For many Filipinos, the stock market is a complex and risky investment method. Most of us would rather go the traditional route: start a business, set aside a tidy nest egg, or invest in real estate. The hesitancy comes from our lack of understanding on how the stock market works and the observation that many people who dabble in stocks fail.
This view is generally correct if we are talking about stock market trading. About 80% of stock market traders lose their money, according to entrepreneur and author, Bo Sanchez. Many of these traders speculate and buy stocks from high-risk companies. These companies can have stock values as low as 20 centavos, but speculators take a risk and study the market forces hoping that their 20-centavo investment could give them high returns. If you think it’s similar to gambling, you’re not wrong. Many people trade stocks on the possibility they could get high returns, and many of them fail.
Investing in Stocks
Investing, on the other hand, is a different matter. If you invest in the stock market, you choose a relatively stable and large company that would pay an annual dividend to its investors. The returns may not be as high as those from trading, but they could give you a satisfactory return on your stock investments. Many investors also have the option of choosing stocks from several companies to diversify and lower the risk of losing their money. If you invest in stocks, you could increase the possibility of creating investments and savings that could set you for life.
What is Peso Cost Averaging?
The best method you can use when you want to invest in the stock market is peso cost averaging. This allows you to set aside an amount for a specific period (monthly or quarterly) over the medium- or long-term. You may also invest as much as you want, as long as it fits your monthly budget.
When you do buy stock market shares for a set period, you should consider buying fewer shares when the prices are high and more shares when the prices are low. You should do this for the set period you committed, and sell your shares you’ve made a healthy profit.
Investing in the stock market can be risky, but if you know the difference between stock trading and share investing, the stock market is one of the best ways to make your money work for you. Filipinos should see the long-term benefits of exploring this investment strategy and build a financially stable future for their families.