4 Reasons Why You Should Invest in the Stock Market

As I was cleaning up my files, I found this folded paper inserted in my notebook. It is a paper that you should read if you haven’t started investing yet.

It declares, “Investing is the most effective way to build your personal wealth and secure your financial future.”

[Image courtesy of Sira Anamwong / FreeDigitalPhotos.net]

Let me state it differently…

Look ahead to the future and imagine yourself in whatever future age you want to imagine. It would be great to live long, right? The risk though is if you live long, will you be able to finance your living expenses in the future? It is a question not to elicit fear of the future but rather to put things into context. While there is this risk, there is a way that we can minimize such risk. That is to invest – to build your personal wealth and secure your financial future.

As I am writing this, I am looking at a material from COL Financial, the largest online stock broker in the Philippines. It shares four reasons why you should invest particularly in the stock market:

Here’s the list:

By Investing, You Will…

First, become financially independent.

“Financial independence is the ability to be self-sustaining. It means having passive income to enable you to do what you enjoy the most without having to worry about living expenses.”

When I was a child, I did not know yet what passive income is but somehow the concept was clear in my mind. As a kid, I would imagine myself having a vacation with my family but still having an income on that particular day of vacation because there is “something” – a sort of money-machine that was set up that churns income on its own. (Note: Please don’t mistake this as a strategy for lazy living. It is totally not. But I’ll reserve that issue in another article.) As a young boy, I was clueless on how this could happen. Now, I found the answer how. The next step now is the execution of that how.

Second, attain your financial goals.

“Having a plan on how to achieve your financial goals will serve as motivation and create the proper drive towards investing. Whether you have short or long-term goals, investing can help you attain them by making your money work for you.”

I was watching to an episode of On the Money last week and there was this 16 year-old lady who asked a question how she can meet his goal of having P1 million when she turns 25. (She also has a small business.) The experts advised her to continue growing her business, continue setting aside a certain percentage of her income and invest this regularly so that while her business is generating money, her money invested in the stock market will also be working for her.

If she does this, she will be earning through dividends (a portion of a company’s earnings can be distributed to its shareholders either in the form of cash or stock) and through price appreciation (an increase in the value of your stock price that can occur as the company continues to earn).

Third, build financial security.

“Investments are meant to protect and grow the value of your money to help beat inflation. This allows you to take control of your financial health.”

Bo Sanchez shares the two wolves that eat up your money: Ignorance and Inflation. Indeed, we have to keep on learning about personal finance. And we have to beat inflation.

On a graph shown by COL Financial depicting the annualized returns from 2003 to 2013, stocks yielded 15.1% beating the inflation rate of 4.5%. On the other hand, time deposit yields 3.7%, bonds (4.1%), and T-bills (7.7%) – were showing relatively lower rates of return. “History shows that stocks outperform all asset classes.”

“Over the long term, stocks provide greater returns and protection against inflation.”

Fourth, stay ahead.

“The earlier you start investing, the less money you will need to attain financial freedom. Through the power of compounding, your investments will grow over time and help achieve your goals.”

In investing, time is our greatest ally. The earlier we start, the less we need to fund our goal. The later we start, the bigger money we need to achieve our goal.

So do you want to become financially independent? Do you want to attain your financial goals? Do you want to build your financial security? Do you want to stay ahead?

Then take action now!

As COL Financial puts it, “Get invested in stocks now for a richer life.”

Start young and start small.

We don’t need tens of thousands or hundreds of millions to start. You can start with P5,000. That’s it.

Keep on learning about investments and start acting!

Live your dreams with love,

Chris Dao-anis

PS: Just like you, I need guidance in investing. Let me introduce to you to the big man who guides me in investing in the stock market. The man who taught his maids this “seemingly alien investment thing.” Click here.

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