As I’ve encountered, you’ll get two typical answers from this question. First, people will answer this question that “they don’t know what stock market is.” If they know it, they will be hesitant about investing the stock market. You know, I belonged to this “part” before and I want to share with you my misbeliefs and, hopefully, view the stock market as another source of income.
Before I jump off into my main topic, the stock market is where shares of a listed company bought and sold by trading participants. When you buy shares or a stock, this makes you a part-owner of the company.
Now, let me break down for you, some misconceptions on why people are hesitant on investing in the markets. Here are Five stereotypical Misconceptions and I will explain them each:
1. Stock market is for the rich. “Para sa mayaman lang yan.”
I, too, tend to get this answer a lot. However, as I’ve learned through research, investing in the stock market is not for the rich. (Yes!) Everyone as an employee or student can invest in the stock market. For as low as ₱5,000, you can open a stock brokerage account. (Opening balance varies across brokers) Yes, you’ve heard it right. In light of this fact, you can partly own big companies like Jollibee, SM Investments or Ayala Land and take part of its growth and downturns.
2. Stock market is a scam. “Scam yan.”
Your funds are securely stored by your preferred stock broker which are regulated by the SEC (Securities and Exchanges Commission). A registered stock brokerage company should be a member of the Philippine Stock Exchange (PSE) – the national stock exchange of the Philippines. You can check under the “Market Participants” section at the PSE website (www.pse.com.ph) just to be sure. Unlisted stock brokers should be notified to SEC (Procedures will be discussed soon). Having a license separates scammers from the real deal and that difference protects the individual’s hard earned cash.
3. Stock market investing is like gambling. “Pustahan man yun.”
Stock market investing takes tedious approach in analysis. In the financial markets, we generally have two methods namely Fundamental and Technical Analysis (We offer seminar/trainings on these). A tip of the iceberg, Fundamental Analysis considers the company’s operational and financial performance before establishing an investment position while Technical Analysis is the study of market price actions. It’s called gambling when a person without knowledge and proper planning buys a stock hoping for it to go up. You won’t last long if you have this “strategy”. (I’ve had firsthand experience)
4. Stock market is an easy way in generating cash. “Gusto ko madaling pera.”
Earning money is never easy. Same as other investments, it takes time before you see the fruits of your labor. Although, you might get lucky in one random trade but, talking long term, you need a Trading System (A key to successful trading) to survive the Financial Markets. A trading system is a set of rules that generates a buy or sell signal. Ideally, it should generate more profits than losses over the long term.
5. Stock market needs expert skills or inside knowledge to be successful. “Sa mga genius lang ang Stock Market”
The only skill you need in investing/trading the stock market is analyzing data quickly. This ability will put you ahead of the herd and, possibly, maximize returns. Analyzing data quickly doesn’t focus only in reading news but also scrutinizing a company’s financial and operational performances and price movements shown in technical charts (As mentioned in #3). Though perceived as intimidating, an understanding of basic economics and mathematics will do.
And that’s it, 5 misconceptions that stop people from investing in the stock market. Though, there are still other misconceptions but I want to keep it as relatable as possible.
In next week’s column, I give the floor to Keirby Diputado where he will discuss on how to tell if an investment is a scam (valuable information). A recap from our “Getting to know” article, he was one of André’s (one of the co-founders of AlphaEdge Research) students and has an interest and passion in entrepreneurship.
Good luck in investing and learning!
Disclaimer: We want to remind you, dear reader, that the content in this column is my opinion and AlphaEdge Research’s opinion only and should not be construed as investment advice because we’re not your financial adviser nor have we taken into consideration your personal objectives, financial situation, needs or circumstances as your fiduciary. This column is mainly for your entertainment and education only.