One time, I received a tweet from my friend. He has read my article about investing in the stock market. Being a banker, he agrees with the idea of money growing over time but then he says, "Crucial here is choosing the companies to invest in. Many companies close in five to ten years time."
True. I totally agree.
In stock market investing, based on my personal experience, there are only four basic rules to remember and they are as follows:
1. Diversify.
Diversification in the stock market is a technique that reduces risk by allocating investments among various financial instruments, industries and other categories. It aims to maximize return by investing in different areas that would each react differently to the same event. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.
My stocks portfolios, both directly and indirectly, have a good variety of stocks from various industries. I have banking stocks, consumer, conglomerates, industrial, property, power and telecommunication.
Directly, I follow the recommended stocks of the Truly Rich Club. With a membership fee of Php497 monthly, I can sleep well at night knowing that over time, my money will grow through the companies I buy today.
Indirectly, I have invested (and am insured) through Insular Life's VULs. VULs are the ONLY investment with insurance. This is what makes it different from all other forms of investment like mutual funds, UITFs, and bank accounts.
Through my VULs Equity Laced Funds, their fund managers who are backed up years of investment expertise, do all the works for me while I do other things. Currently, I have investment in their Equity Fund (45 actively managed blue chip companies in the PSE), Select Equities Fund (Top 10 companies in the PSE) and Guardian Fund (Next Top 10 in the PSE).
Because I know the stability of INSULAR LIFE, the first and largest Filipino-owned insurance company in the country, now at 108 years, and being the first insurance company to open during Yolanda, it does not only give me sound sleep every night because of the investment part. More importantly, even if God calls me home, I know my loved ones will still be well taken cared of because of the insurance part.
The fund managers take care of the risk, the insurance takes care of my fears.
2. Buy only the giants, and 3. Buy lots of giants.
These are blue chip companies. These are strong, stable companies that stay even when the stock market crashes. As what Warren Buffet said, " Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
I remember a speaker in one of the seminars I attended bought stocks of PLDT back in 1986 when the market was down. PLDT was priced at Php3.60 per share back then. In 2016, PLDT sold at Php3,200 per share. So, you can just imagine how much money he made just by being "greedy when others are fearful."
There is this book that I am currently reading. The Tao of Warren Buffet. It says, "The great secret to getting rich is getting your money to compound for you, the larger sum you start with, all the better. As an example: $100,000 compounded at 15% for twenty years will grow to $1,536,653. But let's say you lost $90,000 of your initial capital before you even started and could only invest $10,000. Your investment would then only grow to $163,665 in year twenty, for a profit of $153,665. This is a much smaller amount." That is way of losing money.
This is the very simple reason why I encourage everyone not to invest just the minimum, or their spare amount. From investing 20% of my income when I began in 2013, I now invest 50% of my income and live within minimum. And, yes it's not easy, but it is possible.
4. Have a long-term horizon for your investments.
I am often asked if there is a holding period for money invested in stocks. There is no holding period. You can sell your shares anytime and withdraw your funds anytime. But since we are here for the long term and our favorite holding period is forever as Warren Buffett would say, it is better that you have a separate fund for emergency. A short term perspective only exposes one at risk to sell shares at a "bad time." This is also what differentiates investors from traders.And remember to have the discipline to stick consistently buying shares and growing your portfolio based on these rules.
Cheers to long-term investing!
P.S. Are you thinking of directly investing in the stock market? Bo Sanchez' Truly Rich Club walked me through it starting Day 1. To begin your journey as well, CLICK >>> HERE
P.S2. Do you want to invest in the stock market but do not have the time to learn and monitor your stocks? Get your own VUL instead, make your money grow while being insured at the same time. Send me an email at financialplanningforpinoys@gmail.com.
Reference:
http://www.investopedia.com/articles/02/111502.asp
P.S. For your investment and insurance concerns, send me an email anytime at financialplanningforpinoys@gmail.com and I can send you a quotation for FREE.
