Guide To Investing In The Stock Market

Photo by Catherine Karnow

In one of my previous post, I talked about the two ways to earn money in the stock market, stock investing and stock trading. In this post I'll be sharing with you the strategy that I use to invest in the stock market. It's a method, that was taught to me as a member of Bro. Bo Sanchez's Truly Rich Club.

The strategy is called Strategic Averaging Method or SAM for short. The SAM strategy is a passive long-term investment strategy that Bro. Bo teaches to his Truly Rich Club members. In short, it is a buy and hold strategy (without the need to hold a certain stock for 10-20 years). The strategy has five (5) rules to follow in investing in the stock market.

1. Invest small and slowly - invest only small amounts of money regularly, preferably monthly (or twice a month for TRC members, after Bro. Bo email's his stock updates).
2. Buy at Buy Below Price (BBP) - Bro. Bo usually provides a BBP whenever he recommends a SAM stock in his stock updates. The recommended stock should then be bought at the price that is lower than the BBP.
3. Stop buying when prices go beyond the Buy Below Price - once the SAM stock goes beyond the BBP, it's a sign to stop buying that stock. Unless Bro. Bo says otherwise or he adjusts the BBP.
4. Wait for the Target Price (TP). Sell when the TP is hit - Bro. Bo's stock updates also comes with a TP, where you sell the SAM stock once it hits the TP. Unless Bro. Bo says otherwise or adjusts the TP.
5. Reinvest to other SAM stocks - use the money earned after selling the SAM stock at the TP to buy other SAM stocks. In this way, you'll be compounding your previous profits with the potential profits that your newly SAM stock could make.

This strategy is made easier to apply because of the stock updates that Bro. Bo provides to his TRC members. He provides an update twice a month, wherein he mentions the stocks to buy, at what price and at what price to sell them (he also sends out emails, outside of his regular updates, if a stock needs to be sold already or an adjustment with the BBP and TP). This system is basically the treasure map of TRC members to making millions in the stock market.

If you don't want to be a member of the Truly Rich Club, the suggested stocks to buy, when applying this strategy is blue chip stocks (PLDT, SM, Ayala, etc.), as these stocks tend to be safer due to the solid fundamentals of these companies. Then I suggest just sell them when you are happy already with the profits that you made and then just reinvest your earnings.

For those who are interested to be part of the Truly Rich Club, just click the link to learn more.

A Lot Of Money Alone Won't Make You Rich

Photo by Tim Clayton

Do you believe that having a lot of money is the key to being wealthy? 

Do you believe that earning big amounts of money will instantly make you rich and wealthy?

Sorry to burst your bubble but the answer is no. Having a lot of money alone won't make you rich and wealthy, you'll need the ability to retain some of that money to become rich and wealthy.

Imagine all the money you received since you were a kid up to your present age. If you add all that up, you'd be surprised that you've already received millions worth of money. The problem though is that, the money only passes through your hands, that's why you're still not yet rich and wealthy.

That is the key to becoming rich and wealthy and the secret of wealthy people. It's their ability to retain the money that they receive, either through their job or business. It doesn't matter if you earn only P10,000 a month, if you're able to keep at least half of it, you'd be wealthier than someone who earns P50,000 a month but only manages to retain P1,000 out of the money he earns.

You're ability to retain the money you earned and use it to acquire assets that generate you income, like rental properties or businesses is the real secret to becoming rich and wealthy. Even if you earn one million pesos a month, but spends it all on things that doesn't earn you money, you still won't be considered rich or wealthy. What will you do then if your income generating job or business suddenly disappears? Will you be able to survive for 6 months? 3 months? 1 month?

Remember that having a lot of money alone won't make you rich and wealthy. You're ability to keep the money and use it to acquire income generating assets is what will determine if you're rich or not.

When To Teach Your Kids About Money

Photo by Corbis

When do you start to teach your kids about money?

Do you start to teach them early or you wait until they reach a certain age?

According to an article that I read way back, there is no age limit to teaching kids about money.

You can actually start teaching them as early as possible and I agree with that. I too was taught how to save money at an early age. I was taught to give my money to my mom for safe keeping until I learn on my own how to save money. Not fully understanding what that meant, I just obeyed and gave her the money that I would receive.

Things changed when I began asking for new toys. My mom would usually buy me what I asked as long as it is within her budget. If it doesn't fit her budget she would tell me to learn how to save my own money so when I have enough I would buy them myself. Since then I started saving and monitoring the money that I get from allowances, birthdays and Christmas in order to buy the toy that I want.

The early lesson on saving money has been one of the valuable lessons I learned when I was a kid, because it's something that I carried with me as I grew older.

It's important to get our kids involved in the financial loop for as early as possible. At least the basic and simple terms, just so they'll have some understanding as to the value of money.

So as they grow older and learn more about money, they already have a good financial foundation to lean on.

7 Steps To Building A Solid Financial Foundation

Photo by Tim Webb

More often than not, people focus only on their investments, especially here in the Philippines.

Now there's nothing wrong with focusing on your investments. It's actually a good sign that people are now starting to become aware of what they need to do financially to secure future financial well-being. My issue though comes from the fact that people focus only on investments and disregarding the rest of their financial foundation.

It's true that investments will determine whether we will be facing money problems or not after we retire. But in investments is just one aspect of the overall financial foundation of person. In fact, it is the last thing that people should be working on, when they are trying to build a solid foundation for their financial future. Investments, without a solid foundation below them will crumble early on in the face of crisis or emergencies that comes our way.

That's why for investments to do what they're suppose to do, prepare for our retirement, a solid foundation is needed to be built below it and here's 7 steps to building a solid financial foundation for our investments to stand on.

1. Increase Cash Flow - Before addressing anything else, people should first start with increasing their cash flow. Doing this first will make addressing the other things that people need to build their financial foundation easier. Most of us rely only on our salary, and more often than not, its not enough to even address our most basic needs. So find way to increase your cash flow first so it will be easier to build a solid financial foundation.
2. Healthcare - Once you increase your cash flow, everybody should focus next on having healthcare, especially long term healthcare (more on this on future posts). Without healthcare, any problems or emergencies caused by unexpected health issues will eat into our investments and disrupt its earning cycle. Having healthcare will solve health problems without touching our investments.
3. Insurance - Insurance is the next thing that people should have for their foundation. Insurance is important to have in case something happens to you or your ability to earn money while your investment is still in its early stages. If something happens to you or your ability to earn money, you or your family will have no choice but to use the investment to shoulder or pay for whatever responsibilities or liabilities that you left behind, even if it is not yet enough to cover everything. So insurance will answer any problems caused by sudden demise or permanent disability that your investment won't be able to do at an early stage.
4. Estate Protection - If you, your parents or grandparents have assets to declare, what usually happens to them when you die? They get transferred to the heir, but this usually takes a long process and it costs money (the tax that needs to be paid is dependent on the value of the asset). It would be a problem for the heir if he/she doesn't have the financial means to pay for the tax and other costs that comes with it. If they have investments, chances are they'll be using the money for investments to pay for the taxes and other costs. Solution? protect your estate, by having your own corporation or holdings company (more on this on future posts).
5. Eliminate Debt - Having zero debt is the next step of building a solid financial foundation. People tend to focus too much on building their investment first before settling their debt. This is a problem, especially for bad debt (check out post on Good Debt and Bad Debt), because interest on debt is usually higher than the interest on your investments. You may have an investment that earns you 15% interest per year, but if you have debt that has interest rate of 25% per year, you're actually losing money per year instead of earning. So settle your bad debts first before you focus on your investments so the high interest rate on your loans won't kill the interest rate you earn from investments.
6. Emergency Fund - This is the money that you put in the bank for easy access. Emergency funds, as the name suggest are for emergency purposes, your house or car needs repair,  a family member needs money, you lost your job, etc. Your emergency money should have the amount of at least 3 months of your salary saved in a bank with ATM for easy access. You need to have this as well so that you don't have to touch your investment in case certain emergencies arise.
7. Investment - Of course once you've established your foundation, you can now start with your investment. With a solid foundation in place, your long term investments will be able to grow without crisis, emergencies or problems disrupting it.

Yes having investments that will make us money and prepare us for our retirement is the ultimate goal of everyone. But it is also important to note that investments alone won't be enough to cover for whatever responsibilities, crisis, emergencies or problems that may arise. So it's important that we build a solid financial foundation to ensure that we covered all of our bases and have the kind of retirement that we want for our life.

The Importance Of Having Multiple Streams Of Income

Photo by Artisticco

I was listening to an audio seminar sent by Bro. Bo Sanchez to Diamond EntrepCircle Members of the Truly Rich Club while I was on my way to Makati. The topic that I was listening to was to "Create Money Machines."

What Bro. Bo was saying in this audio talk is that it's more important to have multiple money machines or streams of income, instead of having more money. He said that more often than not, people pray to God for more money instead of praying for multiple streams of income.

While having more money is not bad and is a short term solution to financial problems, it is better though to have multiple streams of income instead for your long term financial goals. Having more money but with only one or even two source of income is not a formula to fixing a financial problem or achieving financial freedom. With the uncertainty of job security and the continuing financial influx some countries are experiencing, its never been more important to have multiple streams of income to counter whatever financial problems may arise due to downsizing or the continuous recession of some countries.

If you only have your job or your business as your only source of income, you leave yourself vulnerable to the negative impact of financial problems that the world constantly experiences. But if you have multiple sources of income, you'll be able to weather any financial storms that come your way.

But how do you create multiple streams of income?

In the audio seminar that I was listening, Bro. Bo mentioned two types of money machines, the Manual Money Machine and the Automatic Money Machine.

The Manual Money Machine is a form of money making machine that requires you to be present in order for it to work. These machines are having a job or being self-employed. Having a job or being self-employed requires you to be present in order for your machine to make money. You're trading your own time and talent to make money and without your presence, money won't be coming.

The Automatic Money Machine is a form of money making machine that can be set-up in a way that it makes you money automatically even if you're not present there. This is another term for money working for you and passive income. There are three types of automatic money making machines: paper assets, real estate and business.

Paper assets are stocks, corporate and government bonds and mutual funds. You make money through the high interest rate that it earns when you invest your money in these assets. For example, your money can earn as high as 30% interest annually when you invest it in the stock market (see my article on stock investing vs stock trading to learn more about the stock market). The downside with paper assets is that interest rates are not guaranteed because it depends on a lot of factors.

In real estate you make money when you sell property at a higher value than the value that you've bought it in (similar to the buy low and sell high policy of the stock market) or if you rent you're property out. I prefer the latter method because it puts money in my pocket in a monthly basis whether I work or not and I still get to keep the asset. The downside of real estate is that you need big money to purchase a property, unless you're financially literate and you already know ways to buy property with little to no cost at all to you.

The last type of automatic money making machine is businesses. Having a business is different to being self-employed. A self-employed person needs to work in order to make money, while a businessman can still make money with his business even if he doesn't work for a year or more. For me this is the most financially rewarding asset of the three, but it is also the most difficult asset to set-up. It requires hard work at first and a lot of financial education to ensure that you'll put up a business that will succeed. But once you get over that and you set-up your business successfully, you'll have an asset that can make you a lot of money, even if you're not working in it.

Most people have Manual Money Making machines, working for a company or working on your own, to create money. The problem with this money making machine is that you trade your own time and talent to make money. This leaves you little to no room at all to multiply it to create more money making machines for you. So you work to also create Automatic Money Making machines. The beauty of these money making machines is that, since it's automatic, you don't need to dedicate your attention to them once you've set them up successfully, allowing you to create more of them and in the process create more money for you.

Remember that it's not enough that you aim to just have more money, more money won't make your financial problems go away or help you achieve your financial goals. Instead aim to have multiple streams of income and have money continuously flow to you from different directions.

5 Reasons Why Healthcare Is Important

Photo by Greg Vote

Disease has been one of the main causes of death here in the Philippines. According to the DOH website disease of the heart, disease of the vascular system, malignant neoplasms, pneumonia and accidents are the top five causes of mortality in the Philippines from 2004 - 2009.

The high mortality rate due to disease is not caused by inefficient doctors or hospitals, its because most people don't have the financial means to pay for their medical expenses. They tend to self medicate and rely on buying generic medicines because its the only thing they can afford. Other's go to doctors or hospitals only to have problems getting the needed attention and treatment because of lack of money.

The lack of money should never be a problem for people to receive treatment for their health issues and this is one of the reasons why its important to have healthcare.

Healthcare provides people with the means to get medical treatment without the use of money. Yes they pay a certain amount for the premium of the healthcare, but its relatively cheaper compared to paying for your own medical expenses using cash.

Here are five reasons why you need to have healthcare:

1. Cheaper - as stated above, getting healthcare is relatively cheaper than paying for your own medical needs. For most its free because their companies pay for their healthcare. For those who have to shoulder their own, its usually P13,000-P14,000 a year for a coverage of P70,000. That's less than P1,500 a month for your health coverage, it may be big for some, but its still affordable with a little money management and lessening of unnecessary spending and you'll be able to afford it. For those who really can't afford healthcare, there are health cards available that really cheap (I remember paying only P1,500 for this one for one year) that gives you benefits of unlimited check-up only for a year to selected health centers (the good thing about this one is at least you'd get proper treatment and recommendation regarding your illness, instead of treating yourself blindly.
2. Convenience - Having healthcare makes it easier for people to get treated in hospitals and clinics. Before getting treated the first that nurses usually ask is if they have a health card. Once the patient says yes, they immediately admit the patient and have them wait in line to get treated. They'll just confirm with the healthcare provider some of your details and let you fill up a form for their records. Once done you'll get your treatment. If a patient says no, its usually a different scenario, more questions are asked and you're required to fill-up forms first before getting admitted or placed in line to get treated. Some even ask for upfront money first to make sure that you'll be able to pay.
3. Accessibility - Healthcare are accepted in almost all hospitals and clinics nationwide, especially the major ones. So you won't have to worry about your health card being rejected by a hospital and you paying for your own health expense. Other's even offer reimbursement in case you get treated at a clinic or hospital that doesn't accept your health card.
4. Peace of Mind - Having healthcare offers you the peace of mind that regardless of what health issue arises, you know that you're capable to deal with them because of your healthcare.
5. Retirement Security - This is for having long-term healthcare. All short-term have age limit when it comes to health coverage (the highest I heard was 75) and after that you're on your own. Having long-term healthcare though covers that. In the period where our health becomes our biggest concern, having healthcare becomes more important because we'll be the security that we'll be covered in our old age, allowing us to enjoy the money we saved up for our retirement.

Healthcare provides people solutions for their health needs, especially for those who don't have the money to shoulder all of their health needs. It is important that everyone has some form of healthcare for their use. Having healthcare is also one of the foundations of your financial foundation, it is a basic need to building a solid financial foundation.

As the saying goes "Health is Wealth" so have your own healthcare and have the peace of mind that your health is already covered.

6 Steps To Spending Your Money Wisely

Photo by Hero Images

How do you spend your money?

Do you spend it on impulse or you think things through first?

Do you use cash or credit card?

Anyway, regardless of how you decide to spend it, I believe though it's important that you spend your hard earned money wisely. Why? It's because you worked hard for it. You poured in your time and energy to earn it, so it's only fitting you spend it wisely.

I'd like to share something that I read more than a year ago. It's an article that mentions 6 steps to becoming a wise spender. It's a great article that, I believe, doesn't have an expiration, so the steps written there can still be applied even today.

Here are the 6 steps:

1. Buy for quality, not cost - Cheaper doesn't necessarily mean better. The author states that in buying something always go for quality than lower price, this will save you money in the long term as a quality product lasts longer than a cheaper one.
2. Keep detailed track of your expenses - Know where you spend your money. The author states that keeping track of your expenses is key to understanding on how you can spend wisely and minimize expenses.
3. Find alternatives - Look for cheaper but also better options. The author said that once you have a list of your expenses, take a look at it and see where you can cut your cost by finding alternatives for a particular activity or item that you spent on. Like instead of going out on a date, try having a romantic dinner at home instead.
4. Become less dependent on credit - Cash is still king. Using credit card requires discipline that most people doesn't have. The author said that unless you are 100% on top of your finances, its best that you use cash instead of credit cards.
5. Do your research - Don't instantly buy something that you like that you saw at a store. The author states that do a research first, canvass the item you want at a different store, you might get it a cheaper price from a different store.
6. Wait it out - Don't give in to impulse. The author says that we're all usually guilty of purchasing something because of impulse. So instead of giving in, wait it out for a few days, the urge to buy might be gone, or you might get the item on sale.

These tips are really useful to follow if you want to be a wise spender. But like in any advice that comes our way, the decision is still up to you. Unless you decide that you want to be a wise spender, no amount of tip or advice will be able to help you.

To read the full story click here.