“An investment in knowledge pays the best interest.”
– Benjamin Franklin
My experience in stock investing has been really good. My portfolio in a span of six years has grown by about 30 percent, which is about 5 percent per year of earning. Not bad considering our inflation rate has been below 5 percent the past few years. But looking back from where I started, I’d have to say I got a bit lucky as well, since the past 6-8 years our market has been very bullish and it just so happened I started at a good time. Throughout those years of getting myself in stock investing, here are some of the things I’ve learned.
Study, study, study. You can be an OJT for stock investing but that will be riskier than studying first before getting your feet wet. I was an OJT and I’ve lost some along the way.
When I look back, I wish I studied first how stock investing works before getting my feet wet. This way, I minimize the risk of losing a lot and I maximize my potential of earning. Just like any venture we want to get into, understanding how an investment works and how one can earn or lose money is very important in achieving the success we want.
What’s the plan? Most of the people I talked to who ‘tried’ stock investing are not sure about what they are doing. They buy stocks based on ‘tips,’ which at times are just hearsay to hype a stock. I started stock investing without a plan. I was a headless chicken running around trying to follow anyone who may have a ‘good’ tip. Well, guess what? There’s no such thing as a good tip when you don’t do due diligence and make an effort to learn which stocks to buy and which ones to sell. From my own experience of being a headless chicken, I can say that by the time someone says a stock is a good buy because they’ve earned a lot from it, chances are you are late for that party.
There are no guarantees. Recently, a blue-chip stock that for the longest time has been considered the most stable of stocks took a major dive. I for one never would’ve thought this company’s stock price will take this much of a hit considering its reputation of being very stable and generous with dividends. So what’s my realization here, this is investing and in investing, nothing is guaranteed, especially the returns.
It is not gambling. Well, it is when we don’t know what we are doing. The key to making money in stock investing is understanding how it works and figuring out a short-term and a long-term strategy. It becomes a gamble when we just cherry pick stocks without any basis or plan. My parents always told me that stock investing was a gamble, simply because they had lost money way back when IPOs were the biggest hit in stock investing. But when I asked them if they understood how it worked or how to earn from this type of investing, they didn’t have a clue.
It can be for everyone but not everyone will have the heart for it. Making money may be the goal of those people who invest in stocks. But one thing I’ve learned is that it is not the only money-making investment out there. I know a lot of people who have no investment in stocks but are financially successful. It is nice to diversify our portfolios and include a few stocks, but it is important as well to understand the type of investment we are passionate about to ensure that we follow through on whatever plan we have in place. At the same time, that passion will drive us to learn more about our chosen investment.
Though everyone can easily invest in stocks, not everyone has the heart for it, in the same way not everyone has the passion for business. Don’t get me wrong, stock investing can be for everyone, but not everyone will have the patience to dig deeper and learn more about it. It is easy to learn how it works, but when money and emotion are involved, the easy part becomes much harder.
Jeremy Jessley Tan is a Registered Financial Planner of RFP Philippines. Learn personal financial planning at 53rd RFP program this April 30-July 4. To register, e-mail to email@example.com or text <name><e-mail><RFP> at 0917-9689774.