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

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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.