How to Find Opportunity in a Bad Financial Market

Global Markets have been experiencing volatile movements in the past few months sparked by concerns in the Greek economic debt and the European economy. A lot of investors are now pulling money out from the markets on fears that another economic recession might occur. However, according to market experts, investing in the stock market presents a rare investment opportunity during times of recession and market volatility.

Ironically, this time of market uncertainty is generally the best time for an investor to be buying stocks. In fact, it is during the time of recession when some of the greatest investment opportunity presented itself to some of the world’s wealthiest investors. If an investor is smart enough to take advantage of the situation when they can buy stocks for less than what they are really worth then they will be handsomely rewarded once the market started to bounce back.

Remember that poor economic conditions can affect the market as a whole however as long as there is nothing wrong with the company where an investor puts his money i.e. the company has recurring earnings, strong balance sheet, great management team and huge growth potential then an investor can be confident and assured that the value of his investments will surely bounce back to its fair market value once the economy recovers.

It is perfectly normal for the economy as well as the markets to experience booms and busts along with the economic cycle. But as we all know, America is resilient and we know that America will keep growing over time which can be proved historically. Therefore, the economy will rebound and continue to reach new highs and those who took advantage of the great opportunities during tough times will end up with enormous wealth. 

 

Having said that, here are some tips an investor can use in picking stocks during times of economic turmoil and market volatility to take advantage of the rare investment opportunity present:

Look for companies that have double or triple digit growth.  In spite of other drawbacks, a company with massive growth will not be too much affected by the slowdown in economy.

Pick stocks that are undervalued relative to the company’s intrinsic value. Companies with low debt, steady growth and strong earnings are the ones to look out for. This can be seen through the company’s assets, liabilities and cash flow position.

Select companies that have economic independence and those that are not vulnerable to the swings of the U.S. economy. Examples are companies that derive most of their revenues from overseas.

Opt for defensive stocks that focus on food, healthcare and utilities. These companies thrive no matter how the economy is doing and these companies provide the necessaries that even in economic downturn will continue to earn revenues and make profits.

Choose companies that offer a high dividend yield. These companies will be like shelter in a storm and will provide income even in difficult times.

Another tip an investor can do during times of market volatility is to break up his purchasing throughout the year instead of investing money to buy as many shares possible all at once. Using this technique, an investor can buy more shares with his money rather than if he purchased them all at once. Many of the world’s wealthiest individuals made their money using this technique of buying bargained stocks and holding on to them until the markets recovered. 

  

Lastly, value investors are the ones that looks at the intrinsic value of a stock and buys a company that is significantly undervalued and those that are selling at a huge discount. They are the ones who start accumulating shares when everyone is selling and they believe that a fortune can be created when they take advantage of the buying opportunities present during times of market volatility and economic downturns.

The Simplest Financial Plan I Ever Learned pt.3

Invest 20%

Ok, today let’s talk about investing.. but before that I would like to talk about the concept of “PAYING YOURSELF FIRST” Maybe most of you had heard this statement quite a few times but let me ask you, are you practicing this habit?

So what is paying yourself first by the way? Simple. It simply means that you have to set aside some money for yourself first the moment you receive your paycheck or any income for that matter.

The next question is, by how much? Now, here’s where our topic focuses on. I say at least 20%, financial planners say at least 20% and the Bible says 20%. Huh? How did the scriptures get in here. I thought this is blog post is about investing? Well, you see, the Bible is one of the best sources  of financial planning. Really? Yes. And the concept of investing or saving 20% came from the story of Joseph the Dreamer. Do you still remember that story? I hope you do well if you don’t then let me summarize that for you.

Ok, here it goes “The King of Egypt had a peculiar dream that no one among his counselors could explain. Until God told Joseph to explain to the king what his dream meant. Joseph did explain to the king and told him that his dream foretells a 7 year of bountiful harvest to be followed by 7 years of famine that will strike upon Egypt. So what did he tell the king to do? Save 1/5 of the harvest during the season of abundance and they can survive the famine.”

Wow, 1/5 or 20%, isn’t that amazing that even the Bible taught us about investing. So now your asking, what happens next when I invest 20% of my income. Here’s what.

Do you know…

That if you will invest P5000/month(Well that means your earning at least P25,000 a month) in an investment vehicle that will yield at least 12% per month compounded then you’ll end up with…

P1,150,193 in 10 years

P4,946,277 in 20 years

P17,474,821 in 30 years

P56,667,739 in 40 years

Hmm.. not bad huh? Even if you consider inflation and the devaluation of the peso I bet you can still buy a lot of things with P56 million. Right? And I think you can already have a comfortable retirement with this amount.

Am I making this up? No, I don’t and if you’re skeptic with the figures then you can consult your financial advisor if you have one. By the way to add credibility to this you might want to check my older posts specially the one entitled Investments and Compounding Interest: Do they really work?

 

So that’s it for now, I sure do hope that you learned something from this and you will start practicing the habit of paying yourself first. Well I must say that it’s quite hard at first specially that you have to make some sacrifices and lifestyle adjustments. But every good thing in life entails some sacrifice right. So let me leave you with this question.

 

“Sacrifice now, enjoy later or Enjoy now then sacrifice later? Your Choice”

How to Retire in 3 Years or Less pt.2

Ok, I know you’ve been quite anxious waiting for this blog post so as promised here it is. Hmm… so how should I start telling you his secret. Well, as I mentioned in my previous post he only did three things. Let me explain each in detail.

            He used geometric progression and took a massive risk.

            He invested at the right time and at the right place.

           He was patient enough to wait for his investments to grow immensely. 

Before I expound on these things further let me give you some trivia on my friend. First is that he does not have any stock market experience or whatsoever. According to him, he is just the luckiest person alive and I can attest to that. Second, he does not even know and use technical analysis (by the way, technical analysis is the use of charts and patterns in trading markets) to time his trades. He just buy them on speculation and it always works for him. Lastly, he started investing with P3,000,000 and according to him that was his lifetime savings. Great story huh? And one thing I admire from him is that he didn’t change his lifestyle after making a lot of money.

Having said that let’s go over the things he did in order to make millions in the stock market.

First, he used geometric progression. What is geometric progression again, it means that after he doubles his money in a stock, he pulls it all out and then places it in another stock and doubles it again. That is geometric progression, in other words what he did was invested the P3M made it P6M pulled it out, invested it again and until it doubled to P12M then pull it out again and invested it again until it became P24M and eventually to P44M or “$1,ooo,ooo”.

Next, he invested in the right time at the right place. Well its quiet simple, he invested in October 2008 near the bottom of the recession and guess what? He was  able to get prices at a bargain. Well, you might be thinking how cheap stocks were at that time. Let’s just say that he was able to invest in JGS when it was a P1.00 a piece and where is JGS today… P25/share. WOW… just imagine if you invested P1M back then. It’ll be valued at P25M today…after two years, not bad for an investment huh?

Lastly, He was patient enough to wait for his investments to grow immensely. Well I know many investors who made money in the global economic recession back in 2008 but the problem is most of them reaped their gains early on. But that was not the case with my friend, he was able to hold on to his investments through the ups and downs of the market and eventually he was able to reap great rewards.

After hearing his story, I realized that there is really some truth behind the investing values of the legendary Warren Buffett and that is…

“Be fearful when others are greedy and be greedy when others are fearful”

It worked for my friend… maybe it will work for me and us too…in the future J

The Simplest Financial Plan I Ever Learned pt.2

Give 10%

I put this first because I believe that giving back to the source of all our blessings is the most important of all. This is more commonly known as tithing. I, myself had not been practicing this for many years but when I became a member of Light of Jesus Community and under Bro.Bo Sanchez’s teachings I learned to tithe. At first it was hard. Of course it was, that was 10%. Imagine if you have a P10,000 that means you have to give P1000. No excuse. But more importantly you must give from the heart. 

Now I can here you saying, “So what do I get when I give?” 

Honestly, nothing. 

But I believe in the miracles of tithing or so to say that I have experienced it myself. We can never out give our creator. If we give we open ourselves to the abundant blessings available in the universe. It’s a law by the way… That whatever you give you shall receive. What you sow, you shall reap. 

I know it can be hard at first but here’s my suggestion for you. Why don’t you try it and experience the miracles yourself. Start by giving a smaller amount and increase it over time until it reaches 10%. Oh, by the way 10% is not the highest amount you can give, it’s just a good way to start. If you can afford to give more than 10% of your income in the future then that’s better. 

Maybe your asking “Why tithe if I can just give the money to my favorite charity?” That is also a good idea but you see, giving to a charity is alms giving. It is not tithing. Tithing is the act of giving first to God and acknowledging that everything we have belongs to him. 

Ok, enough about tithing lessons for now. Maybe this will convince you better to give. According to my mentor, Mr. Rex Mendoza: “If you cannot give P1000 or 10% of P10,000 to God, then definitely you cannot give P100,000 or 10% of P1,000,000 to Him. Both are 10% and I assure you, you’ll never have a million pesos.”   

Steve Jobs Speech – Three Stories from my Life pt.3

This is the third part of the speech of Steve Jobs for the graduating class of Stanford University. This part talks about living your life to the fullest each day. Hope you will be inspired. 

My third story is about death.

When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.

This was the closest I've been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish.

Indeed we must learn to stay hungry and to stay foolish everyday. Stay hungry for new opportunities and  new beginnings. Stay foolish so that we may always be ready to learn and to grow.  I hope that you have learned much from this speech as much as I did. Until then. Stay Hungry. Stay Foolish.

How to Retire in 3 Years or Less pt.1

Ok, I know this topic is quite catchy and interesting so before I start I would like to give a caveat that this topic is not for everybody. Well it happened to my friend but it doesn’t necessarily mean that it will always happen.

So what am I talking about? You might be thinking, “I thought this blog post is about retirement.” Yes, it is. But before I get into the meat of the details, allow me to give you a brief background on my friend and how we met. I met this friend in one the seminars I have attended about investments. This seminar was a 4 meeting seminar that is why I got the chance to know him better. Well, it was quiet usual at first that we get to know each other’s name and give a little bit of background on ourselves. Along the way I learned that he is a stock market investor and during those times were my days of euphoria in stocks. I immediately began asking him questions and later on found out that he was able to retire recently just because of his stock market investments. He is also living already on passive income and just waits for dividends from his investments. On top of that he told me that he had just invested in stocks back in 2009 and that was just about a year ago when we met. Having learned about all of this, I immediately asked him about his portfolio, how he did it and his investment strategy. His answer to me was simple, he used “geometric progression”. Geometric what? So I continued to ask him until I get the whole picture. So what was it that he did right that made him retire in less than 3 years. He only did 3 simple things and I will discuss each of those in my next blog posts.

PS: By the way, the last time I talked to him, he told me that his portfolio had already grew to $1,000,000. You might want to look again..Yes that is a “$” sign. So are you excited to find out how he did it?

Steve Jobs Speech – Three Stories from my Life pt.2

So here's the second part of Steve Jobs speech. I love this part. Simple story yet full of wisdom. I can relate to this very well specially during times that I feel like giving up and having all the pressure of the world weighted on me. Maybe its all part of the game. At the end when you look back you will realize that the bitter medicine is needed to make you better.

My second story is about love and loss.

I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.

I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

Great speech huh? And as Steve Jobs put it.."Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.."  

If you haven't found it yet, keep looking. Don't settle.