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| source: http://www.quick-good-fortune.com |
Many think stock investing is easy money because of the concept of
High Risk=High Return
and thus a lot of people invest like a gambler, they load up their money without doing the math hoping that the next bet will hit the jackpot.
Probably you heard a news about some stock that has been slumping for the past years and then some guy made news by buying it the other day and made a million the next day. Well it is possible to earn a million in the stock market in a split second if and only if you have also a huge amount invested. That guy might have invested 100 million and since the stock just increase 1 peso on the next day because of a sudden news that the company have struck a new deal that might give the company a higher revenue this year. What if because of what you read jump in and invested your hard earned money of 50 thousand pesos.
So here is the scenario. You read a guy who earned 1 million on Stock A just after one day. The reason why this happened is because the company just recently has a deal that might bring revenues to the company this year. You check the stock and its slump price started to go up.
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| source: http://www.investorpitstop.com |
From 1.01 it jumps to 1.80 (yup the guy who made a million bought it at 0.01) so you scampered to put in your money on this stock because its price is jumping like crazy. By the time you were able to buy shares of Stock A it was already at 2.75 per share. Then you waited and waited some more but it seems that the Stock A is stuck at 2.75.
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| source: http://www.123rf.com |
Then Stock A started to go down, yes really fast. You panicked and ordered your online broker to sell it at 2.75 just to breakeven. After some really dizzying up and down of the stock you were able to sell it at 2.80. So you were happy at least you gained 0.05 on your stock investment. Then you were shocked when you check your online account. You actually lost let say about 300 pesos (this is just an estimate for illustration) from buying Stock A.
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| source: http://thesnowolf.com |
Why did this happen? Well one you didn’t take into consideration the tax, broker’s fee, and other charges when buying or selling stocks and second your investment as compared to the guy that earned a million is way too far. You may have both earned around 1% but because of the magnitude of his investment he was able to earn that much.
I am not saying that stock investment can be an easy money, it does, but those guys who have made millions in the stock market either have huge money to invest and knows so many things about the stock market. This means they have an edge over you that is why they are able to at least predict that there will be a great opportunity in a certain stock.
Just like what I posted about Warren Buffett. He looks at a company as a business first before looking into its stock’s market price. When he finally has such information and after gauging cost over benefits that is the time that he makes action. Also I always tell what Robert Kiyosaki said that when you buy stock or property for that matter, you buy to earn.
And with all that being said I guess stock investment is not easy money… it takes a lot of crunching numbers and getting familiarized with the rules of the game which at first is kinda hard but when you start to get it and when you get seasoned to it you can easily trade or invest in stocks even if your eyes are shut.
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About the blogger
Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Learn more about Louis and his financial freedom advocacy here.
