Whenever I talk to people, I often encourage them to save, manage their finances, have proper protection, eliminate their debt and eventually invest for the long term. But for most people, they tend to skip the process and ask me about how do I earn in investing in stocks or in similar ways like mutual fund.
Earning in stock market is easy. You buy low and sell when the price gets high. Easy, right? Just like the photo below.
This photo shows that in just over 4 years, your money would have been doubled. This 119% gain is very unusual because the Philippine economy is just booming, the reason why we are experiencing an unprecedented growth.
There’s a lot of factor and a lot of risk involve in investing in stock market. You can’t expect the market to go up like that every time you put in money.
Some markets can be a reversal of what happened in our stock exchange. So we encourage people to study first or get mentors to be profitable in this kind of trade.
The photo above is in a shorter time frame (January to August 2016). This trade gained a 34% profit.
The real challenge in investing in stock market is when to buy and when to sell because nobody really knows when it will go up or when it will go down.
There are indicators and signs of reversals that technical analysts use to time the market, that’s one strategy you can use. Also, there are analysts who use fundamental data to know when to buy and when to sell. Professionals use both to get more precise in timing the market and get the most of the profit on each trade.
Investing directly in stock market is really time consuming and risky. You need to put a team to make the most of your time and resources.
I am not discouraging you but instead I’m telling the truth. I myself, is trading directly in stock market using both technical and fundamental analysis to time the market. But I also use another strategy that is beneficial for a longer term perspective.
This strategy does not need to be monitored the whole day. It does not require much effort to study and time the market. What it needs instead is discipline and years of consistency.
This strategy is called cost averaging. See the photo below.
This strategy requires discipline and time. You need discipline to continually invest for a long period of time. You need to do it automatically, every month you buy whether the stocks went up or down. Each month allocate the same amount that you want to invest and buy stocks that is gigantic and has established a business that will last your third generation.
This is a sample computation of how this strategy works.
|Buying Stock||Amount Invested||Share Price||Number of Shares (B x C)|
Getting the total shares you bought from consistently investing Php 5,000 which is 3,256 shares. If you decided to sell at a fair price to secure your profit. Let’s say you sold at 10.07 share price. Then this is the computation,
Current Share Price = 10.07
Total Shares to be sold = 3,256
3,256 X 10.07 = Php 32, 788
Remember you only invested Php 25,000 in total and your money grew to Php 32,788.
That’s 31% gain or Php 7,787.92 in peso value. That’s how it works.
This strategy eliminates the need to time the market and basically uses common sense in choosing a company. In this way, you will have more time growing your business, be the best in your career and have more money to invest. Focus on what you do best.
However, we still suggest that you learn more on money management and be updated on the financial market condition. There’s is no magic in getting wealthy, it will take years or even decades to accumulate real wealth. Also find a community that would encourage you and remind you of your goals before anything else.
Increase your cash flow because if you don’t have money to invest then you really can’t do much on accumulating financial wealth. Hence, you should invest time on financial education.
PS. We are advocating Financial Literacy, teaching people around the world how to achieve their financial goals. Get financial coaching and join a community that encourage saving and investing. Attend our FREE Personal Finance Seminar. Register here.
PS2. Do you want to gain Financial Wealth and Spiritual Abundance at the same time? Join the Truly Rich Club.