Before starting out investing in stocks, one big question always asked is “is it safe to invest in stocks?”. Well the answer is; it depends. Let’s examine why.
Take note that there is always risk in investing but the good news is that you can manage and minimize risk by doing your homework. Always remember this: it’s you and only you who are in charge of your money.
The fact is, if you don’t invest, you are already losing the value of your money because of inflation. As Robert Kiyosaki says “not investing is risky” and “savers are losers”.
There are two major “players” in the stock market.
The first one is called the “trader”. These people buy and sell stocks in a day or two. They study and monitor the movement of stocks. When the price of a particular stock is down, they buy then if its up, they sell.
In other words, “timing” is the strategy to earn money for traders. Some people also call this a “legalized gambling” and based on study, 80%-85% of people here loose money. If you have a lot of time to study the market, this might be suitable for you. Personally I don’t do this.
The second major “players” are the investors. These people buy stocks and sell them after 5-20 years or more. They have a long time perspective in investing. If you are in a corporate world like me, this is recommended specially for retirement.
This is far better than parking your money on the bank. Why not “own” the bank by buying shares in the stock market?
Whether the market is up or down, as investor this doesn’t concern you. Normally, people here are buying shares of “blue chips” companies. These are solid and giant companies whose businesses are already stable and have a very good track record from the past.
In the Philippines, these are companies like Ayala Corporation, Jollibee, SM Prime Holdings, Bank of the Philippine Islands (BPI) to name a few.
If these companies got bankrupt which I doubt, you will loose your money. COL Financial – a stock broker, has the list of recommended blue chips companies. Below is a screenshot of some of them.
As an example, if you buy 100 shares of Ayala Corporation in February 2011, the price is 335 pesos per share so its worth 100 x 335 = 33,500 pesos. Let’s say you forget about it and realized upon reading this that you have 100 shares of this company.
Today the price of Ayala Corporation is already 767 pesos per share. So your 33,500 pesos worth of money is now 76,700 pesos! Wow! That’s a profit of 228%! I bet, no bank will give you this amount of profit.
This concludes that in investing, risk can be managed and minimized. Now go and start the habit of investing! Share and enjoy!