Rule Of 72

By Zigfred Diaz

An Overseas Filipino Worker (OFW) started to work abroad. Having worked for several years there at the age of 29 had a total savings of P 100,000.00 (Philippine peso)

In order to preserve his P 100,000.00, he decided to place it in the bank, since this is the only vehicle of investment that he knew about. The bank manager was delighted that the OFW opened an account with them. He even recommended that the money be placed in a time deposit account enabling the OFW to earn more than the ordinary savings account.

So the money remained in the time deposit account until the OFW reached the age of 65. At that time, he then went back to the bank to withdraw the P 100,000.00. He was amazed when he learned that the P100,000.00 had already grown to P 400,000.00. He was quite happy with the growth of his money. He then withdrew the money from the bank, enjoyed life and lived happily ever after.

Do you think this is a "live happily ever after"? Has this OFW "wisely" handled his money? Are you sure he is maximizing the full potential of his money or has somebody become more richer because of his ignorance ?

Under the rule of 72, in order to determine how many years it takes for your money to double you only need to follow this very simple equation: 72 / interest = No. of years it takes for your money to double

Since the OFW deposited his money in a time deposit account, at 4 % per annum, his money will double every 18 years. (72 divided 4 % per annum = 18 years.) Since he deposited P 100,000.00 at age 29 add 18 years to that and his money will become P 200,000.00 when he reaches the age of 47. Add another 18 years to that and he reaches the age of 65 wherein this time his money becomes P 400,000.00

So what does the bank do with that P 100,000.00 ? Well, they take the OFW's money and invests it at mutual funds, the stock market, the money market, government bonds, corporate bonds and even consumer loans etc. averaging a 12 % return per annum. Using the Rule of 72, the OFW's P 100,000.00 will double every 6 years. (This is computed as follows: 72 divided by 12 % interest = 6 years)

So after 36 years when the OFW goes back to the bank to claim his P 100,000.00 the bank manager gives back his P 100,000.00 with a smile plus the interest of P 300,000 totalling to P 400,000.00.They wouldn't need that anyway since they already made a total of P 6,400,000.00 out of the OFW's P 100,000.00. Talk about hi-way robbery !

Think like the bank if you want to be more wealthy and a more better steward of your money ! The Rule of 72 works ! Make it work for you ! - 23217

About the Author:

Would you want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he blogs about several interesting topics such as investments, money management, business, making money online and Stock market investing

Basic Investment Principles In The Stock Market - Part 3

By Zigfred Diaz

In part three of this four part series we will be discussing the next four principles of stock market investment. Previously, we discussed about the first three principles of investment. Number one principle is that the stock market is just another vehicle of investment. Secondly, you must realize that investing in the stock market is a like roller coaster ride. The third principle involved answering the question on what type of investor you are. If you wish to view the entire article in its entirety, visit my blog.

4.) While investing in the stock market does not take a lot of cash however having lots of it will obviously have an impact on how much you earn. - It is true that you don't need hundreds of thousands of pesos or millions to invest in the Philippine Stock market. For me personally you only need about P 20,000.00 to start trading. This was the initial amount I began with. You don't exactly need P 20,000.00, you can even start trading if you have P 10,000.00. But personally, I believe that is too small an amount. To show you what I mean let me cite Jollibee (JFC), one of my favorite stocks as an example. Jollibee shares cost only 51.50 per share as of today. In order to invest in a stock you need to purchase a minimum number of shares which is called the board lot. The board lot for Jollibee is 100. If you do the math you will only need P 5,150.00 (51.50 x 100) to be a stock holder of Jollibee Food Corporation. Let us presume that a year after you purchased the stock it climbed to P 100.00 per share. This means that you have gained P 5,000.00 more. However if you had invested 200 shares you could have gained much more.

5.) Be consistent in your investment - Start small but do not stay small. You must have the discipline to consistently invest a certain amount of your income to the stock market. This way you can have more capital thereby growing your portfolio. Over the years, I have slowly added to my investment. I did not stay at P 20,000.00. The act of investing should become your habit, and I say it is a good habit to develop.

6.) Maximizing profit at the least possible losses. - Every time you see that the price of your stock went down, relax, the loss is only on paper. Actual loss is only attained when you sell your stock at the "losing" price. Therefore never sell at a loss. It should be emphasized that the money that you put into the stock market should not be taken from your emergency fund. It should by "surplus money." Putting in your emergency savings will result in you selling your stocks at a loss if you need the money badly. The gains you received in the stock market such as sales from stocks and dividends should be utilized to purchase more stocks to maximize your profits.

7.) You must realize that the stock market is not a get rich quick scheme - Don't ever expect to get rich overnight in the stock market. In all investment scheme always remember that money takes time to grow. Investments that give you unbelievable rates of return in a very short period of time are mere scams. The stock market, especially the Philippine stock market takes several months or even years in order for you to really profit. There may be times that it will just take weeks or days perhaps but these are rare occasions like when there is a consistent bull run that is going on or that there is an unusual drop or climb of prices in a short period of time. - 23217

About the Author:

Are you willing to learn more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, financial management, business, making financial online and Stock market investing

Stock Market Basic Principles - Part 1

By Zigfred Diaz

A lot of people have asked me on whether they should invest in the Philippine stock market. Most of those who asked also wanted to know how to start doing it. I do not know if they are really serious about investing or if they are merely curious about it since it has been given emphasis lately considering its very positive performance.

The fainthearted has no business investing in the Philippine stock market or the stock market in general. A true investor always has expectations as to how much he will earn from a certain investment. Normally this is measured in terms of how much money will grow at a given time. (This is commonly known as interest per annum) Now that the Philippine Stock market is in its highest level for some time now, people think that they should get themselves involved. Sad to say most do not even have a grasp of the basic principles involved neither do they understand how the system works. This is not to imply that you have to be an economist before you should consider investing.

What I am saying is that you should understand the basic principles involved first before you could succeed in the stock market. While it is true that fortunes are made on the Stock market, loss of wealth has also been experienced by some. Some who just barge into the stock market without understanding the basic principles of investment end up leaving the stock market convinced that the stock market is no good at all as an alternative vehicle of investment.

Before discussing the details on how to invest in the Philippine stock market we must first have a good grasp on the basic principles of investment in order that we might possibly succeed and enjoy trading. There will be ten principles that will discussed. The first one will be discussed here. Other points will be discussed in the articles to come. Please visit my blog if you wish to see the article in its entirety.

1.) You must realize that the stock market is just another vehicle of investment - There are several investment vehicles where you could place your money. One is not more superior than the other. They have their advantages and disadvantages, but this will not be discussed in depth here.

You must understand that the stock market belongs to an investment category called "Capital Markets." Capital Markets are divided further into several categories. Here alone, there are several investment vehicles wherein you could place your money. Examples of these investment vehicles aside from the stock market are real estate, pension funds, bonds, insurance, different types of savings and time deposit accounts. It is of vital importance that you know this fact because knowing the different types of investment vehicles under the Capital markets will help you evaluate whether or not you should invest in the Stock Market considering that there are other vehicles of investment.

I reiterate that each vehicle of investment has its own advantages and disadvantages. I did not to place all of my eggs in one basket. Most of my investments are in the Capital Markets though. This includes bonds through mutual funds, the stock market, insurance, pension and deposits. - 23217

About the Author:

Would you like to know more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, financial management, business, making financial online and Stock market investing

Stock Market - Basic Principles - Part 4

By Zigfred Diaz

In this article we will be discussing the last three principles of investment in the stock market. In the past articles we have already discussed the first seven principles. If you want to see the entire article, visit my blog.

8.) Take time to study- Investing in the stock market requires that you should take time to study what it's all about. You can't expect to succeed if think that you can just place in your money and hope that it will somehow grow by itself. Studying a lot of books and materials on the stock market will certainly help. When I first started investing I searched for materials in the internet regarding the stock market especially the Philippine stock market. I bought the "investor's primer" from the Philippine stock exchange. This is a great material for those who are new to the Philippine stock market.

Attending seminars on how to trade in the stock market can further add to your knowledge. Some brokerage firms conduct free seminars for those who are new investors. Last year I attended a 2 day seminar by CITISEC Online. They are one of the most active, most innovative and well managed brokerage firms in the Philippines. The information that you learn in the seminar will certainly help you in your quest to succeed in the stock market. Continuous study is required if you want to be successful in investing in the stock market. Do not not stop learning.

Read all the materials you can and attend all the seminars you can in order to learn. Don't be discouraged when there are terms you could not understand. For example just reading this post alone, you would probably raise your hands and tell yourself not to invest anymore since there are some terms you could not understand. You don't even know what "points" are when I was talking about them in point number 2. You don't even know what the heck is the Philippine Stock Exchange Index (PSEi) or what does "Blue Chips" or "Bull run" mean. Worse you don't even understand what a stock is and how it basically works. But so what? I started out not knowing what some of these things are.

You can never learn these things in school. However I learned these things by reading a lot about the subject and through experience. In order that you might be inspired, I suggest you watch the movie "Pursuit of Happyness." This inspired-by-a-true-story movie is about a man who overcame all odds to learn the stock market letting him make millions later on through stock market trading.For sure, you will be inspired by watching the film.

9.)Know what is happening in the world around you - There are several factors that affect the stock market. Be aware of the news that is making headlines in the news paper. For sure this will give you a hint on the direction that the market will take. Never skip the business news. It is here where you will be given an idea as to which stock you should buy. I prefer reading the online version of the Philippine Daily Inquirer in order that I may know where the market is heading.

10.) You must start now - The best way to learn is to experience it yourself. Start small if you wish but start now. Don't procrastinate. However don't rush immediately without studying how to go about it. After you have at least learned the basics of investments then you can start buying your first stock. There's nothing more exciting when you have made your first sale at a profit. - 23217

About the Author:

Want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, financial management, business, making financial online and Stock market investing

Reasons For Investing In The Stock Market - Part 2

By Zigfred Diaz

In my previous article, the first part on the advantages or the reasons why you should invest in the stock market was discussed. Three points are highlighted, mainly potential for greater returns, part ownership of the company you are investing and belonging to a special group of people. This is the second part of this two part series. Check out my blog should you wish to view the article in its entirety.

4.) One of the best if not the best vehicle of investment - In 1986 the Philippine stock market recorded its highest return rate at 224 %. The lowest return rate was recorded in 1997 at negative 41 %. The average return in 20 years time however ranges from 24 % to 28 % per year. It can therefore be clearly seen that while it is true that investing in the stock market has its up and down, in the long run long term investments in the stock market still yields a greater return. Hence it can be concluded that the long term investors always benefit and that the stock market is still one of the best vehicles of investment.

5.) Increases your financial knowledge and forces you to learn. - If you dozed off in your high school or college days economics class before, you might loose all your hair right now just to force yourself to try to understand what inflation means. You start to begin reading the business news regularly and try to give importance to major news headlines as this will have an impact on the behaviour of the market. You will be forced to understand words that you never understood before. You will become more smarter and wiser more than ever as are forced to keep on increasing your financial and investments knowledge.

6.) Helps you more to become internet savvy. - It has been said that the development of mankind is divided into several ages. First we had the "stone age", then came the iron age and then the bronze ages etc. Afterwards we moved up to the industrial age. Currently we are said to be in the "information technology age." In this age, knowledge is power. This is not just considered as an adage. Rather this is the essence of the information age. Engaging in online trading will surely help you understand what this means. During the time that I was in college I wanted to invest in the stock market. The reason for my curiosity was because I always see in the movies how the traders are shouting buy or sell. However I did not invest during that time because of three reasons. First I lack the information. Secondly, I do not have the capability and thirdly I do not have the money to invest.

With the advent of the internet age, information is everywhere through the World Wide Web. Add to the fact that you can now trade online. With this opportunities that come into play, it was now possible for me to trade in the stock market. I monitor the news online, I buy and sell online, I transfer money to my accounts online and best of all it is now possible to trade globally and invest in other stock markets around the world with the use of your computer. Although this is an entirely different arena but the stock market trading principles still come into play.

7.) Helps build the nation - Investing in the stock market helps build the nation. Most stock market investors may not realize this but this is one of the most noble objective and advantage of investing in the stock market. Companies who are listed in the stock exchange intends to infuse more capital into their business in order that such capital might be further used for expansion. Business expansions would mean more people are hired for work. The government also benefits as more taxes are being paid. This further translates into more economic activity which in the long runs helps build the nation.

Certainly these compelling reasons make a valid argument as to why you should invest in the stock market. - 23217

About the Author:

Would you want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, financial management, business, making financial online and Stock market investing