Archive for the personal finance Category

Why invest in the stock market?

Posted in entrepreneurship, personal finance on July 31, 2010 by gohelpyourself

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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People don’t have to retire

Posted in personal finance, philosophy, psychology on November 27, 2009 by gohelpyourself

Let's drink to life. (photo courtesy of http://www.sxc.hu)

By Anthony O. Alcantara

Sometimes you’d have to envy the retarded. They’re blissfully unaware of what the future will bring them. They have a vague recollection of the past, and they usually enjoy the moment, smell the roses, so to speak.

That sounds like an appealing way to live. I’m using the word retarded in its simplest sense, no negative or disparaging connotations here.

Anyway, most of us are not retarded, and we are bombarded and influenced by messages of commercialism and consumerism. Thus, many of us are trapped in a treadmill of endless wants.

This is complicated by the popular idea of retirement. It goes something like this: you work like crazy doing something you don’t like for 40 years, you save as much as you can, and after that, you finally retire so you can do the things you really want to do.

But what if you’d like to try bungee-jumping after retirement? What if you’d like to try mountain climbing? Now you have a problem. Your body may not be up to it.

Edmund Lao, a registered financial planner (RFP), recently wrote a guest post about retirement at Randell Tiongson’s blog, www.randelltiongson.com. Tiongson is also an RFP.

What Lao wrote is depressing. I know he means well and he’s probably an excellent finance expert. But in his piece titled, “The Tired, the Retired, and the Re-tired,” he paints a gloomy picture, despite the amusing title.

Here’s what he said: “A lot of people mistakenly correlate retirement with age when in fact, retirement has something to do with personal net worth and cash flow. The sooner a person reaches his financial goals, the sooner he can retire and enjoy life.”

Challenging retirement

But can we only enjoy life as we want it when we finally retire? Should retirement and a very big nest egg be our goal? For most of us, it will take years before we amass wealth great enough so we can do the things we want to do.

Or is that so?

In the internet age, there’s an emerging school of thought that adheres to “having your cake and eating it, too.”

It’s a change of mindset and it’s increasingly becoming appealing to many. The basic tenet is that happiness is in doing the things that are important to you. It’s not having the physical things that you want.

You may want a nice car with a shiny replica of a ferocious cat in front. But it is actually driving it and having girls swoon as they see you in your car that may make you happy.

So it’s actually what you are able to do rather than what you have.

Alternatives, options

In that case, I propose some things you may want to consider. I’m still experimenting with them myself:

1. Don’t plan for retirement. Well, at least not the popular notion of retirement. Instead plan on how you can enjoy life more. If you don’t enjoy your job, look for something else. If you look hard enough, you’ll find it. And you may also want to consider looking for ways to enjoy your job more.

You may not like everything that your job entails, but you certainly can find something in it or some aspect of it that you enjoy. Psychologist Mihaly Csikszentmihalyi said that in theory you can enjoy any job provided that you set up some self-directed little goals, finding ways to measure your progress, immersing yourself in the process and continually raising the bar to improve.

2. Invest more on doing things that are important to you instead of having things. If you want to take that trip to Europe, you can begin planning now. Little baby steps go a long way. Reconsider your priorities.

If you can save money for your 42-inch LCD TV or that PSP, you can certainly save for that dream trip. Think of it this way: Would you rather take the trip now that you are young and have the strength to be adventurous, or take the trip along with a bunch of senile geriatrics many years from now?

3. Instead of goal-setting, why not life-setting? Sometimes, we can get obsessed with goals and fail to consider that life can be lived fully without being compartmentalized into goals we can tick off in our list.

I call it life-setting because the kind of life that we really want should come first. If we set the life we want first, the goals come naturally.

Ultimate goal

And what about that retirement nest egg that financial planners insist you should have no matter what?

Well, I know it’s important. But it shouldn’t be your ultimate goal. When you’re doing what you really want to do, when you’re doing what you’re passionate about, when you’re doing things that make a difference in the lives of other people, you probably won’t need or want to retire. That’s the be-all and end-all of life for me.

Of course, this is just another way of looking at retirement. It’s a tad quixotic. Retirement, as the popular definition goes, is a depressing word and it isn’t a worthwhile goal.

Not everybody will like this. But I hope some of you will be less gloomy with this thought: It can be wonderful not to retire at all.

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