6 FAQs: Investing For Beginners
Entrepreneur and Registered Financial Planner Fitz Villafuerte, also the author of The Ready to be Rich Guide to Investing, answers frequently asked questions about investing without the confusing jargon. Whether you're 15 or 55, it's always the right time to start.
1. Why should I trust the stock market?
Those who understand how the stock market works know that it’s not a game of chance, but a series of informed decisions that will help you make money. Buying stocks is simply buying shares or ownership of a company. When you buy shares of a company in the stock market, it's like saying that you believe this company will grow in the future, and you want to be part of it.
2. Should I put all my savings in the stock market?
No. Always leave 6 months’ worth of your expense money in your savings account for financial emergencies. Then, prioritize getting protection first such as life insurance and health insurance. Like all businesses, the market experiences ups and downs—lean seasons and peak seasons. When the market is down and you suddenly need money, you might be forced to sell your shares at a low price, even at a loss, and you don't want this to happen. Investments in the market need time—at least five years—to grow in the stock market. Make sure that the money you put there is something you won't need for that long.
3. What is your advice on how I should allocate my money?
It's prudent to spread your investments. Apart from the stock market, it would be wise to also invest in pooled funds, bonds, real estate, and even time deposits.
4. What do I do when the market drops?
You should not panic and instead make a plan on how to handle the situation. If the reason for the market drop is just a reaction to the global economy or simple market correction (people are just withdrawing the net profit of their investment but not really getting
out of the market), and the national economy is doing well, then there's no need to be scared.
5. How do I know which companies to trust?
Ask the following questions to have an adequate perspective: Has the company been doing well in the past few years? Are the people running the company trustworthy and capable? Are the products of the company competitive and top quality? Is the company a market leader? Does the company have long-term plans for growth?
6. Should I just hire someone to make my investments for me? Who can I turn to for advice?
Learning how to create and manage your own portfolio takes time, but it is not a very difficult task. If you need advice, consult with a Registered Financial Planner. RFPs are like doctors who can help diagnose your financial situation and give you objective advice on what you should do to achieve your financial goals.