Question: I attended a stock investment seminar recently and I would like to start investing. I have P100,000 on hand that I had set aside for my maternity as I was expecting caesarian, but I was able to deliver our baby normally. I wonder if you can recommend a good broker and what stocks to buy. Can you help me? (Excerpt from a text received from ArlinS. of Cebu City.)
Hi Arlin, thank you for asking for our advice on investing. Let me congratulate you first for your new blessing, your baby, and also for planning to invest. You are taking the step necessary to achieving financial peace for both your and your baby’s future.
Before answering your question straight, there are many things we need to consider. It is difficult to give good advice if we do not have the necessary information. Below are the things you need to consider before investing.
First, gauge your reason for investing. Many investors these days just invest because it is the new trends. The main reason for people getting burned in the stock market is that they do not know why, when, and how. Knowing your why (or reason) gives you the support for investing. It is to say, know your goals and make sure they are harmonious with your values. Values are our inner core. The reason people get stressed is that their action is not sync with their inner values. Try to use these guiding questions: What is the number one thing that you value the most right now? How do I want to see my family and myself 10 to 15 years from now? How much do I need to reach this goal? Your answers will tell you if investing would make sense to you and your family.
Second, before you invest, make sure you have enough savings as a back-up fund or what we call emergency fund. It is difficult for individuals to invest without having this. For example, in case any member of your family might get sick. Where will you get your money? If your entire liquid asset is in the stock market, it may not be possible for you to get the money when you need it most. The market fluctuates and it may not be the right time to liquidate your holdings. So, make sure you have sufficient funds for emergency, like 3-6 months of your monthly expense or your monthly income.
Third, make sure you have an adequate income protection. If you are the breadwinner—that is, you have someone who depends on your financial support—make sure you have the necessary insurance.
Now, if you sure about and comfortable with all the things mentioned above, it will be easier for you to invest.
The first thing you need to do, if you want to invest directly in the stock market, is to study the companies whose shares you want to buy. Try to evaluate their business, understand how the business works. This is one of the tricky parts of investing. To make it much easier for you in evaluating a business, try to see it from your own perspective. What products do you use every day? And what business you believe would outlast your goals, or that would last longer? After this, try to identify the management of the business. To gauge this, use this question: If I were the business partner of this management, do I trust them? With their management principles, will I still do business with them?
Once you have done the research, you can now start valuing the companies through their market price. You can now do fundamental analysis on each company. You can compare the market price and the company’s intrinsic value.
To look for brokers, you can always choose the nearest you to have the convenience. All brokers have their own uniqueness of their platforms. You can check which one suits you best.
All these things I have discussed here can claim a great chunk of your time. So, if you are a full-time employee, consider hiring an independent financial planner—a planner not connected to any financial product-supplier to avoid any biases.
Wishing you all the best and success towards financial freedom and peace.
Serge Barcenas Bargayo is a Registered Financial Planner of RFP Philippines based in Cebu city. To learn more about personal financial planning, attend the 3rdbatch of RFP Cebu Program this Sept 28—Oct 1, 2016.To inquire, e-mail email@example.com or text <name><e-mail><RFP>at 0917-9689774.