4 Signs You’re Ready to Invest in the Stock Market
When it comes to investment, the Philippine stock market has its share of good news and bad news. Statistics show that over the last few years, there has been an increase in the number of Filipinos who are into stock trading or investing—with current numbers pegged at 640,000. Still, this number represents no more than 1 percent of the country’s more than 100 million population.
So, is it worth investing in the stock market then? For starters, this practice helps people form positive spending habits and gives them the opportunity to grow their money over time. More so, if money is invested in various investment products, as it serves as a cushion from when a particular stock loses value. Investing in stocks is also a way of preparing for one’s retirement way before that eventful day comes.
To help you decide if it’s time for you to enter the stock market, here are some signs to watch out for:
- You are financially sound.
- You’re making enough money to cover your expenses and pay debt, and you can handle your financial responsibilities and keep tabs of your savings account at the same time.
Having debt is out of the question too, as it goes against the logic to invest your money in the stock market when you barely have enough funds to pay off your loans.
- You have extra money to invest. With your expenses, loan payments, and savings all covered, you could afford to part with the excess money you have in favor of investment.
If you’re confident you won’t be withdrawing your investment money prematurely, it’s a positive sign that you can seriously consider investing as an option.
- You have set an amount of money you are willing to invest. It could be any amount more than at least three months’ worth of your emergency fund, which should be enough to help you deal with unforeseen expenses.
- You can give time to it.
As the stock market is highly volatile, your stocks could be doing very well one moment but could suddenly go downhill the next instant.
As a stock investor, you need to make time in monitoring news about industry trends that may determine how the stocks in your investment portfolio may be affected. You should also proactively keep track as to which companies are performing well or otherwise.
Staying on top of these things every day can help you and your broker or financial planner make decisions such as when’s the best time to buy, sell, or trade your stocks.
- You did your homework.
As with any unfamiliar territory, it’s a must for you to familiarize yourself with the ins and outs of investing in stocks. The first on your list should be learning about the different kinds of stocks.
For example, preferred stocks entitle you to a fixed amount of dividends, regardless of the market situation, in contrast with common stock that has a lower dividend value allotted for its shareholders. By knowing their distinctions, you could make better choices about which investment products are right for your needs and means.
You should also be concerned about getting a good financial planner to work with you or could check with your bank/s or ask for referrals. Make sure you choose someone who has both the technical expertise and good standing in the stock market community.
- You know the risks of investing your money in the stock market.
Never expect your love affair with stocks investment to be all rosy. There will always be risks you will encounter, and it’s important that you know how to manage or minimize them.
Higher returns mean risks will be greater too. What you have to do is to determine how much money you’re willing to risk and to stay within that limit, without going beyond your investment cap.
It would also be wiser not to invest all your money in just one stock even if it looks like it’s on a roll. Similarly, some stocks are naturally riskier than others, so you might want to stay away from them as far as possible.
Perhaps the one last sign you need before you go into buying, trading, or investing in stocks in the Philippines is its growing popularity, much like how online pawning is becoming the go-to alternative of Filipinos looking to add value to their cash position.
Those in the know-how will likely agree that when done with utmost care and caution, investing in the stock market can be an attractive option. Best of all, it could pave the way for financial literacy and stability that you’ve been aiming for.