I know you are already familiar with stock market and how it works, but you still have that hesitation in you, a fear of entering something new. Honestly, we have now tools that made investing in stock market easier, BPI Trade or COL Financial as example. You just need to open an account with them then you can already start buying and selling stocks!
Let us say, share price of SM in a certain date is P845.00 (closing price) with a “board lot” of 10 shares (minimum number of shares to buy). Doing your math, P845.00 x 10 shares = P8,450.00, this is the amount you need to become a stockholder of SM. You then need to monitor movements of stock prices so you’ll be able to sell the stocks at a higher price so you can have earnings. Basically, this is how stock trading works. It can be easy for some, but not for some. In order to monitor, you need to give it extra time (which most busy people do not have). You also need additional learning to know how prices go up and down, so you would know when is the best time to buy and when to sell. Net, you must know how to predict the market.
Since not everyone has the capacity to do this, here is another option which I highly suggest for beginners. Introducing… Investment in Mutual Fund!
With as low as P5,000.00, you can already join the stock market craze. And with that minimal amount, your money is not limited in purchasing stocks of a single company, but with all blue chip companies like BPI, Meralco, Ayala Corporation, Megaworld, Puregold, Jolibee, BDO, etc…
Mutual Fund as defined by Philam Asset Management Inc. is an investment company that pools the contributions of private individuals and institutional investors, and invests the money on their behalf. Each mutual fund has specific investment objectives and strategies, designed to suit the objectives of its investors. When you invest money in a mutual fund, you become a shareholder of that particular fund. The price of shares in the fund will rise and fall depending on the performance of the overall investments buy as you buy and sell shares of the fund based on the prevailing Net Asset Value Per Share (NAVPS).
Nosebleed?!!! In layman’s term, this is how it works…
- You buy shares of a mutual fund.
- The money of all investors is being pooled together and is managed by Fund Managers.
- These are used to buy stocks of blue chip companies, government bonds or money market instruments depending on your fund portfolio.
- Shares of the mutual fund company may rise or fall depending on how well it is managed by Fund managers.
Advantages of investing in Mutual Fund:
Your investment is managed by an expert. Though, it seems how mutual fund works is very complicated, it doesn’t matter. It is the work of your fund manager. He is trained and experienced to do all those things so you don’t need to worry.
Your fund is diversified since the pooled funds are invested to different securities like stocks, bonds and other money market instruments.
Initial investment is minimal. You don’t need to have a big budget to start investing. You can start with only P5,000.00 and have subsequent investments of P1,000.00 anytime.
There are different funds available that will suit your risk appetite. High Risk Funds are those that are invested mostly to stocks or equities. This is preferred by risky investors who wants bigger return but can also accept high loss. Bond Fund are for investors who would like a safe investment. This may not offer a big return, but is safe as most of the fund is invested in Bonds. Balance Fund is the combination of the two. So if you do not like high risk, and do not want small return as well, then this fund is for you.
For beginners, if you feel that investing directly in the stock market is not your way, a mutual fund investment may do. You just need to coordinate with a Certified Investment Solicitor (CIS), a person that is licensed by Securities and Exchange Commission (SEC) which serves as your Mutual Fund Advisor. To know more about this, please feel free to contact me thru my FB page www.facebook.com/mannypascualpagaduan or leave a comment below.