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Look before you dive in sea of trade, newbies urged
« on: May 27, 2012, 12:58:12 AM »
Look before you dive in sea of trade, newbies urged
By Daxim Lucas
Philippine Daily Inquire

Unless you have been living in the mountains all these years, chances are you,ve heard by now how financially rewarding and exciting investing in the stock market can be.
Mass media bombard people with information and images about the equities markets here and abroad, and how easy it is to make one's first million by simply choosing the right stock.

In reality, things are slightly more complex (and less glamorous) than what movies would like to make people believe. According to experts, to be successful at stock-market trading, a person has to do a lot of research and self-assessment before taking the plunge. And any trader wannabe will also need disposable capital?the more, the better.

But make no mistake about it: participating in one of the most dynamic modes of investment available today is attainable and potentially rewarding for the man on the street. But the path to becoming the next stock-market guru starts with understanding oneself.

Self-awareness

The first task for a first-time investor in the stock market is to examine what his motives or objectives are,said CitisecOnline president and CEO Conrado Bate.
Bate knows whereof he speaks. As a longtime stockbroker, he has helped clients from the biggest global fund managers to the smallest retail investors attain success in navigating the tricky waters of the Philippine Stock Exchange.

A newcomer to stock market investing must understand his reasons for investing, he said, explaining that one of the biggest pitfalls for first-time investors is often a lack of self-awareness. Is he there just to trade, or to invest for the long term??
Once this is established, the newbie investor should now scout for a stockbrokerage firm that will be able to service his needs, whether it is giving advice on the design of a long-term investment portfolio or providing the platform for short-term, quick in-and-out trading.
More importantly, clients should seek firms that would actually help educate them while helping grow their investments.

People should choose brokers that will give them the services they require,Bate said. One major requirement is client education. Often, they just go to brokers who can execute orders, but who can't help them understand the market.

Black swan events

Once a potential investor has determined how much he can allocate for stock market trading, and what kind of risk he can absorb, he has to make sure the nature of his funds match the nature of his investments.
Bate said he had seen this error made countless of times before: short-term funds used to buy long-term investments.
There has to be a matching of resources, he stressed. If you are buying stocks for long-term growth, you cannot should not use money that you will need next week, next month or next year.

Indeed, the most common error committed by newbies is to believe that excess funds can be invested in stocks this month, while waiting to pay for the amortization of the house or car next month.

There are so many black swan events, Bate said, referring to the term used for once-in-a-lifetime, unforeseen market upheavals like the Japan earthquake or the unrest in the Middle East. So for me, the best stock investments are long-term investments. And for these, you need long-term funds.

Long-term investments do not, however, necessarily mean large investments.
Most stockbrokers that trade stocks on the PSE accept client accounts trading as little as P20,000. Many local mutual funds that specialize in trading local stocks accept clients with as little as P5,000 in initial investment an amount CitisecOnline also accepts.

We have a facility for investors who want to start out at this level,Bate said.
But as a general rule, he advises clients who trade anything lower than P1 million to do what he calls self-directed trades, rather than rely on tips and recommendations from stockbrokers.

Discipline

He said a good broker would provide investors with a list of pre-screened stocks from which a client can choose four or five stocks to focus on.

As long as you stick to good companies, you will not go wrong over time, Bate said.

Is his advice solid? It seems it is, based on the growing number of clients signing up for CitisecOnline's Internet-based trading facility something that is increasingly being adopted by other stockbrokers.

But it is perhaps Bate's final piece of advice that often makes or breaks a stock market investor: You have to have discipline.

According to the bourse veteran, a client's discipline be it the discipline to maintain a regular schedule of buying stocks regardless of price, or the discipline to cut losses, or the discipline to resist trading on impulse is the ultimate determinant of success.
With this trait, any newbie client is already halfway to his investment goal

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Look before you dive in sea of trade, newbies urged
« on: May 27, 2012, 12:58:12 AM »

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