every one's life. Studying in Manila is not cheap, living there alone is not cheap.

I enrolled in Philippine School of Business Administration-Q.C. My Alma Mater is primarily focus in the area of Accountancy and Management so I ended up taking B.S. Accountancy. As a newbie in Manila at the same time newbie in accounting I am always fascinated about the course I took. Accountancy is not about how to get rich, it is more of how to analyze the business transaction. If you are also an accounting graduate like me I believe you can do Fundamental Analysis which in our accounting language is Financial Ratio Analysis(the subject you hated besides Accounting 7, Management Accounting, Law, and Tax ). 

I know my story is kinda deviating so here is the reason why I got myself to investing.

source: http://www.shepherdsvoice.com.ph/

I read a book written by Eugenio Sanchez Jr. aka Bo Sanchez. The title of the book was "Simplify and live a Good Life". I have read his magazine, Kerygma, and Thank God, His Boss! but in all his works this one greatly influenced me. With my background as a seminarian and the thoughts Bo wrote in this book it made me think why are so many people are tired everyday. They work and work for no reason. They work hard to pay the house they never really enjoyed because 3/4 of the day they are not in it. Money shouldn't be the problem. One must know how to make money work for them so that one wont go to the trouble waking up even though you really don't want to but because you have a house to pay and expenses to pay you drag yourself out of your bed to go to work. I am not implying that going to work is bad, we need to earn a living but most of us are buried in debt that makes our lives miserable.

At the same time at school, we have this subject Corporate Accounting. My professor and dean of the school, Dr. Raul Addatu, would always tell us to buy stocks of SMC(San Miguel Corp.) and wait till it goes up. Yes I learn about stock, stock rights, stock dividend, and so many things about stocks but never about stock investment and stock trading. Dr. Addatu always tells us that in his MBA class, in order for a candidate to be granted the MBA title one must buy a stock and have a profit at the end of the program. That scared me because I was planning to take my MBA but until now I haven't.

So after all those experience I started looking for answers that bothers my mind. I searched publications about investments. I got a primer from a local paper discussing stock investment and my mind started to swirl when I learned that stock brokers require a minimum of 100,000.00 pesos to open an account. Online stock brokers are not yet around at that time. But it did not stop me from dreaming to own stocks of some famous company the likes of PLDT, SMC, and Ayala.

When I was working in my last employer before working here in Guam I already set my goal to be an investor. I have been setting aside money for it. The very first investment I made was at a mutual fund. I just have to make that first move to keep myself going into that direction. It was just a small and right now I don't know how it is already but hoping to check it after five years to avoid charges of early withdrawal of funds. 

While working here in Guam I always check the websites about stock market like PSE, DOW, Bloomberg, CNBC and TV shows like CNBC watching the World Wide Exchange, Managing Asia hosted by Christine Tan, and other programs. I waited nearly two years until I opened my brokerage account. 

source: http://www.shepherdsvoice.com.ph/

In Bo Sanchez's book 8 Secrets of the Truly Rich he mentioned about Citiseconline. So checked them out and even emailed them on how would I open an account even though I was outside the Philippines. And so last November 2009 while on vacation I opened my account with them placing my initial deposit of 25,000.00 pesos. To tell you the truth I was thinking twice and I was a bit jittery about it. Even though I have read a lot about it and even played the online stock trading game it still makes me think how will I do it.

I have eyed on stock of JFC(Jollibee Food Corp.) and have been placing buy order from January 2010 to early March.  It was only in March that I have my first buy transaction. Then SMPH(SM Prime Holdings). I have been holding this two until it made a profit in around April or May and released it. From their on I started bold buy and sell transactions. It came to the point that I was holding 18 stocks and most of them are at the negative. But it didn't bother me. The years of learning and understanding stock market trading finally sink in to me. 

Also I have joined a forum and started this blog to share what I learned about stock investing. It may be scary because it is your hard earned money that is on the line but knowing how to play it and having knowledge about it makes it easy. And so I will re-iterate my and my friends advice when doing stock trading:

1. Only invest free cash

2. When your portfolio is negative you have not yet loss anything

    unless you sell it

3. Buy low, sell high. Lower your average cost per share and take 

    profits when prices is near your target price 

4. Prepare for market correction. Always have available cash for 

    bargain buying

5. Read, research, and learn. 

6. Don't be afraid to ask, you are an investor

7. Always be humble and share your knowledge to others
8. Trade at your own risk. 

How about you how did you start your stock investment? Share your story here in the comments

How did I start in investing?

source: http://www.debtfreeadventure.com/

I have forgotten that I have been babbling about stock investing and online stock investing for sometime now without sharing how did I start about investing.

Let me share with you a long story of my financial freedom quest and the reason behind it.

My consciousness about the importance of money really started when I was in college. When I was young money was not a problem since it is not my duty to worry about it. Also being and studying in the seminary has taken that away even if I know my mom and dad worry about the tuition(yes some seminaries are not free so if you can donate or sponsor a seminarian please do so). The moment I entered college I learned how money really affects each and every one's life. Studying in Manila is not cheap, living there alone is not cheap.

I enrolled in Philippine School of Business Administration-Q.C. My Alma Mater is primarily focus in the area of Accountancy and Management so I ended up taking B.S. Accountancy. As a newbie in Manila at the same time newbie in accounting I am always fascinated about the course I took. Accountancy is not about how to get rich, it is more of how to analyze the business transaction. If you are also an accounting graduate like me I believe you can do Fundamental Analysis which in our accounting language is Financial Ratio Analysis(the subject you hated besides Accounting 7, Management Accounting, Law, and Tax ). 

I know my story is kinda deviating so here is the reason why I got myself to investing.

source: http://www.shepherdsvoice.com.ph/

I read a book written by Eugenio Sanchez Jr. aka Bo Sanchez. The title of the book was "Simplify and live a Good Life". I have read his magazine, Kerygma, and Thank God, His Boss! but in all his works this one greatly influenced me. With my background as a seminarian and the thoughts Bo wrote in this book it made me think why are so many people are tired everyday. They work and work for no reason. They work hard to pay the house they never really enjoyed because 3/4 of the day they are not in it. Money shouldn't be the problem. One must know how to make money work for them so that one wont go to the trouble waking up even though you really don't want to but because you have a house to pay and expenses to pay you drag yourself out of your bed to go to work. I am not implying that going to work is bad, we need to earn a living but most of us are buried in debt that makes our lives miserable.

At the same time at school, we have this subject Corporate Accounting. My professor and dean of the school, Dr. Raul Addatu, would always tell us to buy stocks of SMC(San Miguel Corp.) and wait till it goes up. Yes I learn about stock, stock rights, stock dividend, and so many things about stocks but never about stock investment and stock trading. Dr. Addatu always tells us that in his MBA class, in order for a candidate to be granted the MBA title one must buy a stock and have a profit at the end of the program. That scared me because I was planning to take my MBA but until now I haven't.

So after all those experience I started looking for answers that bothers my mind. I searched publications about investments. I got a primer from a local paper discussing stock investment and my mind started to swirl when I learned that stock brokers require a minimum of 100,000.00 pesos to open an account. Online stock brokers are not yet around at that time. But it did not stop me from dreaming to own stocks of some famous company the likes of PLDT, SMC, and Ayala.

When I was working in my last employer before working here in Guam I already set my goal to be an investor. I have been setting aside money for it. The very first investment I made was at a mutual fund. I just have to make that first move to keep myself going into that direction. It was just a small and right now I don't know how it is already but hoping to check it after five years to avoid charges of early withdrawal of funds. 

While working here in Guam I always check the websites about stock market like PSE, DOW, Bloomberg, CNBC and TV shows like CNBC watching the World Wide Exchange, Managing Asia hosted by Christine Tan, and other programs. I waited nearly two years until I opened my brokerage account. 

source: http://www.shepherdsvoice.com.ph/

In Bo Sanchez's book 8 Secrets of the Truly Rich he mentioned about Citiseconline. So checked them out and even emailed them on how would I open an account even though I was outside the Philippines. And so last November 2009 while on vacation I opened my account with them placing my initial deposit of 25,000.00 pesos. To tell you the truth I was thinking twice and I was a bit jittery about it. Even though I have read a lot about it and even played the online stock trading game it still makes me think how will I do it.

I have eyed on stock of JFC(Jollibee Food Corp.) and have been placing buy order from January 2010 to early March.  It was only in March that I have my first buy transaction. Then SMPH(SM Prime Holdings). I have been holding this two until it made a profit in around April or May and released it. From their on I started bold buy and sell transactions. It came to the point that I was holding 18 stocks and most of them are at the negative. But it didn't bother me. The years of learning and understanding stock market trading finally sink in to me. 

Also I have joined a forum and started this blog to share what I learned about stock investing. It may be scary because it is your hard earned money that is on the line but knowing how to play it and having knowledge about it makes it easy. And so I will re-iterate my and my friends advice when doing stock trading:

1. Only invest free cash

2. When your portfolio is negative you have not yet loss anything

    unless you sell it

3. Buy low, sell high. Lower your average cost per share and take 

    profits when prices is near your target price 

4. Prepare for market correction. Always have available cash for 

    bargain buying

5. Read, research, and learn. 

6. Don't be afraid to ask, you are an investor

7. Always be humble and share your knowledge to others
8. Trade at your own risk. 

How about you how did you start your stock investment? Share your story here in the comments

How did I start in investing?

source: http://www.debtfreeadventure.com/

I have forgotten that I have been babbling about stock investing and online stock investing for sometime now without sharing how did I start about investing.

Let me share with you a long story of my financial freedom quest and the reason behind it.

My consciousness about the importance of money really started when I was in college. When I was young money was not a problem since it is not my duty to worry about it. Also being and studying in the seminary has taken that away even if I know my mom and dad worry about the tuition(yes some seminaries are not free so if you can donate or sponsor a seminarian please do so). The moment I entered college I learned how money really affects each and every one's life. Studying in Manila is not cheap, living there alone is not cheap.

I enrolled in Philippine School of Business Administration-Q.C. My Alma Mater is primarily focus in the area of Accountancy and Management so I ended up taking B.S. Accountancy. As a newbie in Manila at the same time newbie in accounting I am always fascinated about the course I took. Accountancy is not about how to get rich, it is more of how to analyze the business transaction. If you are also an accounting graduate like me I believe you can do Fundamental Analysis which in our accounting language is Financial Ratio Analysis(the subject you hated besides Accounting 7, Management Accounting, Law, and Tax ). 

I know my story is kinda deviating so here is the reason why I got myself to investing.

source: http://www.shepherdsvoice.com.ph/

I read a book written by Eugenio Sanchez Jr. aka Bo Sanchez. The title of the book was "Simplify and live a Good Life". I have read his magazine, Kerygma, and Thank God, His Boss! but in all his works this one greatly influenced me. With my background as a seminarian and the thoughts Bo wrote in this book it made me think why are so many people are tired everyday. They work and work for no reason. They work hard to pay the house they never really enjoyed because 3/4 of the day they are not in it. Money shouldn't be the problem. One must know how to make money work for them so that one wont go to the trouble waking up even though you really don't want to but because you have a house to pay and expenses to pay you drag yourself out of your bed to go to work. I am not implying that going to work is bad, we need to earn a living but most of us are buried in debt that makes our lives miserable.

At the same time at school, we have this subject Corporate Accounting. My professor and dean of the school, Dr. Raul Addatu, would always tell us to buy stocks of SMC(San Miguel Corp.) and wait till it goes up. Yes I learn about stock, stock rights, stock dividend, and so many things about stocks but never about stock investment and stock trading. Dr. Addatu always tells us that in his MBA class, in order for a candidate to be granted the MBA title one must buy a stock and have a profit at the end of the program. That scared me because I was planning to take my MBA but until now I haven't.

So after all those experience I started looking for answers that bothers my mind. I searched publications about investments. I got a primer from a local paper discussing stock investment and my mind started to swirl when I learned that stock brokers require a minimum of 100,000.00 pesos to open an account. Online stock brokers are not yet around at that time. But it did not stop me from dreaming to own stocks of some famous company the likes of PLDT, SMC, and Ayala.

When I was working in my last employer before working here in Guam I already set my goal to be an investor. I have been setting aside money for it. The very first investment I made was at a mutual fund. I just have to make that first move to keep myself going into that direction. It was just a small and right now I don't know how it is already but hoping to check it after five years to avoid charges of early withdrawal of funds. 

While working here in Guam I always check the websites about stock market like PSE, DOW, Bloomberg, CNBC and TV shows like CNBC watching the World Wide Exchange, Managing Asia hosted by Christine Tan, and other programs. I waited nearly two years until I opened my brokerage account. 

source: http://www.shepherdsvoice.com.ph/

In Bo Sanchez's book 8 Secrets of the Truly Rich he mentioned about Citiseconline. So checked them out and even emailed them on how would I open an account even though I was outside the Philippines. And so last November 2009 while on vacation I opened my account with them placing my initial deposit of 25,000.00 pesos. To tell you the truth I was thinking twice and I was a bit jittery about it. Even though I have read a lot about it and even played the online stock trading game it still makes me think how will I do it.

I have eyed on stock of JFC(Jollibee Food Corp.) and have been placing buy order from January 2010 to early March.  It was only in March that I have my first buy transaction. Then SMPH(SM Prime Holdings). I have been holding this two until it made a profit in around April or May and released it. From their on I started bold buy and sell transactions. It came to the point that I was holding 18 stocks and most of them are at the negative. But it didn't bother me. The years of learning and understanding stock market trading finally sink in to me. 

Also I have joined a forum and started this blog to share what I learned about stock investing. It may be scary because it is your hard earned money that is on the line but knowing how to play it and having knowledge about it makes it easy. And so I will re-iterate my and my friends advice when doing stock trading:

1. Only invest free cash

2. When your portfolio is negative you have not yet loss anything

    unless you sell it

3. Buy low, sell high. Lower your average cost per share and take 

    profits when prices is near your target price 

4. Prepare for market correction. Always have available cash for 

    bargain buying

5. Read, research, and learn. 

6. Don't be afraid to ask, you are an investor

7. Always be humble and share your knowledge to others
8. Trade at your own risk. 

How about you how did you start your stock investment? Share your story here in the comments

Income classification: why is income from stock investing the secret of the rich

I already posted about active and passive income. If you want to know more about active and passive income click here for my post.

Another way to look at income is how to relate the quantity. Income could either be linear, fixed, and exponential.

source: http://guidetosuccess4life.com/the_plan

Linear income is an income where you earn based on the quantity performed. The best example of this type is employment. When you are employed you have a rate. It could be an hourly rate, weekly rate or monthly rate. You are paid based on how many hours you have worked. It could also be in the number of item made or sold. For example a banana cue vendor's earnings is based on the number of banana cue he can sell, a doctor's earnings on how many patients he or she can served, and a sales agent's on the number of sales he or she makes and if the quota is reached.

Linear isn't that bad, the thing is you only earn when you work and make effort so if you got sick, or you are tired or you ran out of  materials to create the thing you are selling you wont earn anything. You are limited to the availability of you time or resources. 

source: blogs.inquirer.net/moneysmarts

Fixed income on the other hand as the name says is fixed. In a way it is similar to Linear income only that fixed income is always just there. A good example of this is earnings on interest on time deposit that is not compounded. In a time deposit the bank pays you a stated interest rate for a period of time. It is in a way the effect of passage of time. So if you placed a time deposit of Php 250,000.00 that pays you 5%  per annum and the interest is paid quarterly for five years you will get Php 3,125.00 every three months. Now did you noticed what I said....not compounded right?

source: http://fxtraderzone.com/
Exponential income is in a way fixed income with the effect of compounding and timing. If the time deposit above is compounded it will be a different story. Compounding means putting interest on top of the original principal plus the earned interest. This is one form of exponential income. Another form is timing and the best example for this are stock investments. 

Stock prices go up and down...but the secret as always is to buy low and sell high, meaning timing. That is why we have the term bottoming up and taking profits. You buy stocks when they are at their lowest possible value and take profit when they are near their highest value. This is exponential income because your earnings is not dependent on how many hours or units you made, it depends on how much is the value. Of course being exponential does not only mean exponential earnings, it also means exponential loss. That is why timing is a key factor in the stock market trading.

But another way of looking at exponential is how it duplicates itself. The best example of this is a music made by a composer. Remember there is only one music done and yet so many albums sold. It is by duplication that the earnings becomes exponential. Another one is by franchising. A franchise is actually a business modeled by some wise businessmen. In order to earn more the businessman allows others to use the business model he created thus one: the business is expanded and duplicated and two: it reaches more customers. 

source: http://anongbalitangayon.blogspot.com/2009_10_18_archive.html

In the Philippines Tony Tan Caktiong has one of the most successful franchises that the Jollibee brand has expanded worldwide. They have also established and acquired brands to capture certain market and at the same time combining two franchises to have better choices for the customer. Thus in some places Jollibee and Greenwich are juxtaposed.

One of the recent earning streams is by blogging. Blogging actually earns though advertisement which we call online marketing(to know more about online marketing click Jomar Hilario's site). They key factor that can make your blog generate exponential income is readership or what we call traffic. The more readers you have the more advertisers would like their ads to be in our blog. But you may ask how in the world blogging becomes a source of exponential income?

 source: google.com

Well if your blog is heavily trafficked and ads are related to your post even if you stop posting new blogs as long as the words and ideas are still there, your blog stands as a online billboard. People searching the Internet might stumble on your post and learn and is able to see a link that will lead them to a product. Imagine that, after making your blog so famous and so widely read and then you suddenly stop. People will still come to your blog probably by Internet search or referral or what we call a back link. You are not doing anything yet readers still come to you and off course where there is traffic there is earnings...you are just like the music composer who once wrote the song and sold millions of copies of the album.

I know my post kinda diverted from stock investing but at least you know what are these types of income. In stock investing you can compound your earnings by re-investing whatever gains you have from your profit taking. You can also duplicate your money by investing in several good stocks. Just keep the cycle going. Buy low, take profits when prices are high, reinvest your earnings, and invest to more good stocks.