Hello reader! You probably have an idea how profitable it is to invest in the stock market but investing in stocks is not an activity where you could be a millionaire overnight.
Some common misconception in stock investing are:
- The time horizon in stock investing.
- Stock market is unpredictable! I could lose all my money!
- You need to be rich, super intelligent and spend a lot of time in stock investing.
Time horizon in stock investing
One critical mistake that most people do is treating the stock market as a slot machine or any form of gambling; they invest in the hopes of doubling their money in a short time such as 6 months or even 2 weeks after they invested. Although some would claim making money using this method (and we here respect that) conservative individual investors should not invest their money which they would need in the next three years.
The stock market may fall more than 40% from their current value. Just this 2008, JFC fell from P50 on September 2008 to as low as P35 by the end of November, a decline of 30%. Should you panicked and sold your shares at a loss you could have missed it bouncing up to P70 by June 2010 making a substantial gain of 40% should you purchased it P50 per share.
Stock market is unpredictable! I could lose all my money!
Yes stock market is unpredictable and I believe that no one can predict where the market would be going in the next few days. But hey! We are not to predict the whole stock market! We are only to worry about the stocks we invested in. With the basic fundamentals (to be discussed on a later date) your investment should be doing good and the risk involved would only be minimal.
You need to be rich, super intelligent and spend a lot of time in stock investing.
How well you invest in stocks will depend on many factors and none of them depends on whether you are rich, super intelligent, or with fancy software. It depends solely on what you already know. If you love fast food and your nephew Juanny craves for Jollibee; who could be in a better position to predict the rapid growth of Jollibee foods corporation (JFC) but you. You love the chocolate coated Pretzels, the healthy snack Nova, and the refreshing taste of C2; who would be in a better position to analyze (URC) but you. You could have reaped substantial gains should you acknowledged that you experience their products first hand. JFC more than quadrupled its value from P20 on April of 2004 to its current price as of this writing of P88 and URC more than quintuple its value from 8 pesos on January 2009 to about P47 as of this writing.