How to tell you are ready to invest in the stock market

Are you ready to invest in the stock market?

For most people, the stock market is great long term way to make money. But things are not really that simple. By definition, a stock market or equity market is a public entity for the trading of company stock or shares, as well as derivatives at an agreed price. We always hear in the news or read in newspapers about the unpredictable situations of the stock market. The stock market might be the right place to put your money in if you are looking for an awesome investment with high returns and low initial investment. Many people have made hundred thousands or even millions in buying and selling stocks. Those of us who are interested in investing out hard-earned money often wonder, “Is now the best time to invest?” Many people have lost money due to ignorance about the in's and out's of the stock market, or bad luck. To ensure success, or at least minimize the risk of loss, you should first prepare yourself and be knowledgeable with the mechanisms of the stock market.  

Understand

First, you must understand what the stock market is. We have our own national stock exchange here in the Philippines known as the Philippine Stock Exchange (PSE). It is one of the oldest stock exchanges in Southeast Asia, which has been continuously operating since its inception in 1927. It currently has two trading floors: one at its headquarters at the PSE Plaza Ayala Triangle, Ayala Tower One in Makati City's Central Business District; and one at the Philippine Stock Exchange Centre in Tektite Towers, Ortigas Center in Pasig City. As of present, the Philippine Stock Exchanges is comprised of 15 Board of Directors, with Jose T. Padro at its Chairman. The main index for PSE is the PSE Composite Index or PSEi, which is composed of thirty listed companies. There is a specific set of criteria to be selected in the companies in the PSEi. The main idea of stock market is “sharing” ownership of different companies through the “stocks” or “shares” being bought and sold. You are like a part owner of the company; hence, you participate in the company's earnings or losses. There is a great chance of garnering high returns, but of course there would always be risk. There are two ways to earn money on your stock investment: one way is through the appreciation of your stocks' price, and the other way is through the dividends declared by the company. At this point of time, though, very few companies give substantial cash dividends and they are only treated as some sort of bonus, so investors mostly rely on the appreciation of stock.

Identify

Secondly, if would do you well if you know how to spot “good” kind of stocks. Try learning how to differentiate a potentially high-yielding stock, from a stock that is overpriced. Assess if the price of particular shares is justifiable. It does not necessarily mean that you should better buy stocks with low prices than those with high prices. Sometimes, stocks that are sold cheap do not really yield high returns; and stocks with higher selling-prices could give you substantial value. You should start learning the basics of investing, as well as different tools you could leverage in order to help you with your investment, such as mutual funds, securities, bonds, ETFs, and treasuries.

How much?

Thirdly, decide on how much you are willing to invest. You could start investing in stock market with just five thousand pesos at hand with some stock brokers; but the more funds you have, the better you can diversify your holdings to minimize the possible risks. Experts say that you should not put more than twenty five percent of your savings to be safe; and if you are near your retirement then you should not put more than ten percent of your available resources. If you have any concerns regarding job security or your own business, save at least twelve months worth of you income saved before placing your bets on the market. Remember: do not risk what you cannot afford to lose.

Open an account

Fourthly, open an account in a reputable stock broker. You could get a complete list of accredited stock holders by visiting the website of Philippine Stock Exchange at www.pse.com.ph. Some of the requirements in opening an account are the following: two valid ID's, specimen signature cards, and proof of billing. You may also be asked to provide a cash deposit in order to begin investing. Check out the website too on what stock would you like to pick. You could get into a mutual fund which is composed of variety of stocks. Read books and browse sites that would help you understand the trends of the stock market and improve your skills in picking stocks.


Stock market is truly a fascinating endeavor. Just always remember that when in comes to investing in the Philippine stock market or any other investment, there are lot of risks involved and you should heavily consider your every decision. It is always up to you to manage those risk. Do not expect to earn fast, because investment is not get-instant-money scheme. To ensure success in the world of investment, you must have the patience, knowledge, and dedication to expand your knowledge and improve your skills especially when it comes to making decision. It would be best if you have in-depth understanding with the trends of the stock market before risking your hard-earned money.

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