Most people love the idea of a back-up plan. It makes sense. When the unexpected happens, it will save you money, sweat, and tears. But not everyone likes the idea of creating one. It takes effort, and who likes to go through all that trouble, right?
For Haj Narvaez, president of BPI Securities, investing in the stock market should be part of a sensible back-up plan for anyone thinking about their future, and it can be broken down into simple steps.
“But you have to start with your ‘why’,” he said. “Whether you are planning to save up for your kid’s educational plan, your own retirement fund, overseas travel, house purchase or any other personal goal, it is best to be aware of why you’re investing. Once that’s clear, you can set a long-term investment time horizon to give your stocks ample time to grow.”
Haj listed some tips for a successful investment journey for beginners:
Risk is inherently part of the stock market, especially now that the COVID-19 pandemic created a turbulent market. Given the volatile condition of the markets, an investor needs to have the right attitude when investing.
“Thinking long-term is an advantage. The longer that you keep your money in the stock market, the more time your investment can gain value, grow, or, in case of turbulence, bounce back,” said Haj.
Do not funnel all your money into stocks. You should also have a level of discipline by religiously setting aside a fraction of your money or salary for other investment instruments to include in your portfolio.
“It is important to have a certain percentage on bonds, stocks, and savings accounts to take advantage of the movement of the economy. Likewise, distribute your money in different industries, so that when one industry is erratic, another will support your investment,” Haj added.
It is during the initial public offering (IPO) or follow-on offering that the public can have an opportunity to enter the market at favorable rates. During an IPO, buyers can buy stocks without having to pay any fees, unlike when it is already listed in the market.
When you decide to participate in an IPO, take note of the terms and know how the company will use the money. Assess its prospects—does it have a project lined up? Does it have a good leadership team? Is the business sustainable?
Buy low, sell high
There are two ways to earn in the stock market: capital appreciation and dividends. To benefit from capital appreciation, the golden rule is to buy low and sell high, because the lower the acquisition price, the higher the likelihood of stock appreciation.
A company may distribute part of its earnings to shareholders through cash dividends, which they may keep or use to buy more shares, or stock dividends, which they can sell in the market.
Gone are the days when you have to invest huge sums to start investing. For those who want to start small and make investing a habit, peso-cost averaging is a good strategy. Through peso-cost investing, you can buy stocks, no matter the price, for a fixed amount every end of month or every pay day. This strategy minimizes the feeling of loss. Through peso-cost averaging, you even out the price fluctuations in your stock investments.
Choose the right broker
Your investment journey begins by signing up with a trusted broker because they have the representation in the Philippine Stock Exchange (PSE) to buy and sell your stocks in the market.
“For beginners who are still at the stage of learning how to navigate the world of investing, they may choose to get a broker who can accommodate clients with limited funds for buying stocks,” said Haj.
BPI Trade, the fully-integrated online trading platform of BPI Securities, is an example of an online broker that anyone can use easily. It does not require any upfront fee or initial investment when opening an account, and it allows clients to fund, invest, and withdraw from their accounts by linking their BPI Trade account to their BPI bank account.
There is no one-size-fits-all approach to investing. Develop your own small habits: research, understand, and be consistent. In time, you will have the back-up plan that you need.