How To Get Started In The Stock Market
Becoming an expert investor is hard, and most of us don’t know where to start. But for Marvin Germo, Registered Financial Planner and stock market trader, he had a goal from the get-go. He wanted to have a better future for himself, and saw that investing was the way to go. “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 in how to invest in different things.” He started investing in his early 20s and hasn’t looked back since.
Now, Germo is a prominent stock trader and investor with two best-selling books about investing in the stock market, who often appears on TV to talk about investing and has given talks all over the world about the subject. But getting to that point wasn’t easy. So iMoney spoke to Germo about how he educated himself in investing, and how you can get started in the stock market as well.
Why Is Investing Important?
Photo: Markus Spiske / raumrot.com
“It’s the best way to earn,” Germo says simply. “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,” according to Germo. “For example, college tuition fees go up on average 10% every year. If your money’s in a 1% time deposit, you’re actually losing 9% every year!”
Investing also allows you to take part in the economic boom that the Philippines is experiencing. “Jollibee was only P10 12 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.”
But perhaps the best argument for investing is the freedom it can give you. Germo himself has quit his 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 that’s education for your kids, your wedding, or retirement.”
“Now I can revolve my life around what I’m passionate about. Achieving this liberty 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?
A lack of financial literacy holds a lot of Filipinos back from discovering the freedom that investing can give them. “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 that dissuade the regular Filipino from investing are:
- The mistaken belief that you need a lot of money to invest.
- No desire to watch their investments every minute of every day.
- Not having the expertise of an accountant, economist, or financial analyst.
But Germo says that these doubts are unfounded. You can get started 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 investments and earn 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.”
Lucky for you, there’s no shortage of trainings and seminars available if you want to educate yourself about 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 own Stock Smarts trilogy of books) and attending seminars, another good way for you to build knowledge is by finding a mentor who is actually trading and can share their experiences with you.
How Do You Start Investing?
Photo: Trading Academy
- Open an online trial account. 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.
- Start with a very small amount. Once you’re comfortable with the idea of investing, you can start small. Make sure it’s an 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, if you don’t have the knowledge to back your investment up, you could be setting yourself for a very costly fall. “If I plan to invest a million pesos, I would start with P10,000,” Germo advises. “Because that P10,000, I don’t care if I lose all of it, but the knowledge I will get from how I trade that money will allow me to trade larger amounts in the future.” Start with a small investment, and allow your knowledge and skills in the stock market to grow along with your gains.
- Find the investment approach for you. There’s no magic investment strategy that fits everyone. Learn as much as you can before diving into stocks. If you don’t have the time to learn complicated strategies, start with something simple like the peso-cost averaging strategy. Then, as you gain more confidence, you can start adapting your approach to maximize your investments.
- Pick companies that are making money. You don’t have to be a financial whiz to figure out which companies are making money. Look at financial statements, easily available on the company’s website, or read the business pages, to make sure that the company you’re considering isn’t suffering net losses every year. “This principle alone would spare you a lot of sleepless nights,” says Germo.
- Learn, learn, learn. Ultimately, you will have to take responsibility for the decisions you make in the stock market. “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 learning. Learn from your losses and gains. Seek out ways to develop your investment strategy further, and practice what you learn from reading books or attending seminars. The more knowledge you have, the more wealth you can build.
“Study and start now.”
If Marvin Germo could give you one piece of advice, it’s 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 stock market investing isn’t just for the rich and powerful — it can also be a powerful tool for you. Time is on your side, so start now.