The myth
Many believe that stock market trading is an expert’s game. After all, you need to know the right stocks to purchase, when to buy and sell your shares, and how much money to invest.
Newbie investors worry that they do not know enough about the market to join in. They fear this lack of knowledge could cost them their money. Most people also think it requires a considerable amount of money.
The reality
Online tools and resources have made the stock market more convenient, accessible and affordable for beginners. However, even with easy-to-use apps, investing in stocks still comes with a fair share of risks and challenges.
In general, stocks are known to rise and fall in value in a short amount of time. Some people take advantage of this price volatility through day trading, which is the quick buying and selling of stocks within minutes, hours or days.
This requires a high risk tolerance as well as time and technical know-how to spot potential trades, monitor movement and predict market trends.
If that doesn’t sound like you, there are plenty of other options to explore. You can set your sights on Blue Chip stocks, which are pretty much the top 30 companies in the Philippine Stock Exchange based on trades, liquidity, performance, and stability.
They tend to have a reliable performance and are more likely to grow in value in the long run. If you’re still not confident enough to do the buying and selling yourself, the good news is you don’t have to.
Managed funds are a suitable option since they have dedicated, expert and professional fund managers who do the research and make the decisions for investors.
You pretty much outsource the decision-making to them so you no longer have to monitor the market, acquire the skills needed to trade on your own, our spend too much time waiting for the perfect price action.
Remember that these funds come in various forms that put money in different assets. These include Money Market, bonds, balanced, and equity-laced funds.
There are also foreign currency-denominated funds, feeder funds, fund of funds, and most recently, REITs-centric funds. You just need to make sure your preferred fund invests in stocks.
Verdict: It depends.
It pays to do your research and know your risk tolerance before getting into stocks. For newbies, products like managed funds or exchange-traded funds are a great entry point that could help balance the risks and rewards.
On the flip side, the fast-paced world of day trading is better reserved for skilled investors who know the ins and outs of the marketplace. A do-it-yourself approach of buying individual stocks also requires a good understanding of how the market works.
Keep in mind that there are different ways to invest in stocks. As a beginner, you can always build your knowledge and confidence as you go along.
Eventually, you may be able to manage your own stocks and maximize your returns.
