Is it ok to invest in stocks while still learning?

Is it ok to invest in stocks while still learning?  When it comes to UITFs and Mutual Funds, there are some basic info you need to understand first, but for the most part it's possible to invest right away.  When investing in equity funds, it's good to be able to understand what the prospectus is saying, the numbers it's quoting and how to judge if it's a good fund for you. But that's relatively simple.  After that, it's just a matter of investing regularly. But to answer the question more directly: It 's ok to invest in equity funds while still learning as long as you understand a few key points:      Understand that your investment will wildly change in value     The best fund last year likely won't be the best fund this year     Consider cost-averaging; it's a good strategy for any beginner investor     Last, but most important: you really need a goal for your investment(s).
That's the question one reader asked me via the comment section. I've already provided an answer, but I thought this was actually a pretty "universal" question and wanted to give it a more thorough answer via it's own post.

But first, here's the question:

"...But as a beginner, do you think it will be wise to invest in UITF like the BDO equity fund while learning? I can see from your comment above that it is wiser to learn first before investing into stocks. You mean UITF or the one you personally invest? Can you share some tips please... Thank you :)"
- Janine

Now for my answer: 

When it comes to investing directly in stocks, I think it's best to learn first. It's easy enough to buy (and even sell) but the strategy and psychology involved takes some getting used to. It's more profitable to learn first.

When it comes to UITFs and Mutual Funds, there are some basic info you need to understand first, but for the most part it's possible to invest right away.

When investing in equity funds, it's good to be able to understand what the prospectus is saying, the numbers it's quoting and how to judge if it's a good fund for you. But that's relatively simple.

After that, it's just a matter of investing regularly. But to answer the question more directly: It 's ok to invest in equity funds while still learning as long as you understand a few key points:
  1. Understand that your investment will wildly change in value
  2. The best fund last year likely won't be the best fund this year
  3. Consider cost-averaging; it's a good strategy for any beginner investor
  4. Last, but most important: you really need a goal for your investment(s).

As long as you understand those, you can invest in an equity fund while learning.

At this point it's also worth noting that some people can vary in "style". Somewhat contrary to what I've been advising, I'm actually the type of person who invests and learns at the same time. I find out a little bit, and then jump in (when I'm not procrastinating, that is).

The reason I never advise that is because after a while, there's usually a few things I learn that I wish I knew before starting. Like when I first I bought stocks directly. or when I just chose a UITF simply because the bank was near my workplace. Another reason is that you tend to learn when something relatively bad happens (corrections, bear markets, panic selling/buying, the other bank just a few steps away from mine has a much better track record of returns, etc.)

But on the other hand, it's better to start something and learn than to delay and forget about it. Of course, the tough part is to not get complacent and keep learning.

Investing while learning ultimately depends on what's fits your personal "style". But as long as you do invest, and you make the effort to learn, which comes first won't matter that much. (except in direct stock investing, that's a different "animal"...)



If you liked this article, please subscribe to my feed, like me on Facebook, circle me on Google+, or follow me Twitter @thePFApprentice. It's free, you won't miss new articles, and you'll also get my free ebook: the Super Savings Guide.

Enter your email address for your free subscription





photo credit: s_falkow via photopin cc

6 comments:

  1. I,too, started with MF then to individual stocks. I agree on "identifying your goals before investing". Don't forget to build an emergency fund before investing. It would not be wise to pull out investment immaturely because you don't have fund to cover emergencies if it omes knocking at your door. Insurance (term),identify your risk tolerance-are you able to sleep at night knowing that your investments might go bust tomorrow?Palakasan lang ng loob but do understand too that the more risk you take, the greater the reward.

    Yah, in my experience, it's possible to "learn along the way" coz I am doing that,too, though I had read 15 books on finance before jumping into it. In investing/trading on individual stocks,I am a "forever student" coz there is too much to learn. I need to gather courage pa to trade.

    Mag invest na, Janine. The earlier, the better! Goodluck

    ReplyDelete
    Replies
    1. Totally agree!

      ...15 books!? Wow! Now that's preparation.

      Delete
  2. hi what company offering MF would you recommend or would you rather recommend enrolling to COL and start with their Easy Investment Program?

    ReplyDelete
    Replies
    1. Hi Lucky,

      Personally, I prefer UITFs with low fees. When it comes to MFs, I've heard that FAMI and PhilEquity have great track records.

      About COL's EIP... Well, that's a great alternative too.

      But to be honest, I can't recommend what would be good for you without knowing more about you.

      If you're a newbie, I would recommend looking at BDO, FAMI, PhilEquity, and seeing which of them you like/trust the most. Consider other banks if you like. (I'm on BPI myself, though I'm not necessarily recommending it; And you can read my post to find to see other MFs: http://www.personalfinanceapprentice.com/2012/11/investing-in-mutual-funds-and-uitfs.html)

      Aside form that, I think it would be best to consider convenience as well. Much better to get into the habit and be able to invest your money right away, before a reason to spend pops up.

      Happy investing!

      Delete
  3. Hi! I just want to know if do you have any articles regarding online hustle jobs i can do here in ph. Im a stay at home mom and would like legit extra income. Thanks

    ReplyDelete
    Replies
    1. Try 199jobs, raket.ph, UpWork, onlinejobs.ph, staff.com, writers.ph. There's also a lot more sites if you google it.

      Delete