Daryl, one of my followers on my Facebook fan page, asked how a freelance graphic designer like him can invest in the stock market. Interesting question, isn’t it?
Daryl threw a better question than the question I asked myself two years ago: “I don’t have a tuxedo and an attache case. What’s my chance of investing in the stock market?”
Not so long ago, I discovered the answer to my question. Whether you wear a first class tuxedo or a sleeveless undershirt, you need two things to be able to invest in the stock market.
- 20 percent of your net income
So You Ask, “I Believe I Am A Disciplined Person. Why I Still Don’t Have A Portfolio In The Stock Market?”
Alright. I wish you’re asking that question to yourself because none of the top motivational speakers and advisers in the world can answer that question but only you. You need to discipline yourself even before you start investing in the stock market. If you will only start disciplining yourself once you step onto the arena of the stock market, chances are you won’t even reach your third month-sary (if there’s such a word) in the stock market.
Invest on a regular basis, which could be on a monthly, quarterly or yearly basis. I suggest that you continuously fund your portfolio on a monthly basis so you can turn your stock market investing into a habit.
I have many reasons why discipline is a pre-requisite. Let me give you one reason. Whether the prices of the stocks in your portfolio are going up or down, continue to buy new shares every month.
I often hear traders in the stock market who lose their heart when the prices go down. How is that? Let me create a scenario. Last month, John bought SM Investments for PHP700.00 per share. This month it costs PHP650.00 per share only. John bought 10 shares last month for a total of PHP7,000.00. Because the price per share went down this month, his 10 shares now only have a paper value of PHP6,500.00. The paper value decreased but his number of shares remains intact. John still has 10 shares of SM Investments.
John is a short term investor. I am a long-term investor (But that’s another story. I’ll discuss the difference in my next post).
John only loves to see the price per share of SM going up. He drops his chin when he sees the price per share going down. John fails to see the truth that the lower the price, the more shares he can buy. The higher the price, the lower the number of shares he can buy.
Don’t be John. Be Peter. Peter consistently buys new shares of SM Investments month-on-month, whether the price goes up or down. Peter sees the growth potential of this gigantic company. Peter has discipline.
In the case of Daryl, since he knows that he needs to invest every month, he must do a great job in his current graphic designing projects so he’ll win the heart of his clients and make them repeat customers. His conscious mind will give him a strong desire to get more graphic designing projects. More projects will lead to a higher net income. The higher his net income is, the higher is the amount he can allocate in his stock portfolio.
Once you have developed your self-discipline, you’re ready to invest 20 percent of your net income in the stock market.
So Why Only 20 Percent? Why Not 19.99 or 20.01 Percent?
My wife and I invest 20 percent of our net income on mutual funds and in the stock market. We allocate 10 percent of our net income for tithes, donations, and family emergencies. We live in our 70 percent. We bought a car, that’s in the 70 percent. We treated our relatives for a summer outing, that’s in the 70 percent. I bought a pair of socks, that’s in the 20 percent. We watch movies on a weekly basis, that’s in the 70 percent. I gave a tip to my manicurist, barber, and masseur, that’s in the 70 percent.
I don’t go beyond 20 percent as far as our investments are concerned. I really don’t – even if I am tempted to invest 50 percent. Trust me. I always have the temptation to transfer 30 percent and even 50 percent of our net income to our stock market portfolio. It’s a good thing Mr. Discipline is always with me.
So let me go back to the question of Daryl. Can a freelance graphic designer invest in the stock market? The answer is a yes. In this post, I didn’t mention the “how” per se. I intentionally did this because before one should go out of himself and take the initial steps, one should come into one’s self and assess his motives on why he wants to invest in the stock market.
Money neither makes you good nor bad. Money does not act on its own. Money only magnifies what’s within you.
On my next post, I will talk about the actual steps on how to invest in the stock market based on what I personally do. Bookmark this website so you will never be the last one to know.
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