Engaging in a venture that is by nature highly volatile can be very intimidating, even off-putting to some–and yet investing remains to be one of the top ways ways to be financially free. While there are many horror stories with trades gone wrong, there are just as many successes. It’s never about luck, but framing an investment strategy that will allow you to win repeatedly over time.
Winning in the stock market requires the discipline to completely follow your strategy and ignore the noise of the crowd, but a general rule of thumb if you are a long term investor, is to invest in companies that are doing well. For example, Security Bank Corporation bagged The Banker’s prestigious award, Bank of the Year, in 2018. Regarded as the Oscars of the global banking industry and the world’s longest running international banking title, the award is granted to banks who have exemplified mastery in developing new products and services while delivering exemplary financial results. The award is the bank’s fourth from The Banker in the last six years. With a consumer loan portfolio that grew by 48% and a total asset growth of 6%, Security Bank is definitely a fundamentally sound company for the long term. As of this writing, Security Bank’s stock price is up 38% from its lows last October 2018.
With that, here are some tips on investing that have stood the test of time.
1. Invest in yourself
This might seem like funny advice, but this is the very first thing you should do! You are your greatest asset and you will only go as high as what you know. You need to not just educate yourself but you need to invest in building your skills. You need to develop skills that will bring value to people. Because people will pay you by the amount of value you give them. I graduated as an Electronics and Communications Engineer and to make that shift into the world of investing and trading I knew I needed to invest in myself and build new skills. Looking at it from hindsight, it’s the best investment that I have ever made.
2. Understand where the money is going
Before jumping right in to buy a stock at an attractively low price, know and understand first the dynamics of the industry you’re investing in. Learn how it works and how to read the news properly–don’t make decisions based on every bad piece of news you read. Check first how the news impacts the company because if the stock drops, but nothing changes in the way the company grows and makes money, that should be the best time as an investor to put more money in and buy. People tend to be cautious and overreact at the slightest hiccup in the stock market, but that’s how you can win in the market for the long term, just buy amazing companies when everyone is fearful and sell them when everyone becomes so greedy and want to buy.
3. Know your risk tolerance
Do you like to take big risks for big rewards? Or do you like to win the race slow and steady? Those who win big are those who take risks that normal people don’t take. That’s why the rich get richer because they do things that 99% of the population don’t do. Although it’s attractive to mimic the investing habits of those who win, it’s important to realize that wealth is a process. There will be investments that will take your portfolio to the next level, but if you don’t feel comfortable with the volatility, my suggestion is to put a small amount that you can tolerate that even if it goes to zero you can still sleep well at night. Meaning it can be as low as 1,000 Pesos or 5,000 Pesos but only put an amount of money that if the stock price drops, you will still be okay. You can start adding more later on when you feel more comfortable about volatility. At the end of the day, investments are suppose to add value to you and not take away your peace of mind.
For those who want to invest in managed funds but still have exposure in the stock market, some companies categorize their funds according to risk. Security Bank Corporation arranged their list from moderately conservative to aggressive, and currently have ten funds to choose from. To add to their roster, they recently introduced three new funds–the Asia Pacific Equity Feeder Fund, the US Equity Index Feeder Fund, and the Global Equity Index Feeder Fund, all for those with aggressive risk appetites. The first fund is a dollar-denominated unit investment trust fund (UITF) that allows the public to invest in highly profitable companies across Asia; the second fund focuses on large, mid, and small capital US equities with different growth and value styles; finally, the third one enables the public to invest in developed and rising economies in the world market.
4. Long-term investing works
You may have seen my posts on how I track the market every single day and how I break down each stock based on how it moves from a technical analysis standpoint. While my goal in every trade is to maximize my gains if it’s a winning trade and minimize my losses if it’s a losing trade, you have to remember that there’s no such thing as a perfect strategy. It’s not a one size fit all investment. If watching the market frequently isn’t for you because of your hectic work schedule, then I’d like you to consider being a long term investor. Similar to what I said above, it’s all about you buying good companies, that are growing and holding them to the fullest extent of its potential. Warren Buffett was one of the first investors that I followed over a decade ago when I was just starting out and he himself believes this: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Knowing if the company is good and growing will give you the confidence to hold on to that stock for a very long time.
So these are a few of my tips, and I hope you’ll find them useful! It’s important to remember not to give into the hype and buy and sell stocks just because other people are doing it. Follow your own strategy, trade with your own conviction and see yourself win in the stock market for a very long time!