I love it when market is down.
Not only because I am given that precious chance to accumulate shares of my favorite stocks at lower prices, but because it’s the most effective way to teach people the harsh reality of investing.
People start investing because they read articles on the power compounding, how stocks outperform all other asset classes, how one stock jumped from few centavos to hundreds, and how it gives dividends without sweat. And those are all true! Beautiful things actually.
However, most of these people fail to see the inherent risk involves in any investing activity, and that is the possibility of losing. And so when it happens, that’s the time they start thinking of they made the right move.
How do I deal with them? I ignore. Seriously!
But that’s because my background.
I’m able to do it because I have trained myself on some few simple rules through my years of investing.
What are the rules I have?
1. I put money I won’t need in the next 10 years.
Candidate for these are my retirement fund, wedding fund, and all other money I need long term.
I simply don’t put money I will need tomorrow, next week, next year, or the next five years.
You may not be as young as me, but if you have the same time projection for the money you’re putting, a down market are party time!
2. I invest only in great companies.
These companies are not immune to market downside, but given enough time, I’m confident they will go back up, multiplying more the money I put during this kind of period.
A viable business model and consistent income growth is the key criterion to look
3. I invest regularly.
This investing regularly is the secret key in making big money in investing – buying when market is down taking advantage of the possibility of higher returns. The goal is not to time the market, but to accumulate stocks of great companies as many as you can.
I have this habit of setting aside a part of my income ever since I started investing.
I started with 5k a month. Then I add my 13th month pay. Then if there’s some company bonus, I add it too.
In my mind, my monthly income has been covering all my expenses, so I see no need to spend those windfalls.
… a change in focus
But that was before.
Now, I’m able to put my entire salary to the stock market every single month.
I can do it now because through my years of learning this finance thing, I realized that an improvement of cash flow is more rewarding than investing when it comes to short-term needs.
Investing is a great multiplier of wealth. But it takes time and substantial cash if you want to see substantial growth.
Since investing takes time as its ally, it can never pay my Coron trip which it to happen in the next year. But an additional income stream can cover it with a higher chance.
When I realized that truth and worked on it, I saw clearly that the payback on this shift of attention is more straightforward. And just like investments, a focus on income streams can compound through time if designed properly.
I’m not suggesting that you go straight to all those MLM companies offering all sorts of opportunities and promising heavens in their formatted presentation.
But I’m sharing that you become more conscious how to use the resources you have – time & talent included – and find ways how to make it your additional income generator.
Back to investing…
Peter Lynch, one of the biggest names in investing, said
My best stocks have been the third year, the fourth year, the fifth year I’ve owned them. It’s not the third week, the fourth week. People want their money very rapidly, it doesn’t happen.
– Peter Lynch
If you will look at the chart below of some companies, it’s easy to recognize that the harvest of great returns through investing indeed takes time, so make it work for you.
Ayala Corporation (AC)from 100 to 800
Jollibee Foods Corporation (JFC) from 20 to 200
DMCI Holdings Inc (DMC) from from 0.3 to 16
Megaworld (MEG) from 0.5 to 6
Investing is simple. The enemy is usually not the market but yourself. (In trading, everyone is your enemy!) Stock market can be harsh to one who cannot manage himself. But to those who has have been disciplined enough to stick to few simple rules that work, a relaxing investing journey awaits.
Have fun investing!