Should I Invest in the Stock Market?
A straight up answer is YES! Everyone should own a stock regardless if your profession is a farmer, fishermen, clerk, manager, government official, doctor, engineer or a businessman everyone should own a share of stock.
What is a Stock Market anyway, and why I should buy stocks?
Imagine that we have an old trusted friend - Aling Nena wants to put up a small grocery store but Aling Nena does not have enough capital and she decided to raise P50,000 from her connections like you and me for example. According to her business plan, the total cost to put up this small grocery is P100,000 but she only has P50,000 and you and I were convinced that it has a huge potential so together we invest P25,000 each.
| OWNER | Capital Share | Share | |||
| Aling Nena | P50,000 | 50% | |||
| You | P25,000 | 25% | |||
| Me | P25,000 | 25% | |||
| Total Capital | Total | ||||
| P100,000 | 100% |
We decided that Aling Nena will be the president of our business for she owns more shares and she will handle the daily operations, you and I are co-owners/Investors and Aling Nena will have a separate salary from her daily efforts of managing our grocery. After 1 month, the business had a net profit of P15,000! The 3 of us are entitled to the shares we own.
| Owner | Profit-Sharing |
| Aling Nena | P7,500 |
| You | P3,750 |
| Me | P3,750 |
RISKS INVOLVE
If someone offers you an investment telling you that there is no risk in it, avoid it. It is a scam. Everything has a risk. Our banks in the Philippines are only insured up to P500,000! Even the big banks can close and history has proved that. Click here for the full story of Lehman Brothers.
Lehman Brothers had a total of P32 Trillion in assets. Even if we combine our top 3 banks in the Philippines (BDO, BPI, and Metrobank) it will not even reach P2 Trillion.
The point is, wherever you put your money the risk is always there. In the Stock Market, your goal is to educate your self to reduce the risk.
Top 5 Strategy in the Stock Market you need to develop
- What company to buy.
- When to buy.
- When to sell.
- When to hold and do nothing.
- Learn fundamental and technical analysis.
CONCLUSION:
When you buy a stock you become a part-owner of that company. You can earn in 2 ways since you're a part-owner, first is through dividends (that is your cut from the profits of the business) second is by the stock price appreciation. Jollibee was around P60 a share back in 2010, now it is already P255 a share. If you invested P100,000 in Jollibee in 9 years ago, you can sell it now around P420,000.
On the flip side, if the company had a bad year and recorded net losses, the stock price will also fall resulting in a depreciation of your investment.
Jollibee has announced that it is buying Coffee Bean. Do you think it is good for Jollibee Foods Corporation?
Photo is courtesy of http://marketmonitor.com.ph/pse-sets-new-index-rules/