Why I like investing in stocks
I have been investing in stocks for over a decade now. The experience was very rewarding.
Listed shares are shares owned by a company that can be bought and sold easily in a public market. Here are some of the reasons I like investing in stocks:
You can partner with big companies you admire. For a small fee, you can instantly become co-owners of great companies whose leadership you admire.
You can make a living reading and sitting on your ass. There are many ways to earn a living. There are also a few that allow you to sit back and think. This job is one of them.
It doesn’t take much to get started. You don’t need a big capital to get started and wait for a long time. You can start with as little as P5,000. You can add as you go. You can start small and think big.
You can take advantage of the power of compounding. If done correctly, a small amount could snowball into a larger amount over time. Your knowledge and skills also accumulate the longer you stay. Your skills and portfolio would therefore grow exponentially over time due to compounding.
Limited downside. Unlimited advancement. If you invest P5,000 in a stock, all you can lose is P5,000, but you can earn P10,000 or even more over time if you are patient and find the right companies.
Liquidity. Some investments may be more difficult to make. If you own a property and think property prices would fall due to a negative event and you want to sell, it will take time. But REITs (Real Estate Investment Trusts) would be easy to sell. It is normal to make investment mistakes if you correct them as soon as possible. Going out and taking a loss in stocks is a cinch due to its inherent liquidity. Stocks allow you to quickly change your investments in the event of a sudden change in the investment environment.
You can do it full-time or part-time. Full-time employees can also trade. Part-time workers are more likely to invest. Depending on your available time, you can take advantage of Mr. Market.
Dividends. Unlike in property where you have to pay taxes and duties when there are no tenants or in businesses where you still have to pay fixed fees even when business is slow. In stocks, you can get paid while waiting. Most stocks pay dividends. The amount depends on the income of the business and its capital needs. Certain types of stocks such as preferred stocks pay a higher fixed amount of dividend than bonds. REITs pay a dividend and might also offer a reasonable upside.
Fees and taxes. For stocks listed on the Philippine Stock Exchange, the total fees and taxes would be less than 2% of the total selling price. This percentage is low compared to real estate capital gains taxes and business taxes.
Scalability. You can invest P10,000 with a good investment idea and earn P3,000 or 30%. You can also put in a million pesos and earn 30% or P300,000 instead. Same idea, but more funds would mean more money, too.
Average intelligence is enough. As Buffet says, “To invest successfully, you don’t need to have a stratospheric IQ, unusual business knowledge, or insider information. What is needed is a solid intellectual framework to make decisions. and the ability to prevent emotions from corroding the frame.” If you can read and understand fifth-grade math, you should be able to invest. Everyone has enough brains to succeed in the stock market. However, not everyone can handle the volatility. If you tend to panic and sell everything every time the market goes down, stocks might not be for you.
The world is at your fingertips. These days, you don’t need to be near a stock exchange to buy and sell stocks. You can invest in any stock anywhere in the world with just one click. You can live anywhere too. You can be at the beach or in a cafe and still earn a living.
There are always opportunities. The things that move markets happen every day. If you’re missing out on a great investment, don’t worry! Many more will come. When a pandemic hits, pharmaceutical companies and essentials increase. When the economy reopens to tourism, hotels and airlines could explode. Every day is a new day of opportunity.
There are no strikeouts. You can choose your stock, your price and your schedule. If you can’t find businesses that seem appealing to you, you can stay in cash until you find some.
With these benefits, it is hoped that more people would take a look at this investment instrument called stocks and see it as another way to achieve their financial goals.
Josefino R. Gomez is a Registered Financial Planner of RFP Philippines. To learn more about personal financial planning, attend the 94th RFP in March 2022. [email protected] or SMS to 09176248110.