stock markets

[ANALYSIS] Key factors to making money in the stock market

Den Somera

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[ANALYSIS] Key factors to making money in the stock market
Instead of looking at it as a cut-and-dried savings plan, we mistakenly take stock investing as an an exotic way of handling excess cash – in our desire to make more money

Have you ever seriously thought of what your objective is in investing in the stock market? According to seasoned investors, this is a key consideration to your success, as they also quickly add that “objective” is not the same as the “desire” you feel about making money in the stock market.  

According to the dictionary, desire is but generally a “wish” – a strong feeling for something to happen. It lacks the specifics of what an objective is. As defined, an objective “carries with it the particular reason for which it is done.”   

This lack of distinction or confusion between the desire and objective in making money in the stock market may well be the reason why we mostly fail, if not, perform poorly.  

A sign that we don’t actually have an objective when investing in the stock market is that despite the many years of investing in the stock market, we still don’t have any significant accomplishment to show.  Instead, what we all have is but a scattering of various stock holdings that are oftentimes in small meaningless quantities. This even extends up to owning many stock holdings in odd lot sizes – for not knowing any better how to trade them profitably, too.  

To digress, there are ways how to trade odd lots for a profit. In the US, it’s an entirely different world of making money. In our case, it’s probably as rewarding but certainly more tedious.  Also, odd lot trading does not exactly appeal to our proclivity to the quick get-rich mentality. 

One overriding explanation why we end up with mediocre performance is traced from how most of us look at stock investing: we have a skewed understanding about it. 

Get-rich paradigm

Instead of looking at it as a cut-and-dried savings plan, we mistakenly take it as an exotic way of handling excess cash in our desire to make more money. It is regarded as one of those quick get-rich paradigms that we aspire to have, that most of us get easily enticed to delve into – but more often than not ends up losing, being – oblivious of the many things one must first learn and know in winning in the stock investing game.  

In pure and simple terms, stock investing is but a savings plan. It should only be your objective to making more money. This will lead you to how much money you should put into play and how much time you need to spend to reach that objective.  

For the last three weeks or so, the market has been moving within the trading range of – give and take 50 points – 6,400 and 6,600 levels of the PSEi.  

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[ANALYSIS] Concentrate on trading and not on the money to win your game

[ANALYSIS] Concentrate on trading and not on the money to win your game

Between April 17 to 21, the market was seen trading – as in undergoing some consolidation – at 6,425.14 and 6,453.27 levels, which are virtually within the edges of the market’s immediate support level.  

When the market closed last week on Friday, May 5, it has technically broken out of its immediate resistance level, which could now be the market’s new support level. It ended at 6,685.66. This came about from a two-day winning streak that started the day before.  

Something didn’t look good in the breakout, though. Looking closer at the trading results of Friday, of the total 78.97 points gained in said two days, 77.66 points were made on Thursday while only 1.31 points were earned on Friday; foreign investors were major net sellers for the day, too.       

Come Monday, May 8, the market was down 84.92 points or 1.27% when it closed at 6,600.74 with volume of 718.19 million shares and total value turnover of P5.87 billion. The market inched higher to 6,622.61 the following day, Tuesday (May 9), with a net gain of 21.87 points or 0.33% notably on a much lower volume of 325.80 million shares and total value turnover of P4.18 billion.   

The market continued to climb higher on Wednesday, May 10, up 35.98 points or 0.54% at 6,658.59, but on a comparatively thin volume and total value turnover again of 721.31 million shares and P4.64 billion, respectively.  Foreign investors are minor net buyers for the third day.

With such relatively limited trading breadth and depth, it may still take a bit longer before we will see which direction the market will be tracking.  In the meantime, some brokers have already issued buying recommendations for it looks like the market is on an “accumulation process” having technically broken out of the estimated resistance level of 6,600 or so.  

Other brokers, on the other hand, had issued selling recommendations to probe further the market if it has indeed a new support level already. Make your call. 

Other key considerations     

Aside from having a clear objective, which should be a pure and simple savings plan – considering that you are not trading for a living in the stock market – you must also come to understand that the return you should aspire for is realistic.  

For instance, don’t expect a return of a P100,000.00 from a P100,000.00 investment in one year.  This is possible but a long shot that is close to impossible, considering the present performance of the market.  It should be somewhat above prevailing interest rates, though.  It must also compensate for the higher risk presented by the stock market.  

Under these circumstances, you should hit for a rate of return between 15% to 25% per year.  You can aspire for more.   Under present circumstances, however, this may only materialize through luck or inside information.   

Trading on inside information is strictly prohibited under the PSE rules and SEC code.  Luck seldom comes. And when it comes, it only comes to those who are prepared to receive it. This is because, according to a Chinese saying, while luck is good, it can also be bad for you.  

Again, you are not to lose more than 2% of your capital to a single trade. You must also have a selection of investment positions not only for the sake of diversification to distribute risk but to take advantage of the various yields afforded by other stock positions. This trading rule will also help you figure out just how much money to put up to start trading.  

If you don’t have that amount yet, buy what you can afford and treat it like a deposit to a savings plan.  Once you have “saved” so much, that’s the time when you start to trade.  In the meantime, hone your decision-making abilities with a paper trade – another important key factor to your success in stock investing. –

The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the author at

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