Despite the spectacular growth of the Philippine economy the past few years, only less than 1% of Filipinos invest in the stock market. Most pinoys still prefer to put their money in a savings account. Some invest in real estate and time deposits, most avoid the stock market for various reasons. Below are the usual reasons why most pinoys don’t invest in the stock market.
The Stock Market is Too Risky
One of the most common misconception I often hear about the stock market is that it is a high risk investment. Even though the stock market is a volatile investment, there are strategies you can apply to minimize risk and improve your odds to earn.
Most people are not aware of the different types of investors in the stock market. There are day traders who hold their shares for short duration and long term investors, who hold their stocks for months or even years. People who just started investing in the stock market should focus on long term investing. Investing in long term lessens risk since you don't need to time the market. People who invest in long term won't be bothered about movements in the market. Long term investors see bear markets as opportunities and bull markets to purchase stocks at a cheaper price. They know they will be able to recover the paper lose they incur during a bear market on the next bull market.
One method to lessen your risk in the stock market is to use Cost Averaging. Cost averaging is basically investing regularly in solid and well established stocks regardless of whether the market is up or down. Investing in a stock regularly will allow you to buy more stocks when the market is down.
Diversifying your investment spreads your risk and provides you with more chances to earn. The maxim "Don't put all your eggs in one basket" applies in stock market investing. Invest in familiar and well established stocks from different sectors, diversifying will allow you take advantage on sectors that might perform better during a bear market.Unless you are already well educated on how the market works, it is advisable to spread your investments in different sectors to prevent a catastrophic lose in case a particular sector crashes.
Another simple method of diversifying your portfolio is to invest in an index funds. Their are funds both mutual and trust funds that mimic the PSEi. Investing in index funds allows you to invest on a bunch of stocks with minimal cost. Index funds relieves you of the headache of constantly adjusting your portfolio in order to balance the diversity of your investment.
Most people are not aware of the different types of investors in the stock market. There are day traders who hold their shares for short duration and long term investors, who hold their stocks for months or even years. People who just started investing in the stock market should focus on long term investing. Investing in long term lessens risk since you don't need to time the market. People who invest in long term won't be bothered about movements in the market. Long term investors see bear markets as opportunities and bull markets to purchase stocks at a cheaper price. They know they will be able to recover the paper lose they incur during a bear market on the next bull market.
One method to lessen your risk in the stock market is to use Cost Averaging. Cost averaging is basically investing regularly in solid and well established stocks regardless of whether the market is up or down. Investing in a stock regularly will allow you to buy more stocks when the market is down.
Diversifying your investment spreads your risk and provides you with more chances to earn. The maxim "Don't put all your eggs in one basket" applies in stock market investing. Invest in familiar and well established stocks from different sectors, diversifying will allow you take advantage on sectors that might perform better during a bear market.Unless you are already well educated on how the market works, it is advisable to spread your investments in different sectors to prevent a catastrophic lose in case a particular sector crashes.
Another simple method of diversifying your portfolio is to invest in an index funds. Their are funds both mutual and trust funds that mimic the PSEi. Investing in index funds allows you to invest on a bunch of stocks with minimal cost. Index funds relieves you of the headache of constantly adjusting your portfolio in order to balance the diversity of your investment.
Investing in the Stock Market is too Complicated
Most pinoys who are unfamiliar with the stock market believe that you need a special diploma or expensive software or degree to successfully invest in the stock market. Pinoys are unaware that majority of the stock investors in the Philippines don't have special degree on stock investing, most of them are not even from the finance sectors. These investors often learn about stock investing through books, seminars or the internet. Some people who are too busy too learn about the stock market often subscribe to professionals who offer advice for a small fee.
Another option is to invest in equity mutual funds or trust funds, which are invested in the stock market and professionally managed by experts. Some of these funds often out pace the stock market making up for the small fees these funds charge.
Another option is to invest in equity mutual funds or trust funds, which are invested in the stock market and professionally managed by experts. Some of these funds often out pace the stock market making up for the small fees these funds charge.
I don't have the Capital to Invest in the Stock Market
A lot of pinoys believe that you need to be rich in order to invest in the stock market. They will be surprised to know that more than a third of stock investors have an annual household income of less than Php 500,000. You can open a stock trading account and start investing for as low as Php 5,000. You can also start investing in Equity Mutual funds or Trust funds for as low as Php 1,000.
I don't have the time to monitor the Stock Market
Unless you want to be a full time trader, you only need a few hours a month to invest in the stock market. You don’t need to regularly monitor the prices of your stocks if you invest using cost averaging. Investing regularly using cost averaging strategy will free you of the time consuming activity of monitoring and timing the market. Long term investing using Cost Averaging requires minimal hours and offer good returns.
I am too Young to start Investing
Time is the best advantage young investors have over their older counter parts. Investing early gives these young investor the luxury of learning from their mistakes. It provides them with a longer period to allow their investments to grow. It affords these young investors the luxury to learn from their mistakes. It will allow them to take advantage of market cycles. Even though most young investors start investing with small amounts, these small investments will have a huge impact on their investment portfolio the longer they continue to invest. Young investors can take advantage of the compounding growth of the stock market which is around 10-15% annually.
