Financial stability is a dream most Filipinos are dying to achieve. While some people are contented with having just enough funds in their banks, there is a select few who dream of multiplying their money twenty-folds. One of the best ways to multiply money is by investing in stocks.
Some people work hard for money, but some people want their money to work for them. These are the individuals who are investing in stocks.
Making money work for you may seem problematic at first, but using this simple three-step formula, reaching financial success becomes doable.
1. Pay Yourself First
At a young age, people were already taught to set aside portions of their money for savings. However, in the long haul, there are only a few people who are successful in saving money.
To save money efficiently, one has to pay himself first. People are fond of spending their money first to pay bills and other expenses before setting some cash aside for the bank. However, they always end up spending all of their money for the bills and nothing for their savings account.
Here is the magic formula that will help you save money for the future:
Income – Savings = Expenses
With the formula stated above, you will have something to put in the bank even though you have already spent everything on the bills.
2. Invest Your Money
It’s not enough to put your savings in the bank. You also have to multiply it. By making your money work for you, you’ll be able to double your money.
History will tell you that the stock market can provide with 10% to 12% gains from your investment if it is maintained yearly, regardless of whether the stock market is at a smooth or rocky season.
Peso-cost averaging is a beginner-friendly way to get into the stock market. It is when you continuously buy stock shares for a fixed price at regular intervals.
Consequently, this will lower your total average cost over time. To discuss how peso-cost averaging works, here is an example:
Let’s say you initially invest Php 15,000, and your stock increases by 10% for every year. At the end of the first year, your stock investment grew to Php 16,500. If you continue taking hold of your stock and it appreciates by 10% again for the following year, then your stock would now amount to Php 18,150 by the end of the second year.
In continuing with this trend, you can double your initial investment in around eight years’ time. Through peso-cost averaging, you can strategically buy more shares when the price is lower, and fewer shares when the price is high.
Suppose you invest Php 10,000 each month to acquire stock shares. On your initial purchase at Php 50 per share, you are able to buy 200 shares. If during the second month of your purchase, the price of the stock increases to Php 62.50, then you are able to buy 160 shares only.
On the succeeding month, if the stock price goes down to Php 40, then you can now buy 250 shares with the similar amount of cash that you’ve spent during the previous months. This will then set your average buying price to Php 49.18.
Through the process of acquiring more shares at a less expensive price over time, your investment will increase in value as well.
However, it is crucial to point that peso-cost averaging will also work if you decide to put your investment in top-performing and stable companies that have an excellent track record and are handled by professionals that are undoubtedly experts in the industry.
3. Invest Now
In stock investing, time is your most valuable asset. When you start earlier in investing in stocks, the more time you can multiply your money.
Referring to the chart above, a 25-year old who had just invested P60,000 a year for 10 years will have earned P69.7 million by the time he/she reached 65 years old whereas the 65-year-old who had spent P300,000 a year for 25 years will only gain P50.5 million.
Even though many people consider the adage “time is money “a common statement, the saying echoes truism in the case of stock investing. Get started in investing in stocks now and see how much you’ve earned in a year or two.
Remember that peso-cost averaging is not a method that will guarantee the growth of your money in the stock market. Forget about the words “guaranteed earnings” in any legit investment. Legit businesses that offer investments or investment consultancy services proactively tell their clients that earnings are not guaranteed.
Would you want us to help you become an independent trader and a profitable investor through stock investing?
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