Why invest in the stock market?

For long-term investing, the stock market is better than having money in the bank or investing in risky businesses. (photo courtesy of http://www.sxc.hu.)

by Mary Louise M. Alcantara and Anthony O. Alcantara

If you ask people for a list of what they would invest in if they had a million pesos, the stock market would probably not make the cut.

A PSP or Gameboy console would probably get a better ranking. But that’s because, for most people, the stock market is as inscrutable as the Hammurabi Code.

The stock market pretty much runs like your regular neighborhood public market. Let’s say you want to buy a plump tilapia that you can stuff with tomatoes and onions and grill using your brand new electric griller.

You go to the fish section and see a promising candidate on top of the pile. You check out her skin. You look at her eyes to see if they’re clear and not cloudy. You check if the flesh is firm. You sniff her for the right fishy aroma. This is it, you say to yourself… your perfect candidate for dinner.

In the stock market, you deal with companies instead of fish, though they could smell fishy sometimes, especially if they’re run by unscrupulous businessmen. You buy company stocks, which entitle you to profits, dividends, and partial ownership of the company.

Simply put, it’s just like buying and selling anything. We believe most people, like those who buy and sell cellular phones, have transferable skills that could be applied in investing in the stock market.

But there’s a learning curve. If you could muster some interest and genuine curiosity, you can definitely learn enough to be confident to invest in the stock market.

Ways to earn from the stock market

There are two ways you can earn from investing in stocks: dividends and capital appreciation.

When you invest in the stocks of a certain company, you become part owner of that company. For instance, if you own shares equivalent to 10 percent of a company, then you have the rights to 10 percent of the profits of that company.

When a company earns a profit, and the board decides to retain only a certain amount for expansion, dividends, which are expressed in pesos per share, may be given out to stockholders.

Capital appreciation is the increase in the value of the stocks or shares that you own. For example, if you invested P100 in a company, after five years, the value of that investment can become P150. That’s an increase of 50 percent in five years.

And why would the value increase? Well, just like in the neighborhood public market, where the price of tilapia fluctuates with changes in demand and supply, the value of your shares fluctuates, too.

Fortunately for really well-run companies with a good track record, they increase their value significantly over the years. The stock’s real value, or the actual cost, and perceived value, or the value that people assign to the stock, determines the price of the stock.

Invest online

The easiest way to invest in the stock market is by having an online stock broker. So far, the best and biggest online stock broker in the Philippines is Citiseconline. We have to admit that one of us knows one of the VPs of the company, but we’ve done our research. Please let us know if there is a better online stock broker.

Citisec’s website (www.citiseconline.com) lists everything you need to know to get started. It answers all your questions about stock market investing. All forms are downloadable. You just visit their office to submit the forms and other requirements, and deposit an opening fund. You can do this through BDO, BPI, Security Bank or HSBC.

One such product that we recommend is Citiseconline’s EIP or Easy Investment Program. With at least Php5,000, you can start investing.

Under EIP, you can invest in great companies that Citiseconline recommends. They are:

Ayala Land Inc.

Bank of the Philippine Islands

Jollibee Foods Corp.

Manila Water Co. Inc.

SM Prime Holdings, Inc.

Philippine Long Distance Telephone Co.

You can deposit Php5,000, or any amount you choose, every month to your Citiseconline account. Then you just pick which stocks you want to invest in among the six companies mentioned.

Citiseconline believes these companies are the best picks for long-term investing, which means 10 or more years. Through peso cost averaging, you will minimize the effects of fluctuations in the stock price.

Since we don’t intend this article to be exhaustive, and since the details are best explained by Citiseconline’s experts, we recommend that you check out Citiseconline’s website (www.citiseconline.com).

It would be best if you attend the company’s free seminars. They even offer free sandwiches and drinks, too.

Have an open mind and give the stock market a chance. It’s one of the largely-untapped investment tools in the country. And it may be your ticket to riches.

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One Response to “Why invest in the stock market?”

  1. Natural Gas Stocks…

    […]Why invest in the stock market? « Go Help Yourself[…]…

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