The Secret of the Wealthy: Money Cost Averaging

Many people are asking is it safe to invest in stock market. One says, my father lost money in stock market. How can I sure I wont lose my money too ?

Most likely the father lost money in stock market because he was trading.  Trading means buying and selling stocks constantly by trying to "time" the market.  That should be left to an expert. It is not the right way of investing.

Right way of investing is long term investing. It's between ten or twenty years. But will my stock grow at 20% every year ?

No, it won't. For example, one year, your investments will fall by 20%. The following year, it will rise by 30%. The next year, it falls again by 10%. And so on. It will be a roller coaster ride. But, if you put tiny amounts of money every month over a ten ot twenty year period, the average growth will most likely be 20% per year IF-and that a big IF- you follow the simple money-cost-averaging.

Is that realistic 20% growth per year ?  Stock Market Analyst says, they did not pull this data from thin air. They based this projected growth from the history of the market 20 years ago. They found out - If the person invested small amount of money consistently in top notch companies every month, the average growth yearly was 20%. 

So, money-cost-averaging is investing small amount of money consistently each month over ten or twenty years. Only in great companies. And that's the secret of the wealthy.

Why Invest in Mutual Fund

Mutual Fund yields far higher interest rates compared to bank deposit rates. Historically,  stock market has out-performed both short and long term bank deposit rates. Unfortunately, not all people know about this effective financial management and diversification. People failed to realized that we are living in fast changing world. They think that the financial solutions their grand parents used before is still applicable today. Absolutely wrong. Why ? Before the 20th century, like 1970's or 1980's. Time deposit in banks were still higher around 8% to 12% so their parents used that vehicle of investments but the world is changing, time deposit now in banks is only around 4 percent. That is below the average yearly inflation rate.      Through mutual funds, small investors or you can also participate in this high yielding investment instruments without a headache of personally selecting and monitoring a portfolio. Mutual funds are ideal vehicles for growing money over time.  It can be used as a savings medium for retirement, education for a child, or building up a long-term cash fund for some specific financial objective in the future.

Trader vs. Investor

Are you already investing in stock market or in mutual funds ? If yes, to whom do you belong ?  Are you a Trader or an Investor ?

Let me tell you.
You are an investor if you are investing in  long term let say more than 5 years.  An investor usually invests 5 to 30 years without pulling out their money from their investments. However, if you are investing in less than 5 years term only, you are a Trader.

Now you know where you belong, but which of the two earns more ?

It depends on their skills in stock market but to win in the game surely, you must be an investor.
I strongly suggest that you don't become a Trader but an Investor.
Because, in the long term, Investors earns more than Traders.

Ask yourself, who is the richest guy in the stock market world today ?
He is not a Trader but an Investor.
His name is Warren Buffet. 
He buys solid companies and he doesn't sell them for years.

What is Mutual Fund

A Mutual Fund is an investment company that pools the funds of many individual and institutional investors to form a massive asset base.   The assets are then entrusted to a full time professional fund managers who develops and maintains a diversified portfolio of security investments.  People who buy shares of a mutual fund are its owners or shareholders.  Their purchases provide the money for a mutual fund to buy securities such as stocks and bonds.  A mutual can make money from its securities investments in two ways: a security can pay dividends and interest to the fund, or a security  can rise in value or its Net Asset Value Per share. ( navps).  The fund passes any dividends, interest or profits on the sale of its portfolio securities, less fund expenses, to shareholders in the form of distributions.

There are four different types of Mutual Funds:

1.  Bond Fund
         Bond funds invest primarily in bonds such as treasury notes issued by the Philippine  government and commercial papers issued by reputable companies in the Philippines .  Having a full basket of only fixed-income securities, bond funds provide capital preservation while maintaining a conservative stance in terms of asset allocation. This type of fund earns around 6-8% anually.

2.   Money Market Fund
          Like bond funds, money market funds also have a conservative stance since they have a full basket of fixed income funds.  The main difference lies in the term of investments of money market fund investments, which is one year or less. This yields around 2-4% annually.

3.   Equity Fund
           Equity funds invest primarily in shares of stock issued by Philippine corporations.   The dominance of stock issues within the portfolio positions the fund to attain a more aggressive rate of growth.  This yields around 18% or more.

4.   Balanced Fund
          Balanced funds invest in both shares of stocks and bonds, thereby accessing the growth potential of stocks tempered with the presence of secure fixed-income instruments. This yields around 12% annually.

 

PRACTICAL MONEY MANAGEMENT STRATEGIES

"There was a golfer who kept buying new golf clubs, but never invested in his golf lessons. He wondered why his game never improved. Many people are like this golfer. They walk around buying stuffs---latest gadgets, better phones, expensive jewelries, but they don't invest in their Financial Education. They then wonder why their financial scores don't get better."

Do You Want to Know How to Have a Better Control of Your Finances?......

Attend The WEALTH ACADEMY Series.

PRACTICAL MONEY MANAGEMENT STRATEGIES
"Financial Wake-Up Call!"

I. WHAT YOU'LL DISCOVER:
- The Six (6) Steps to Financial Freedom
- How Money Works
- How to Increase Cash Flow
- How to Get Out of Debt
- Fundamentals of Investments
- The Wealth Formula
- How to Build a Solid Financial Foundation
- How to Invest in Mutual Funds, etc
- The Different Investment Strategies

II. EVENT DETAILS:
Dates:
-  to be announced

Venue: 3/F, King's Court Building 1, Chino Roces Avenue, Makati City


III. REGISTRATION
A. No registration fee.

B. Contact Raymond Layoso for your registration details:

a. Text: 0917-5430140
b. E-mail: raylayoso@gmail.com

Ignorance

If you Think  Financial Literacy is a WASTE of TIME and MONEY. Try IGNORANCE