Friday, March 8, 2013

Understanding How An Investor Earns in Stock Market



How will my money earn in Stock Market?
I heard this question a couple of times from people who had been asking me about how their money will earn in Stock Market if they invest.

I know you are curious too so let me explain it in the way that I understood it when I was still in my first few months of investing.

There are two ways on how an investment goes up or earns in Stock Market:
1. Value Appreciation
2. Dividends

Value Appreciation

It will be easier to present Value Appreciation of share price by this scenario. Lita,a businesswoman, bought a product (named Product A) for 10 pesos per piece as an introductory price. She thought that in time, Product A will increase its value because consumers will benefit a lot from this product. So she bought 1000 pieces. After a few months the price went up as more and more consumers are believing in the product. Time came that the value of product A appreciated, it costs 15 pesos each. Happy Lita, she sold her products with 50% increase in her capital.

Now, here's  a true strory. Two years ago when I started investing in stock market, we were advised in Truly Rich Club by our mentor Bo Sanchez to buy stocks from SMPH. At that time, the value of each share ranges from 10-11 pesos only. Now, the value of each share ranges from 18 - 19 pesos. So, if you are Lita who believed in the future value of the product she bought (SMPH in this case), you could have gained not just 50% but almost 80% profit. For an accumulation of 1000 shares, your Php 10,000 will become Php 18,000. What if you have 2000 shares? Then your Php 20,000 will become Php 36,000. Try increasing the number of shares and you will be amazed of how much your original investment has increased. I leave the computation and imagination to you. ;) If you are happy with that 5% interest the bank gives you for the whole year (I just hope there's a bank that gives that much interest cause it's usually 2-3% per annum), Lita is happier by 14 times with that 80% profit.

Below are the stocks previously suggested by Truly Rich Club. See how much their values went up in a period of 5 - 14 months. So for Truly Rich Club members, they surely gained a lot. Image taken from one of the Stocks Update we receive in Truly Rich Club. Click here to know more about the Club


Dividends

There are two types of dividends: Cash and Stocks. 

A cash dividend is something that the company give to its shareholders in the form of, hmmmn... cash. (I know that's a brilliant explanation). Imagine it like the company giving you incentives for investing with them so they are sharing some profit to you. So in our example on SMPH, if you have 1000 shares and the company says it will give Php 1.00 dividend per share, you will get 1000 * 1.00 =  Php 1000.

A stock dividend, on the other hand, is a dividend in the form of stocks. Genius me. Lol. When companies declare that they will give stock dividends, this means your original shares will increase. Let's say you have 1000 shares and the stock dividend issued is 25% of what you have. That means your 1000 shares will become 1250 shares. The stock dividend given can be sold to convert it to cash. Once sold, it goes directly to your fund.


That's basically how your money increases or earns when you invest in Stock Market. But of course, you have to know what stocks to invest in. For a newbie like me and a young professional who doesn't have enough time to make researches for all the companies listed in PSE, I joined Truly Rich Club. It's a lot easier since they give reviews of the stocks they suggest to buy and sends update as to when is the best time to buy and sell stocks. You will be guided as you start your investment. I have been a member for more than two years and I'm happy with how much I have earned. See my previous post on My Two Years of Investing in Stock Market and How I earned.

If you're reading this because you want to increase your financial wisdom, I recommend that you download this free ebook by Bo Sanchez. This opened my mind into a world of financial abundance.

                           Get Bo's FREE ebook!

2 comments:

  1. That's basically how your money increases or earns when you invest in Stock Market. But of course, you have to know what stocks to invest in. For a newbie like me and a young professional who doesn't have enough time to make researches for all the companies listed in PSE, I joined Truly Rich Club. It's a lot easier since they give reviews of the stocks they suggest to buy and sends update as to when is the best time to buy and sell stocks....how to invest in stocks

    ReplyDelete
  2. what is the difference between an account in citiseconline and an account in philippine stock market? which is better? or are they the same..

    Anyway, I am planning also to invest in Stock Market maybe in 2 to 4 months from now. I just need all the informations, guidance, and of course the cash to invest in. Hope you can help me. And about being a member of TRC, do you have a member fee? Please give me a preview of this club.

    ReplyDelete