The 4 Golden Rules in Investing
A successful stock investment program requires discipline and the right methodology.
Understand and follow these four basic guidelines to stay on track.
Rule No. 1: Invest EARLY.
Invest early to benefit from compounding over a longer period of time. If I invest Php 25,000 at
the age of 25 and it grows at an annual rate of 8%, my investment will be worth Php 543,000 40
Rule No. 2: Invest REGULARLY.
Instead of investing only once a year, I now invest the same amount every year. Consider how
this can make a significant difference in my portfolio: If I invest Php 25,000 at the age of 25,
allowing it to grow at an annual rate of 8%, and then add another Php 25,000 every year until I
retire, I will eventually retire with an estimated Php 7 Million. The key is to compound your
investment and add to it on a regular basis.
Rule No. 3: Invest for the LONG TERM
Long-term investing eliminates the problem of short-term volatility (choppiness in price). On
occasion, economic, political, or natural events may cause price swings. However, the chart
below shows that the PSE index always bounces back to new highs, even during difficult times.
After all, companies require time to mature, so prepare to sow your seeds in great businesses
and let time do the rest.
Rule No. 4: Invest through DIVERSIFICATION.
Risk management should always go hand in hand with your investment choice. Diversification,
or spreading investments across multiple asset classes, is one method of mitigating risk. “Do
not put all your eggs in one basket,” as the saying goes. Furthermore, try to spread your capital
across a variety of stocks in different industries or sectors to avoid putting too much risk in one
area; maintain a good balance in your investments.