While you are on holiday today, and while you are taking a sip of your favorite buko juice or any refreshment for this hot summer, I invite you to this discussion – let’s take a SIP on the stock market!
[Featured image courtesy of Stuart Miles / FreeDigitalPhotos.net]
But before I talk about investing in the stock market, let me share something first about ‘taking a sip’ – like taking a sip from a bowl of soup.
Taking a sip is like an idiomatic expression for me as it applies to the people of my ethnicity, Kankana-ey.
Whenever the well-to-do families would throw a party and invite us, our neighbours would say, “Entako maki-igop si sabaw ed kad-an Mr. Baknang.” In Tagalog (not the exact translation), “Punta tayo sa salu-salo kina Mr. Mayaman, maki-higop ng sabaw.” In English, “Let’s go to Mr. Wealthy’s party; let’s take a sip from their bowl of soup.”
Yes, it doesn’t sound right in English. But in other words, ‘taking a sip’ means ‘taking a small taste of what the wealthy people have.’ In other words, ‘taking a sip’ means ‘sharing what the rich have.’ In other words, ‘taking a sip’ means ‘doing something in your own small version what the rich do in their own gigantic version.’
Why am I telling you this? Because in this article, I’d like to share something that the common people, the common employee, or the small time young wanna-be investor like you and I can do to multiply your money to millions just like what the multi-millionaire investor Warren Buffett do.
After reading this article, my hope is that you’ll have in your hands something that you can do to start investing in the stock market. You’ll have something in your cup of tea a doable system to adopt and mix it into your existing financial plan. You’ll have something in your bowl of soup an actionable blueprint that can warm you up as you move forward to your journey to financial freedom.
Are you ready? Here we go!
SIP is actually an acronym that I coined, Simple Investment Program. I derived it from COL Financial’s EIP or Easy Investment Plan. (BDO also has EIP.)
[COL Financial is the leading and fastest-growing online stockbrokerage firm in the Philippines. In 2008, COL Financial was ranked as the No. 1 stockbroker by the Philippine Stock Exchange, outranking over 100 stockbrokers by having the highest number of transactions in the stock market.]
I changed the word Easy because this system is not easy. It’s Simple but not Easy. To be able to do this, you must have the discipline to make it work. You’ll know why in a while.
What I will be sharing with you (in this particular article) is based on the seminars I attended, on the learning that I gained from the Truly Rich Club, more from COL Financial’s EIP Primer, and more importantly, from the baby steps that I’m taking in my financial journey.
Briefly, let’s answer why you should invest in the stock market:
1. History has proven that investing in the stock market in solid growing companies over a period of time provides greater returns than regular savings.
2. Investing in the stock market is also a good hedge against inflation or the steady increase in prices of goods and services.
Bo Sanchez refer to INFLATION as one of the wolves that devour the value of your money.
Inflation is the increase in the prices of products. In other words, it is the decrease in the purchasing power of your money. For example, the pan de sal that you used to buy at one peso is now sold at two pesos. The meal that you used to buy at 50 is now sold at 100.
Unless your product is fishball, it seems not affected by inflation. What I used to buy at 50 centavos for a piece of fish ball in the streets, today, you can still buy a piece of fish ball at 50 centavos. Oh, that was true before I just asked my roommate and he said that it’s now at 1 peso! So there, even the famous fish ball is affected by inflation.
Robert Orben said, “Inflation is the crabgrass in your savings.”
This year the inflation rate is at 3-4 percent. In the stock market, if you do the system, you may average from 10-15-20 percent growth rate. That way, you beat the effect of inflation.
How do you profit in the stock market? You benefit in the in the company’s growth:
1. Increase in stock price or capital appreciation
2. Company earnings distributed to all shareholders in the form of dividends
Long Term Investing
Set your investment clock from minutes to years.
The Principle of Long Term Investing: The longer you hold onto an investment in a quality company, the less chance of experiencing a negative return on your investment.
But most stock market investors are looking for a way to invest…
– That can minimize risk. Controlling your risk lessens the need to constantly watch or monitor the market. Thus, any time becomes a good time to invest.
– With a small amount of capital. For as low as Php5,000, you can regularly invest in solid growing companies and maximize your earnings potential.
This investment program can help you build your personal wealth with Peso-Cost Averaging.
Peso Cost Averaging is a time-tested personal wealth-building strategy that has been proven to work by investing a fixed amount of money in regular intervals over a period of time.
As they put it, Peso-Cost Averaging is the easiest way to invest in the stock market.
Step 1. Decide how much you want to invest on a regular basis in a good quality company.
Step 2. Determine how often you wish to purchase your stock shares.
Example: Monthly Interval
Why? By purchasing shares of stock in small amounts over time rather than in one large lump-sum, you reduce the risk of volatile swings in market price.
You buy less shares when prices are high and more shares when prices are low. Thus, your average cost remains low.
Step 3. Set a timeline depending on your investment goal.
Example: Time Frame 20 Years
When it comes to investing in the stock market, time is your most precious asset. The longer your time horizon, the more time you have to make money.
The 3 steps mentioned above is from COL Financial’s Easy Investment Program. You can visit their website to learn more about the EIP. You can also take a look at their EIP Primer to see more examples provided in each step. (Note: I’m not an employee of COL Financial. I just appreciate what they do. And COL is my online broker by the way.)
There you have it. Actionable, isn’t it? Yes, you can do it. You can take a sip on the stock market. You can do in your small version what the rich do in their gigantic versions.
Start taking baby steps now.
Embark on your financial journey not tomorrow but today.
Live your life, young mind!
PS 1: The EIP is a wonderful blueprint. And what my mentor (with his wealthy mentor) did was tweak a bit this system and made it even better. The SAM was born. This he teaches at the Truly Rich Club. Find out what this club is here.
PS 2: If you want to take your learning about investments to the next level, visit this page and read on: http://www.youngmindgroup.com/recommends.html