Ten reasons why I love investing in the stock market – Part 1
My father is a businessman and a very good one indeed. When I was kid, I never imagined myself to be one. I was a free spirit, curious about the wonders and mysteries of that nature and this world has to offer. I had a lot of things that I wanted in life and I wanted to explore the wonderful world that God has created. I wanted to be an Indiana Jones, a Lara Croft (male version though) or somebody like “The Librarian.”
When I grew up, I realize that there was a problem with all my childhood fantasies. All of what I wanted takes money. As I grew into adulthood, I realized that life was not what I saw in the movies or read about in novels. Real life is real people working hard to make ends meet. Real life is becoming a channel of blessing to other people. Real life is not about what I want; it’s about what God wants for me to do.
I slowly took on the reigns of my family business and learned the art of making money. Then I discovered the Rule of 72 and the power of compounding interest. Above all I discovered the ultimate money making machine, the Stock market! Ever since I discovered it, I have learned to love it.
But what about exploring the world? Should I just put aside my childhood fantasies? Well not really, I know that time will come by God’s grace than I can explore the world together with my family when I reach my financial goals. So with that introduction, let me give you my top ten reasons on why I love stock market investing.
1.) Investing in the Stock Market gives potential for great returns
Warren Buffett, is undoubtedly the world’s best stock market investor and perhaps the only person in the top ten richest in the world who derived his wealth solely from stock market investing.
If you had invested $1,000.00 (U.S) (The equivalent of which is only about $7,760 in 2008) with Warren Buffett in 1956 (about 53 years ago) it would be worth an estimated $30.6 Million (U.S). That’s the wealth generating power of investing in the stock market! In the early part of his investing career Warren Buffett’s return almost reached 30 % compounded per annum.
You might say, “Well that was Warren Buffett and it is only applicable to him, besides he lives in the U.S.A and I don’t think that will apply in the third world countries.” You are absolutely wrong. The same principles apply in any stock market. I have made a personal study about the Philippine stock market and my findings reveal that if you had invested from in a span of 10 years time from 1997 to 2007 your returns would be similar to Buffett’s ranging from 25 % to near 30 % compounded annually. With this rate of return, a P 100,000.00 would become a million pesos at the end of 10 years. I will be revealing details about my personal research in another post.
2.) Investing in the stock market would make you “part owner” of the company that you are investing in.
It would cost you somewhere between 20 to 25 million pesos to get a Jollibee franchise. Add to this the time, effort and headache that goes in managing the franchise. Instead of franchising a Jollibee outlet to “own” Jollibee why not by stocks of Jollibee Food Corporation (JFC) ?
Using present market prices, you only need about P 5,000 to invest in 100 shares of Jollibee. Since stocks represent a part of a business, this means you are part owner of close to more than 1,500 stores in the Philippines and around the world. Not only that, you are given a “bonus”. You also get to own other great fast food restaurant chains like Red Ribon, Chowking, Deli-France, a popular fastfood chain – Yonghe King in China and popular teahouse chain from Taiwan called Chun Shui Tang including the latest Jollibee’s project, “Tio Pepe’s Karinderia.” Now isn’t that the coolest!
So next time you eat at Jollibee, you could proudly say to your friends and relatives that you enjoy eating there because you are one of the owners of the company.
Always delayed in paying your utility bills? Perhaps owning stocks of PLDT, Globe, Manila Water or Meralco will make you become more prompt in your payment.
3.) Investing in the stock market make you belong to a special group of people
A study made by the Asian Development Bank revealed that by 2005 only 600,000, out of the of the Philippines’ 87 million population invest in the stock market. Whoa ! That’s less than 1 % or roughly around 0.7 %! It can also be observed that most of the market players are from the Class A and B segments.
Well, investing in the stock market is not a race or multilevel marketing wherein, the first people who invest will be the one that will get the bigger share. However I consider it a privilege that among 90 million people I am among the few pioneers who braved it out in the stock market. Certainly investing in the stock market is not also just for the ultra rich.
Another thing to consider is the fact that the Philippine stock market is still at its infancy. Exciting new things are coming in the next 5 years. Soon, the Philippine stock exchange will introduce afternoon trading sessions. (This was suppose to be scheduled the middle of 2009 but was postponed due to market conditions) By 2012, it has been proposed that we will be linking to other stock markets in Southeast Asia. This unified trading system will make us trade stocks with other Southeast Asian Countries at the click of the mouse! Now, isn’t it exciting to invest globally !
This unified Southeast Asian stock exchange, will be among the top ten biggest stock markets in the world! Wow! Isn’t this exciting!!! I just fee like I was among those who rode with pioneer explorers like Ferdinand Magellan or Christopher Columbus or as if I was working with Steve Jobs or Bill Gates in the early years of the computer revolution Wweeeee !!!
Anyway, I don’t want to be carried away by my emotions on something that is not yet realized. But it is indeed exciting! Watch out for the next installment of this post “Ten reasons why I love investing in the stock market – Part 2.”
Hi ! my name is Zigfred Diaz, Thanks for visiting my blog where you can learn stock market investing the Warren Buffett way and using other value investing methods ! Never miss a post from this blog. Subscribe to my full feeds for free. Click here to subscribe to D’Intelligent Investor by Email
Hi. I saw your blog when I was searching for the statistics of Filipinos investing in the stock market.
You have a great blog here. I am also a trader/investor (depends on what securities I’m holding). I’m looking forward in reading more of your post.
Regards,
Ken
Kendrick: Hi ! You are welcome. Thanks for visiting my blog. More power to your blog as well. By the way I am a money sense subscriber for two years now. Love the maagazine. Glad to know you are a part of it.
No wonder why your posts are simply riveting, because after all, you are the GuerillaBlogger. Zigfred, I enjoy every minute that I spent reading your articles because most of the time, I also give a little lengthy yet catchy introductions. I definitely like your style of writing. I am reading and reading and reading posts about stock marketing because I just officially started earlier today. It is very clear from your post that you must have invested in some of the blue chips like JFC. Nice move! I am keeping my fingers crossed that SMPH will do as much good.
I work full-time and simply don’t have much time to focus on this that’s why I delight with the news that there will be afternoon trading. What would be your predictions? Would it be better than the morning one?
I really like this part of the post:
” Soon, the Philippine stock exchange will introduce afternoon trading sessions. (This was suppose to be scheduled the middle of 2009 but was postponed due to market conditions) By 2012, it has been proposed that we will be linking to other stock markets in Southeast Asia. This unified trading system will make us trade stocks with other Southeast Asian Countries at the click of the mouse! Now, isn’t it exciting to invest globally !”
It’s interesting and exciting if that will happen because after all, Asian economy is getting pretty stable and the awareness for Filipinos about this should be made.
Jonha: hahaha ! Yes I am the Guerilla blogger. I guess you’ve read my post before sa zdiaz.com blog ko. Well lahat nang investing topics will be written here na sa D’Intelligent Investor. Pero iyong mga dating na gawa ko on investing will remain with zdiaz.com for SEO purposes (Sayang ang position sa SERP hehehehe)
Yes, you are right there, mostly blue chips and investments ko because of stable earnings, liquidity and most of them are cheap as of now, although not dirt cheap. I used to have Jollibee stocks 3 years ago but I sold them prematurely. Nag ka mali nga ako doon. Dapat I should have held on to them just as Buffett will. Ganda nga nang price na bili ko noon its only about 32 per share. Now it’s about 60. Jollibee is a great company, great ROE, stable income, growing company, little debt etc. Truly a value investing pick. Buffett would have bought this company if he invested in stocks in the Philippines.
But as of now, I don’t like the price. Way too expensive for a value investing pick. Determining what company to buy is easy. Determining at what price to buy it is a little bit tricky. But don’t you worry I’ll slowly teach it as I go along. It’s part of the value investing tools that I will introduce.
About the afternoon trading sessions. It would seem that longer trading would provide some more market activity hence more volatility. But take note that as value investors we really don’t care about the day to day fluctuations of the market. Maganda iyan to to the traders because they buy and sell always. Hopefully it will encourage a lot of people to invest in stocks. From a selfish stand point masaya ako doon kasi it’s the day traders, speculators, purely technical analysts and the efficient market & modern portfolio advocates that pushes stock prices to overvalued levels. In short they make us the value investors rich. in the long run
As Warren Buffett says “Naturally, the disservice done students and gullible investment professionals who have swallowed [efficient markets theory] has been an extraordinary service to us and other followers of Graham. In any sort of contest – financial, mental or physical – its an enormous advantage to have opponents who have been taught its useless to even try. From a selfish standpoint, we should probably endow chairs to ensure the perpetual teaching of EMT.”
Yes, the Philippines and Southeast Asia is an emerging market. I am looking forward to the day when all the Southeast Asia stock markets will be linked. It will be good for our stock market and of course good for our portfolios
Do you have some sort of magic spell? I just told myself a while ago that I will not be reading your post because it’s too lengthy. Now I just finished this first part and read all the comments and even leaving a comment here myself hahaha! Anyway, I like this post so much. Investing in a financial vehicle is one of my 2010 goals… I still need to re-fill our savings but I hope I still get to fulfill my investing goal for this year! Thanks for a wonderful article Zig!
Tim: Magic spell ? hehehehehe … You made me smile when I read that. Anyway, glad you like the post and that I had been of great help to you.
Hi Mr.Zigfred Diaz,tanung ko lang po panu po ba mag invest sa Jollibee? Gsuto ko pa sanang magtry.
Thanks
kate
Kate: Hello Kate. You can invest in Jollibee by buying shares of stocks in Jollibee. This can be achieved through a broker. I recommend online brokers though as they are cheaper. Two of those I recommend are CITISEC online and BPI Trade.
Hi Zigfred
Thank you very much for the info. We will do that.
Thanks
katherine
hi zig,
im on a learning stage in stock investing. Can i ask you where can i find if how much is per share of stocks for example jollibee?..napagusapan na din kasi yung jollibee..as you had said, stable ung earnings, or maybe i could ask for your advice if what kind of stocks shall i start to invest. thanks.
Richard: The current market prices for stocks can be found at the PSE website at http://www.pse.com.ph. Just enter the stock symbol at the upper right hand corner. For example, Jollibee enter JFC. I wrote an article on this two years ago in my personal blog on how to do this. Read http://www.zdiaz.com/2008/02/how-to-invest-in-the-philippine-stock-market-–-part-4b/
JFC maybe a good company, stable earnings etc., has all the attributes of a good value investment. But the price as of now is somewhat expensive, so I wouldn’t recommend buying it as of now.
To know what companies to invest in, the number one vale investing rule is make sure you invest in companies whose business you understand. If you don’t understand the business then don’t invest or do further research. Take note when you buy stocks you are buying a business, and you should know your own business !
Once you understand what your business is all about, then it’s time to look at the financial statements. Read the annual reports. 5 years of financial data would be good, 10 years is even better. Look for stable earnings both gross and net among other things. Ask yourself it the company’s business model, products etc. will still be relevant 10 years from now. Look for a “competitive advantage.” Does the business have a well defined “moat” such that no matter what the competition does it will hardly make a dent if any to the company’s bottom line. Of course of primary importance is a good management team.
Evaluating a company’s fundamentals using value investing principles is both an art and a science. It takes a lot of study before making your final decision. I highly recommend Phil Town’s Rule number 1 and Peter Lynch book “Learn To Earn” for a starter course on how to do this.
And lastly, keep on reading D’ Intelligent Investor. Your number source for value investing in the Philippine Stock Market
What do you prefered on;ine investing like the citisec or the live going to PSE for beginners like me? and do i need to attend seminars on stock investments? do u know one that is free tnx
kany: Attending seminars is ok for as long as the seminars that you attend teach fundamental analysis. Reading books is the best route to take. I started out by doing this. For a list of recommended books click on “Investing Books” at the top of my blog.
Hello zigfred!
Who usually invest in the stock market? (demographics etc.) Why do you think so?
What can encourage Filipinos to invest in the stock market? Given that there are already online brokers which will make it easier for them and more convenient, how can they encourage more Filipino investors?
Reyna: I don’t have demographics as to who invest in the Philippine stock market. I only know that less than 1 % of the Filipino Population invest in stock market.
I think that educating Filipinos to invest in the stock market would increase this percentage. The Philippines has a very high number of depositors in saving accounts. The only vehicle of investments most Filipinos know are either real estate or businesses. If only those who saved in the bank will instead invest in stocks.
The government has been doing all it can to encourage investing in stocks. They have slashed transaction fees, taxes etc. when buying and selling stocks. They’ve done all they can with regards to this aspect. I believe what is lacking is educating the public about stocks.
The Philippine stock exchange market education department has been going around the country on road shows to promote investing in stocks. But I think the best way to educate Filipinos to invest in stocks is by integrating finance and stock market topics in the high school curriculum. Some private schools has done this, but I believe this should be mandated by law.
Anyway, I think this is a nice topic to blog about. I will write a post sometime about how the government can encourage Filipinos to invest in stocks. Thanks for the idea.