3 stock market 'myths' debunked

Posted at 01/11/14 12:41 PM

MANILA, Philippines – The average Filipino tends to shy away from investing in the stock market because of misconceptions that is a form of gambling, it’s unaffordable, and it’s complicated.

On ANC’s “On The Money,” registered financial planner and stock analyst Marvin Germo debunked these stock market “myths.”

It's gambling

According to Germo, investing in stocks is not a form of gambling because gambling entails not knowing “what the future will bring.”

Investing in the stock market, on the other hand, is putting money towards established companies that are sure to be around for decades.

“When you know where you will be putting your money, in a rock solid business, then why would you be scared? Why would it be gambling?” he said.

He also noted, however, that investors should exercise due diligence to study the market to make the best decisions.

It's expensive

Germo said you need not be a millionaire to invest in stocks, but all bases, including an emergency fund, should be covered first before investing.

“Start with money that you don’t need on a day-to-day basis,” he said.

“When you are aware that you’ll start your stock market journey with excess money that you don’t need, it gives you more confidence to dive in,” he added.

Germo cited as an example shares of ABS-CBN, priced at P32.50 with a board lot, or the minimum number of shares that you can purchase as an investor, of P100.

This means an investor can put in a minimum of P3,250.

“Some stocks are P80 and the board lot is 10, so that’s only P800. For P800, you get to be a shareholder,” Germo further said.

You need to be an analyst to invest

Germo said you don’t necessarily have to be a stock analyst to be a trader, but he stressed the importance of building your knowledge on the stock market.

“If you study and build your foundation, stocks will be easy,” he said.

Once you have educated yourself, Germo suggests hiring a stock broker, which will serve as the “tool to help you get in and out of the market.”

But aside from building knowledge, Germo also said you should be prepared for the volatility in the stock market.

“A lot of people that invest in the stock market have the intelligence, but sometimes they don’t have the stomach to go through the volatility,” he said.

Germo also had this advice for newbie investors: “Be an investor first, go for the bigger companies that you know will be around for a long time.”