Starting out as an investor
January of 2019, I graduated from college and I was on my way to make it to the real world in the city of Manila. I promised myself once I started earning, I will set aside part of my income so that I can save and invest to grow my money. It was only until I had my 2nd job that I was able to set aside a portion of my money to be grown through different investment vehicles.
The year 2019 was such a volatile year. The prices of the stocks were unpredictable. Even though I graduated top of my class, I was never the type of person that knew much about the market. I knew the theories and whatnot, but I was not taught how to properly predict the market and its uncertainties. I made a mistake of investing in the stock market when it was at an expensive rate. I did not know it at that time because my knowledge of the stock market is very limited.
In my first year as an investor, I took advantage of the volatile market and tried trading. Because of my low-risk tolerance, I usually acted with regard to my emotions and fears rather than proper assessment and research. I ended up losing a lot of money because of that.
I don't want you to make the same mistakes that I did when I first started. Here are some of the tips I wish I had known before I started investing in the stock market.
Tips for when you start your investing journey
1. Establish your investment goals
Are you investing because you have extra money? Are you willing to take a little risk in order to grow that money? Do you want to invest for your retirement? Do you want to invest for capital gain? Do you want to trade so that you can increase your saved up money for your next vacation? Whatever your goal is, let that be your guide in formulating your investment strategy.
If your goal is for long term growth, you should not let the volatility of the market affect you. With sound judgment, you should buy your investment at a low rate and never check on it again until the specified period that you want to use it arrives.
If your goal is short term, let the next item guide you.
2. Assess your risk tolerance
When it comes to investing, you should always assess the amount of risk you are willing to take. Our emotions can sometimes be the basis of our decisions. Do you have a fight or flight reaction towards events? Are you excited about getting a large gain on your investment or are you ok with a small gain as long as it's safe?
Know yourself. If you are scared of risks, it might be smart for you to invest in more stable funds. In the Philippines, the available funds that are low risk and low return are Bonds, Mutual Funds, UITFs and MP2 funds of PAG-IBIG. If you are a risktaker, you might as well invest in the stock market. However, you must always remember to do your research before investing in the stock market because you can gain and lose a lot.
Answer this online quiz for a more accurate assessment: http://pfp.missouri.edu/research_IRTA.html
3. Do your research
Before starting out as an investor, make sure you have done some research about the market. Check online about the past performances of the entire market. You may also check on the company that you are interested in investing. Do not rely on hearsay. Make sound judgments when it comes to your decision making.
4. Learn to cut your losses
I cannot stress this enough. In the first year that I been investing, I had lost Php29,000. Damn, Heidi. I thought you were smart? Why in the world would you lose Php29,000 in one go? Glad you asked.
When I started my investing journey, I got so excited and confident about my investments that I refused to acknowledge moments when I was losing. I was always in denial when something came up that hurt the market sentiment, which inevitably hurts the value of my investments. I always had the this will still recover attitude when it comes to my investments that it was too late when I finally decided to let go.
Don't be like me. Learn to let go.
I hope you were able to get an idea of what to do and not to do when you start your investing journey. Remember: Establish your investment goals, assess your risk tolerance, do your research, and learn to cut your losses before you dive in on your investing journey. If you have questions, you can always send me a message via IG: @hildaantonina