How to make money in...

Welcome to a new Guerilla Investing Series Special which will be a series of posts headlined by the title "How to make money in...". For the first in the series, we'll tackle the stock market.

I've written other series in the past and they include primers on investing, unique perspectives on conventional personal finance concepts, the purpose of having your personal mission statement, and of course my continuing take on the Waves of Philippine Business. The last one is still on hold as I'm further developing it.

So what about the stock market? I'm not going to teach you about technical analysis or fundamental analysis (Go to Absolute Traders instead!). I'm going to teach you how to make money consistently by sharing with you an approach that has proven successful for a selected elite group of stock traders.

I don't know them personally. I only got acquainted to their style of trading through my broker. If you are a fan of Robert Kiyosaki, he defines a stock broker as someone who is more broke than you. While that diatribe certainly will raise some eyebrows (especially of stock brokers), let's examine what my broker broke to me. I summarized them as such-

1. Have a Monogamous relationship with your Stock

He has a client who only buys one stock. Yes, just one. Regardless of whether the market is a Yogi Bear, a Red Bull or a Panda market, he only sticks to one stock. My broker would narrate to me how this client would call out of the blue and give a buy order for his (only) favorite stock. Whenever it came to selling time, this guy made a tidy profit.

This person didn't enjoy GEO like profits during the boom market (oh don't you miss the yesteryears of 2006 and 2007?) but he did enjoy profits CONSISTENTLY even during the bear market. Luck? More like excellent stock knowledge of his stock.

2. Have an experienced broker who has knowledge on Technical Analysis and Fundamental Analysis.

I'm no genius. I'll probably take a million years trying to absorb the rudiments of fundamental analysis. Moreover, a broker who is knowledgeable on Technical Analysis can give support to what you see (or maybe, perceived to see) in a selected stock if you pride yourself to be a technician. Since you have to have a broker (unless you trade online) to transact, then why not get his aid? A broker's duty is not just to do salestalk. He has to do a meaningful salestalk.

3. If you are in it for the long haul, learn to average down

The statement could be debatable but I think it is self explanatory. Just make sure you are buying a "good stock with fundamentals" like Ayala Corp., SM Prime, etc.

4. If you are in it for the short haul, learn to cut your losses.

Learn to internalize the catch phrase "don't catch a falling knife" and you'll soon realize that you have to call it quits when your trade goes awry.

5. If you want to feel a gain, you have to invest or trade big.

Usually 50K as a minimum would be a better start. So save up!

6. Timing Timing!

In real estate, location is everything. But redounded to its basic investment philosophy, timing is the more crucial factor, and this is most true for the stock market. Sure, you won't catch the absolute bottom or the absolute high, but if you have a bit of experience you'll know if you're early or worse, late into the investment.

Just look at the tell tale signs. For the stock market when IPOs are the norm, it means the market is about to peak. There were gajillions of IPOs in 2006 and 2007. Most of those that did an IPO in 2007 were flops.

If you follow rule number one and combine it with this rule, then you would know when your favorite stock is at its highest... or its lowest.

So that's it for now. Simple rules to remember. I hope you gained some new insights today. Come back for more and learn more about guerilla investing's guide to investments. =D