9 Reasons You Shouldn’t Be Afraid of Stock Market

9 Reasons You Shouldn’t Be Afraid of Stock Market
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“Whoa! You’re investing in stocks. Aren’t you afraid of the stock market?” – that’s a common reaction among friends and colleagues who do not understand how stock investment really works. Hearing such saddens me, who has been contributing to the growth of publicly listed companies and scratching the surface of the promising Philippine Stock Market.

What saddens me even more is the fact that less than one percent (1%) of Filipinos invest in stocks while the number of scam victims keeps on increasing. In a 2015 report for instance, one in every 100 Filipinos has fallen prey to various investment scams that wiped out more than PHP25 billion worth of hard-earned money [Read Inquirer.Net article].

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To shed light on the what’s and how’s of this promising investment, here are the nine reasons why you and many other Filipinos should never be afraid of the stock market. I am not a stock investment expert, but these reasons are grounded on my two years of stock market experience and some sort of research. As you finish reading, may you change your mind and start making a good investment. So, here we go!

1| Excuse me! Stock market is not a scam.

No article says that it is a scam so why think it is. Our Philippine Stock Exchange (PSE), the national stock market or exchange, traces its origin back to the merging of the Manila Stock Exchange (MSE) and the Makati Stock Exchange (MkSE) in 1992. The PSE, being granted the “self-regulatory organization” (SRO) status, has also kept on strengthening its reforms and initiatives so to safeguard the rights and interests of the investing public against fraud, manipulative trading practices, and erring stockbrokers [Read more about PSE Investor Protection].

“Kung sa tingin mo scam ang stock market, parang sinasabi mo na rin na scam ang malalaking publicly listed companies gaya ng Jollibee Foods Corporation (JFC), PLDT, Inc (TEL), San Miguel Corporation (SMC), Universal Robina Corporation (URC), at Ayala Corporation (AC)” [Read more about PSE Composite Index].

2| Stock market volatility is normal. You shouldn’t worry much.

It’s no question volatile, but that makes a good opportunity. Seasoned or long-term investors, even traders, don’t get nervous whenever the stock market dips. Interestingly, you should take market dips as an opportunity to buy stocks at cheaper prices and average down your stock positions.

Peso-Cost Averaging is a time-tested stock investment strategy of investing a fixed amount of money at regular intervals to minimize risks in a volatile market. Say, you buy stocks last month at higher prices, and soon the market dips and stocks become cheaper, you can now but buy more shares and average down. As the stock market recovers and prices rally over time, expect a greener portfolio [Read also, 4 Na Kamalian ng Stock Investors].

3| Companies want their investment capital grow as much as you do.

Companies go public through initial public offering (IPO), or their first-time selling of stock shares to the investing public, and hence, raise a huge capital for their growth and expansion.

When you buy their shares, you don’t lend them your money for such purposes, rather you become a co-owner of these companies. As a shareholder then, you are entitled to receive stock dividends (slices of the company’s profits) and others agreed upon including voting rights, and service and product discounts and perks [Read also, Bakit Magandang Mag-invest sa Stock Market?].

4| Stock market beats inflation. Your cash savings don’t.

You can’t just stuff your money under a mattress, or let it sleep in a savings account while losing its purchasing power to inflation. Worse to think about, your bank finances its other businesses with your money or lends it to others while you’re earning a meager interest. Hence, you should even be more afraid of your bank savings.

Yes, you can always maintain a good savings account for emergency purposes, but don’t expect that your money will grow and beat inflation. In the stock market however, there is an assurance that you’ll earn decent profits from annual stock dividends and price appreciation. In my two years of stock investment, I have earned thousands from dividends alone, something that I cannot make with my regular bank savings [Read more about Savings Interest Computations].

5| Losing investment capital is but your choice.

As Warren Buffett put it into words, “The stock market is a device for transferring money from the impatient to the patient.” Many lose money in the stock market because they tend to be impatient, fail to wait for the natural appreciation of stock prices over time, and sell out at the wrong time.

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Your stock market loss is realized only when you sell your stocks at a loss, but if you keep holding onto their promises of appreciation, then your investment capital remains intact. Sell only when you make profits. What governs the stock market cycle is the fact that ‘what goes up must come down, and vice versa’ [Read also, Bakit Pabago-bago (tumataas at bumabagsak) ang Presyo ng Stocks?].

6| Don’t be bashful. You can start with just PHP 5,000.00.

You don’t have to be rich or a millionaire to start investing in stocks. You can open an online stock investment account with established and legit stockbrokers such as COL Financial with just PHP 5,000.00. Take note, you don’t have to pay anything upon opening an account. You can use the whole amount as your initial capital to purchase shares of stocks.

In hot summer of 2016, I had the grit to start my stock investment with COL Financial. It’s easy and worry-free, I must say. You shouldn’t be afraid getting scammed because COL Financial itself is a publicly listed company, and it’s highly recommended by other biggies in stock market investment including Bo Sanchez [Read also, Paano Ako Pumasok sa Stock Market?].

7| You’re an investor. Leave the technicals to the traders.

Yes, those technicals – graphs, charts, and other technical market analysis tools – can be quite complicated and hence, daunting. It’s always your choice, anyway. If you prefer to be a day trader, then definitely, you should learn technical analysis and do your homework rigorously. Technical analysis is an evaluation of stock movement based on market factors and data including trading volumes, historical stock price fluctuations, and industry trading trends, hence predicting future stock price movement.

But, if you opted to be just a conservative stock investor, then you can always rely on your fundamental analysis and a little of your guts. Fundamental analysis involves calculation of the intrinsic value of a stock based on economic factors such as income and expenses, growth prospects, competitions, and returns on equities. In short, fundamental analysis is usually part of a long-term investment strategy, and technical analysis, as it is focused on volatility and current market trends, works better for short-term stock trading [Read more about Technical and Fundamental Analyses].

8| Bankruptcy is not a big issue. You’re just overthinking.

Again, you’re just overthinking. It goes as simple as this way however – if the stockbroker goes bankrupt, you need not to worry much because the Philippine Stock Exchange and Securities and Exchange Commission have established protection measures for stock investors, and thus, will arrange the transfer of your assets to another stockbroker or the one you prefer.

Likewise, if the corporation you invested in goes bankrupt, it is hence obliged to liquidate all assets and pay off all debts. Usual order of debt payment starts with the government, financial institutions, creditors, bondholders, preferred shareholders, and lastly, common shareholders. Hello, I don’t think giant companies would go bankrupt overnight [Read more about Stock Investment Basics]!

9| Come on, we’re all tech-savvy!

You’re a digital man, I suppose. You have the knowledge and skills on how to do online transactions and a little research. COL Financial, for instance, has gone totally digital. You buy and sell stocks online. Yes, in just a few clicks! You don’t have to be afraid because, in the first place, you have mastered your Facebook account in a matter of days. So, you can do it as well with the stock market [Read also, COL Financial Account Guide: Tools, Features, and Services]!

Another good thing, you don’t have to subscribe to daily broadsheets for business and investment news and updates because there are available PSE Monitoring apps ready for your download. As a beginner however, you can always check free online resources from credible blogs and websites for instant information and quick answers to your questions [Read also, 10 Websites Where You Can Learn Stock Investing (Philippines)].

There they go – the nine reasons why you and many other Filipinos should not be afraid of the stock market! Without basic knowledge and skills, investing in stocks can be but risky but not as scary as what most people think. As I have already written, if you can manage these risks with safe investment strategies, surely you can take advantage of the volatile stock market and secure investment profits.