Is stock talk leaving you crazily clueless? This quickie primer gives you a peek into this corner of the financial world. Get ready: Stocks may just be your ticket to financial fame!
When the topic of investing in stocks comes up, be armed with the knowledge to join in the conversation - and the guts to turn what you know into a profitable venture. Read on to get the basics about the stock market and the get-rich opportunities it offers.
Q: What are stocks?
Put simply, "stocks are a share of a company," explains Francisco J. Colayco, Ph.D., financial advisor and chairman of the Colayco Foundation for Education, Inc. It represents part ownership of a company that is listed with the Philippines Stock Exchange (PSE).
Q: I want to invest in the stock market. How do I start?
To get started, you need to find a broker and do your research. "You cannot buy stocks directly from the stock market, so choose a broker whom you can trust," says Colayco. Also, do fundamental research, such as which company you should buy shares from, whether it's in a good industry, and if that industry is likely to stay on solid ground.
Q: What are the pros and cons of investing in stocks?
According to Colayco, "[the greatest pro of investing in stocks] is that it's an ownership investment, which means you can make money through dividends and the appreciation of value." On the other hand, prices in the stock market are vulnerable to change, which makes it unpredictable.
Q: How much of my money should I invest in stocks?
Ideally, the money that you invest in the stock market should be money that you won't need in the future. "Everyone must keep some assets in the riskless haven of cash," affirms Benjamin Graham, author of The Intelligent Investor. Colayco advices buying stocks with an amount that you can afford to keep invested for the next five years.
Q: What's the best way to make a profit from stocks?
"My advice to investors is to ignore the short-term noise of the emotions reflected in our financial markets, and focus on the productive long-term economics of our corporate businesses," shares John C. Bogle, author of The Little Book Of Common Sense Investing. Prices in the stock market will rise and fall, but it's important that you have enough sense in you to ignore price fluctuations and concentrate on potential returns (which may not come until later) instead.