How to invest in the stock market

Published May 18, 2015 6:11pm

Right from the start Marvin Germo, registered financial planner and stock trader, wanted to have a better future and saw investing as the path to his dream life.

“My parents never taught it to me. But I saw the effects of not investing. So I said to myself, 'When I get older my life should be different than what they’re experiencing right now,' and that pushed me to educate myself on how to invest in different things.”

He started investing in his early 20s and never looked back since then.

Now, Germo has two best-selling books about investing in the stock market. He often appears on TV to talk about investing and has given talks all over the world on the subject.

Getting there wasn’t easy.

iMoney spoke to Germo on how he learned to in invest and how others can get started in the world of investing.

Why Is investing important?

“It’s the best way to earn,” says Germo. “We’re sitting here talking... But since my money’s invested, it’s working hard for me and I’m earning as we speak.”

Not only is investing the best way to earn, but it also protects your money from the effects of inflation. “The price of things gets higher each year, so you must find a vehicle that will beat the rate of inflation. A savings account is not the answer,” he says.

“For example, college tuition fees go up on average 10 percent every year. If your money’s in a 1-percent time deposit, you’re actually losing 9 percent every year!”

Investing also allows you to take part in the economic boom that the Philippines is experiencing.

“Jollibee was only P10 twelve years ago. Now it’s P202. The only people making money off of this are foreign investors and the super rich. The middle class aren’t investing and they don’t get to enjoy that growth,” says Germo. “It makes me sad. We need more investors.”

Perhaps the best argument for investing is the sense of freedom it gives you.

Germo quit a 9-to-5 job and lives off the income from his various investments and entrepreneurial pursuits.

“Investing gives you the liberty to do that. You know you can beat inflation... You know you can achieve the goals you want, whether... education for your kids, your wedding, or retirement.

“Now I can revolve my life around what I’m passionate about. Achieving this liberty is one of the best things I’ve ever done and I hope more Filipinos get to do the same thing.”

What’s holding you back from investing?

Lack of financial literacy keeps many Filipinos from discovering the freedom from investing. “They always want to buy the latest gadget, go to the latest gimmick place, have a vacation… They prioritize things that aren’t important,” Germo says. “They deprive themselves of opportunities to save and invest.”

Other factors dissuade many Pinoys from investing:

1. The wrong belief that you need a lot of money to invest

2. No desire to watch investments every minute of every day

3. Not having the expertise of an accountant, economist, or financial analyst

Germo says such doubts are unfounded. You can start investing in the stock market with as little as P1,000. And if you pick a good company, you can invest your money in it and not have to monitor it every day. And by studying the basics, you can learn enough to make smart investment moves and that yield good returns.

“The stock market is not as hard as people think it is. But it’s also not that easy that you can go into it without studying,” Germo says. “You need to have the right foundation, so when you start investing you know what you’re getting yourself into.”

There’s no shortage of trainings and seminars available if you want to educate yourself on the stock market.

“They get to learn from our mistakes... The things I didn’t know before... And access to information is easier now,” Germo says.

Besides reading books, like Germo’s Stock Smarts trilogy, and attending seminars, another good way to gain investment know-how is by having a mentor who is actually trading and can share experiences with you.

How do you start investing?

1. Open a trial account online If you’re still a little tentative about investing, online brokers allow you to open a trial account so you can simulate the experience of buying and selling stocks without actually spending any money. BPI Trade, for example, gives you a 7-day trial so you can get a feel for investing.

2. Start with a small amount you can afford to lose or an amount you don’t plan to touch for a very long time Even if you have, say P100,000 to invest now, a lack of knowledge to back up your investment could set you up for a costly fall.

“If I plan to invest a million peso, I would start with P10,000,” Germo advises.

Losing P10,000 for a wealth of knowledge on stock trading is preparation for dealing larger amounts in the future, according to the trader. Start with a small amount and your stock trading skills and know-how grow together with your gains.

3. There’s no magic formula or investment strategy for all Learn as much as you can before diving into stocks. If you don’t have time to learn complex strategies, start with the simpler peso-cost averaging. As you gain confidence, shift the way you approach the market to maximize your return on investments.

4. Select money-making companies You don’t have to be a financial whiz to know which companies are profitable. Look at financial statements on company websites or read the business pages of newspapers and news sites. “This principle alone would spare you a lot of sleepless nights,” says Germo.

5. Learn, learn, learn Ultimately, you alone are responsible for the stock market decisions you make. “You have to understand that when you make a mistake the broker won’t reimburse you... Your friend who gave you the tip won’t reimburse you. It’s your money, it’s your life, it’s under your control so you have to equip yourself to make the right decisions.”

To succeed in the stock market you have to keep on learning. Learn from your wins and losses. Develop your investment strategy and practice what you've learned from books or seminars. The more knowledge you have, the more wealth you can create wealth.

Study and start now

A piece of advice Germo could give you is to study and start investing now. “Studying gives you the confidence to start. And starting now allows you to put that knowledge into action. It’s easy to forget things you don’t practice.”

Hopefully we’ve shown you that investing in the stock market isn’t just for the rich and powerful. You too can do it. And as the saying goes: time waits for no man.

To start your journey towards investing check out our investment tag.

Germo's latest book is "Stock Smarts: Stress-Free Investing." To learn more about investing visit his official website.

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This article first appeared in slightly different form on iMoney.

Tags: imoney, imoneytips