Ever since I started investing in stocks more than 10 years ago, I’ve become more and more in love with it. Indeed, the stock market is one of the greatest moneymaking machine man has ever invented. I’ve always wished more people see the stock market’s potential to make money work for them. The stock market may be down at present but times like these are precisely the time to hunt for good bargains. For those still not invested in stocks, let me cite 10 reasons you should love stock- market investing.
1.) Investing in the stock market gives potential for great returns.
Warren Buffett is undoubtedly the world’s best stock-market investor and, perhaps, the only person in the top 10 richest in the world who derived his wealth solely from stock-market investing.
If you invested $1,000.00 with Warren Buffett 53 years ago in 1956 (The equivalent of only about $7,760 in 2008), such would be worth an estimated $30 million at present. That’s the wealth-generating power of investing in the stock market. In the early part of his investing career, Warren Buffett’s return almost reached 30 percent compounded per annum.
You might say, “Well that was Warren Buffett and it is only applicable to him. Besides, he lives in the US and I don’t think that will apply in third-world countries.” You are absolutely wrong. The same principles apply in any stock market. I have made a personal study of the Philippine stock market and my findings reveal that if you invested over a span of 10 years from 1997 to 2007, your annual return would be similar to Buffett’s, ranging from 25 percent to near 30 percent compounded annually. With this rate of return, a P100,000 would become a million pesos at the end of 10 years. Even if you did not invest directly in stocks but, instead, entrusted your money to a fund manager via pooled funds the past 10 years, your money would have grown at compounded annual growth rate of about 10 percent per annum on average. Investing in stocks certainly offers the potential for greater returns.
2.) Investing in the stock market would make you “part owner” of the company you are investing in.
IT would cost you somewhere between P15 million to P30 million to obtain a Jollibee franchise. Add to this the time, effort and headache that goes with managing the franchise. Instead of franchising a Jollibee outlet to “own” Jollibee, why not by stocks of Jollibee Food Corp. (JFC) instead?
Using present market prices, you only need about P2,500 to invest in 10 shares of Jollibee. Since stocks represent a part of a business, this means you are part owner of close to more than 3,000 stores worldwide. Take note that JFC does not only own the chain of Jollibee fast-food restaurants, the corporation also owns other great food companies like Mang Inasal, Burger King Philippines, Red Ribon, Chowking, Deli-France and other recent Southeast Asian expansion. Now isn’t that the coolest.
So next time you eat at Jollibee, you could proudly say to your friends and relatives that you enjoy eating there because you are one of the owners of the company.
Always delayed in paying your utility bills? Perhaps owning stocks of PLDT, Globe, Manila Water or Meralco will prompt you to pay your bills on time.
3.) Investing in the stock market makes you belong to a special group of people.
According to the Philippine Stock Exchange, less than 1 percent of the entire Philippine population directly invests in stocks. Considering this fact, I think it a privilege that of some 100 million Filipinos, I am among the few “pioneers” who braved it out in the stock market.
Another thing to consider is the fact that the Philippine stock market is still at its infancy. Exciting new things are expected in the years to come. It has long been proposed that we will be linking with other stock markets in Southeast Asia. A unified trading system will make us trade stocks with other Southeast Asian countries at the click of the mouse. The unified Southeast Asian stock exchange will be among the top 10 biggest stock markets in the world. Now, isn’t it exciting to invest globally. With this upcoming development, count yourself among the early pioneers of global Philippine investors.
To be continued
Zigfred Diaz is Registered Financial Planner of RFP Philippines. To learn more about stock selection and investing, attend the 10th Accredited Financial Analyst (AFA) program this January 2017. To inquire, e-mail firstname.lastname@example.org or text <name><e-mail> <AFP> at 0917-9689774.