Read this to learn how to invest in the Stock Market

I am sharing my response to the query of my friend, Simon, who would like to start investing in the stock market. Why am I sharing it? Because I believe that it is the same concern a newbie investor has, it was the same concern I had when I started investing in the stock market 2 years ago. So read on and learn how you can begin and start taking charge of your financial destiny.


Bro,

Iba ka na ngayon. Successful on your field. Looking forward for stock investment maybe by 2012 or 2013. Kailangan ko ng advise mo d2. Keep in touch.

Regards
Simon

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Hi Simon,

Thank you for the encouraging words.

I am glad that you are interested in investing in the stock market. By doing this, you are taking full control of your financial destiny. Because of your initiative, you are on your way to become part of that 1% in the Philippines who invest in the stock market.

Stock market investing is simple. Contrary to common belief that it is just available for the very wealthy, nowadays you can open a stock market investment account for a minimum of 5,000 pesos. As you cannot go to the exchange center to do the buying and selling unless you are a licensed broker, you need to find a good broker to do the buying and selling for you. Personally, I recommend Citiseconline.com. I have an account with them. Check their website www.citiseconline.com. They offer free stock market investing seminars. They will teach you the fundamentals. The learning alone will be a good return on investment.

After opening an account with them, let me know and I will tell you the best companies to buy. I suggest that you open an account the soonest. Don't wait any longer. Take advantage of this momentum. Why? Because there will be no perfect timing. One of the critical factors to consider in investing is the time horizon and compound interest. I will write a blog about this so I suggest you subscribe to my blog account at http://investingphilippines.blogspot.com so you would be the first one to learn the advantage of investing early in life.

In principle, what I am advocating is having an insurance first to secure your family in case the monthly cash flow stops. Next is creating an emergency fund equivalent to a minimum of 3 months to maximum of 6 months. After securing all of these, you may start investing in the stock market or mutual funds.

Don't be overwhelmed by the above. You can do it altogether but GRADUALLY. Say, at the end of the month setting aside 10% for insurance, 10% for emergency and 10% for investment. If 10% is difficult, begin with 5% or even 1%. The most important thing is that you are moving forward. Investing is like a full marathon. You don't jump from 3K to 42K. You take baby steps.

So there, please keep in touch and let me know how you are progressing.

God bless.

Regards,

Anselm

To get the latest updates about investing in the stock market and mutual funds, subscribe to my blog by clicking http://investingphilippines.blogspot.com/.

You may also send your questions by emailing me at anselmreyes@yahoo.com

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There are two stages in the financial life of man: Man working for Money and Money working for Man.

There are two stages in the financial life of man: Man working for Money and Money working for Man.

The goal is to eventually reach a stage where you have enough investments to support your chosen lifestyle. I am not saying you resign tomorrow and then start a business or investment. No! Your work is great because it is an instant source of cashflow. It is readily available capital not only in terms of money but experience, training and connections. The idea is to create other sources of money to create more money while we are still working. I know many people who have retired from corporate work in their 40’s because their businesses had expanded enough and can now give them more than what they need to support their lifestyle. I like what Dean Pax Lapid of Asian Institute of Management said that when he reached 42 and started full time in his businesses, he had “self-retrenched” himself. Wow! That’s what you call being in total control.

We can reach the Money working for Man stage through the following: paper assets, real estate and entrepreneurship.

Entrepreneurship and real estate requires bigger capital and time and as employees these are something which we cannot instantly start. For a business to reach its breakeven point, it will take time. For real estate, we have got to be careful. Buying a house and lot and living in it is not a source of passive income. It may even take away money from your pocket because your property will need insurance, refurbishments, appliances etc. Passive income through real estate is building an apartment for rent or buying a condo or house and lot and selling them afterwards for a nice profit.

Paper assets are by far the easiest source of passive income that you can start today.

Paper assets include investing in the stock market and mutual funds. You can buy shares of great companies owned by Henry Sy, John Gokongwei, the Ayala Brothers and Lucio Tan. By investing in their companies, you act as partner in their businesses that will qualify you to receive a portion of their profits in the form of dividends.

Just to remind you. Do not make the mistake of investing today in the stock market and expecting it to earn tomorrow, next week or the following month. Stock market investing does not work that way. Because the stock or equity market is very volatile, your investment could be down 20% this year or 20% next year. If you are investing in the stock market, you have to be willing to put your money there for the next 10 or 20 years. Yes it will go down but there will be periods when it will also go up. Based on studies, from 1989 to 2009, money invested in blue chip companies in the Philippines will give you an average return of 14% per year. Note that 2009 was the worst period during the last recession where most of the companies went flat. I wonder if they had included 2010 in their equation where most of the companies posted an average annual growth of 40%-80%, the average value would have been a lot higher.

So invest only in the stock market if your risk appetite is strong enough to ignore the volatility. I personally believe that if you would keep on buying great companies for example Ayala Land over the next 10 years every month, it will give you an average return of 15% per year. I always tell people that I am coaching in the stock market to invest only money that they will need after say maybe 10 or 20 years. I do not recommend investing your children’s tuition next school year or the full amount of your retirement if you are in your 60’s. What I am also saying is, if you are a beginner, just invest a little portion of your money and build it up from there as your confidence and investing acumen grows.

Let me know if you have further questions or if you require an investment advice, you may email me at anselmreyes@yahoo.com and I would be happy to guide you.

Thank you for reading my post and please share it with your friends.

 Happy New Year!!!!

Anselm Reyes

For more blogs about financial literacy and investing, visit my blogsite at http://investingphilippines.blogspot.com/

Follow This Model And Never Worry About Your Financial Life

Once upon a time, I was only focused on two things: Savings and Investments.

Savings

I think most of us especially when we are just beginning to earn are inclined to put our hard earned money in banks usually in the form of fixed deposits. There is nothing wrong with this practice if not for INFLATION.

In Economics, inflation is a rise in the general level of prices of goods and services over a period of time. Simply put, a liter of gasoline now is around 50 pesos whereas 5 years ago, it was averaging at 42 pesos. I can still remember enjoying a chickenjoy meal at Jollibee for 100 pesos back in the days when I was still working at the Port of Manila, but now 5 years later, a chickenjoy meal will cost you 150 pesos. That is a whopping 50% increase in price and sadly a reduction in buying power on my part. This is the reason why I am not recommending you put all your money in banks.

A general rule to follow is 100 minus your age. Say you are 30 years old, that means 70% of your money should be deployed in an investment vehicle that will at least give a return of 7% per year. Why 7%? Because inflation in the Philippines is around 4%-6% on average per year, hence, you should target to outperform that. Note that this is just a guideline, you may follow a different model that will suit your appetite for risk and reward but personally, I follow such principle.

Investing

When salary comes at the end of the month, I used to invest everything in the stock market and mutual funds. This is what I used to do and then I realize that nothing is left. One day it occurred to me, what if there is an emergency? Will I be liquid enough so that I don’t touch my savings and investments? Am I sufficiently insured? Are all my dependents protected? Is my Family secured? I may have some savings and my investment portfolio may have been properly diversified, but if my cash position is inadequate to tide myself or my family over during the rainy days, then I am facing a huge risk of liquidating my investments. And selling an investment in a depressed market is a big NO.

What is the right model then?

Insurance-Emergency Funds-Savings and Investments

Insurance

I am never a big fan of insurance until I realized the true cost of my responsibility. To calculate your insurance requirement, all you have to do is multiply your current income by 12 and multiply it again by 10. Example, current income 100,000 x 12 = 1.2 million x 10 = 12 million. This means that 12 million is the insurance amount that you need to protect your monthly income in case you are unable to provide it. Why 12 million? It is based on the assumption that the 12 million will be deposited by your family in an investment that can earn 10% per year giving your family in this example an annual income of 1.2 million or 100,000 per month.

Emergency funds

A good rule of thumb would be 3-6 times of your monthly income. If your income is too high, you can begin with 3 months. This is something that you will use in case you lose your job or for whatever reason, the monthly income stops.

Savings and Investments

I personally believe that for as long as you are properly insured and liquid enough to cover any emergency, you may save and invest whatever the surplus is. A universal rule in personal finance is allotting 20% of your total income into savings and investments. Of course, the bigger the number, the better.

One day when your savings and investments are in millions, you will not be needing an insurance. But for the time being, while your savings and investments are growing, protect it with an insurance.

Thank you for reading this post and I hope you will share it with your friends.

Anselm Reyes

PS. If you have questions about investing in the stock market and mutual funds or anything about personal finance, you may email me at anselmreyes@yahoo.com

Long Term Investors celebrate when the world stock markets tumble

It is a fact that 85% of people who are investing in the stock market do not succeed. Why? Because they are all Traders. Traders are people who time the market to do their buying and selling on an hourly or daily basis. There are Traders who buy on impulse without doing the due diligence of analysing whether a company is earning and has a great outlook. There are Traders who buy when the market is up and sell when the market goes tumbling down. This strategy breaks one of our cardinal rules as Long Term Investors because we Long Term Investors observe a minimum holding period of 10 years.

I have been contemplating about giving you a review of the fundamentals of investing, I guess now is the perfect time. The reason is that the world markets again tumbled this morning, actually it began in the US yesterday. Below is a snapshot of the numbers:

World Stock Market Indices as of 19 August 2011

Stock Market Index	Location	Points Drop	%age Drop
Dow Jones Industrial	United States	-419.63	-3.68%
S&P 500	United States	-53.24	-4.46%
Brazil Bovespa	Brazil	-1,938.92	-3.52%
Canada S&P/TSX 60	Canada	-23.62	-3.28%
Santiago Index IPSA	Chile	-79.96	-1.89%
IPC	Mexico	-802.95	-2.36%
FTSE 100	England	-127.41	-2.50%
CAC 40	France	-84.95	-2.76%
DAX	Germany	-199.51	-3.56%
Swiss Market Index	Switzerland	-137.29	-2.64%
Australia ASX	Australia	-147.50	-3.41%
Shanghai SE Composite	China	-25.11	-0.98%
Hang Seng	Hong Kong	-616.35	-3.08%
Mumbai Sensex	India	-328.12	-1.99%
Nikei 225	Japan	-224.52	-2.51%
Taiwan TSEC 50	Taiwan	-272.01	-3.57%
PSEi	Philippines	-63.64	-1.45%
FTSE Bursa KLCI	Malaysia	-23.93	-1.59%
Jakarta Composite	Indonesia	-184.39	-4.59%
KOSPI Index	South Korea	-115.70	-6.22%
SGX	Singapore	-29.58	-4.59%

Source: CNN Money

If you are a Trader, the numbers above will compel you to do two things: One, sell at a loss to secure some cash, two, sell at a loss to invest in gold. I am not surprised why gold has posted again a record high of $1,855/ounce. I am not surprised why everyone is running away from equities and finding refuge in bonds and other fixed income instruments.

However, if you are a Long Term Investor, you must be celebrating like me. Because you and I know that the best time to buy is when there is a crisis. The key is to spot companies with great fundamentals, earnings and positive outlook.

You may be thinking that my portfolio is immune to crisis but the answer is NO. Below is a summary of my portfolio including my consolidated mutual fund accounts with First Metro, Philequity and Philam Asset Management:

My Portfolio as of 19 August 2011

Investment	%age of Gain-Loss	Remark
Citiseconline account	+1.55%	From +7% YTD, down by 5.45% since US downgrade (02-Aug-11)
First Metro Securities account	-2.88%	Since US downgrade (02-Aug-11)
Mutual Fund Accounts	+2%	From +5% YTD, down by 3% since US downgrade (02-Aug-11)

On average, my portfolio sank by 3% to 4% and it will remain that way for the next 3 to 6 months. Nonetheless, I am taking bold steps to buy when there is a crisis for I believe that companies with good valuations will self-correct when the dust settles.

To prove this, let us take a look at the “self-correction” of the following stocks after the great crisis of 2008. I have done a comparative analysis between the lowest price of a stock during that time and its price today. This is to illustrate the power of the so called “Value Buy” which is buying shares of companies where the intrinsic value is a lot cheaper than the current market price. In layman’s term, buying GREAT Companies at discounted prices and in stock market investing, huge discounting usually happens when there is a crisis.

Stock Code	Company	Lowest price during the 2008 recession (Price per share)	Price per share as of 18 August 2011	% Growth
MBT	Metrobank	20.00	73.80	269.00%
ALI	Ayala Land	6.00	15.92	165.33%
FPH	First Philippine Holdings	18.00	57.60	220.00%
AP	Aboitiz Power	3.90	29.40	653.85%
EDC	Energy Development Corp.	1.50	5.80	286.67%
DMC	DMCI Holdings Inc.	3.95	41.20	943.04%
SM	SM Investments	180.00	540.00	200.00%
SMC	San Miguel Corporation	40.00	124.60	211.50%
TEL	PLDT	2,000.00	2,332.00	16.60%
JFC	Jollibee Foods Corp.	35.00	86.95	148.43%
MPI	Metro Pacific Investments	2.25	3.31	47.11%
AC	Ayala Corporation	155.00	315.00	103.23%
BDO	Banco de Oro	22.00	59.00	168.18%
BPI	Bank of the Philippine Islands	34.25	58.55	70.94%
MED	Megaworld	0.70	1.90	171.43%
AGI	Alliance Global Inc.	1.98	10.80	445.45%
FLI	Filinvest Inc.	0.40	1.17	192.50%
RLC	Robinsons Land	4.30	12.26	185.11%
SCC	Semirara Mining Corp.	35.00	210.40	501.14%
PX	Philex Mining	4.95	27.90	463.64%

Using the average method, the above companies in the span of 3 years posted an aggregate growth of 273.16% or 91.00% per annum. Meaning, if you have 1 million pesos to invest in 2008 and you took advantage of the crisis by buying these companies, the total value of your investment today will be 6.9 million pesos. However, you can argue that we cannot really predict when the market will reach its lowest point. That is also correct and that is also the reason why I have always been recommending that one should apply the “peso cost averaging” method by investing equal amount each month. For example, if you have an annual income of 120,000 pesos and you decide to invest it in the stock market, you basically divide it by 12 months and invest each unit every month. By doing so, you can buy more shares when the market is on a downtrend specifically when there is a crisis like what we are experiencing now.

I would like to remind you though that before you put your money in the stock market or any other investment vehicles, you should always maintain a cash cushion amounting to 3-6 months salary for emergencies. Ofcourse, bigger cash is always better. Do not make the mistake of investing without securing your emergency fund first. Crisis will always come, hence, your emergency fund will allow you to weather the crisis without touching your investments.

The world markets may be crumbling as a result of the US and Eurozone downgrade by some rating agencies. But as Long Term Investors, we do not react on news, we do not react when the stock market plunges. Infact, we should be buying in a crashing market. For as long as the companies that we buy are fundamentally good and we are convinced that these companies will be there for the next 100 years, then continue to invest in these companies every month for the next 10 to 20 years.

To your financial success,

Anselm Reyes

For your questions about investing, you may email me at anselmreyes@yahoo.com

Do you like to gain financial abundance? Join the “Truly Rich Club”. To join, please click on the following link: http://bosanchezmembers.com/amember/go.php?r=14027