Four Reasons Why You Should NOT Invest In The Stock Market

Posted by Fitz Villafuerte under Investing on February 22, 2013

People who have been asking me how to invest in the stock market has more than tripled over the past couple of months compared to the same period last year.

I couldn’t blame them, because news on the current bull market is everywhere – from social networks to traditional media.

And I’m pretty sure that whenever there’s news that the Philippine stock market has reached another record high, people who don’t own stocks feel that they’re missing out on the “greatest party of the year”.

That’s why over the past few weeks, many have dared to open an account without full knowledge of what they are actually getting into, and armed only with hopes that they will make money from the stock market.

To those who “joined the party”, I give you one piece of advise:

Only invest money you can afford not to touch for at least five years.

Now for those who’s still thinking of investing in the stock market, here now are four very important reasons why you should NOT do it, unless you want to lose money.


Reason #1: You don’t have an emergency fund.

Before investing, get into the habit of saving first.

More importantly, be sure that you have at least six months worth of your monthly expenses safely tucked in a savings account and 30-day time deposit.

Read Now: Emergency Fund Calculator: How Much Money Do You Really Need?

Reason #2: You don’t have low and moderate-risk investments yet.

The stock market is a high-risk instrument. All smart investors will tell you that the best way to manage your risk is to have a balanced and diversified portfolio.

This means having the right proportion of low, moderate and high-risk investments.

If it’s your first time to invest on paper assets, then please go for low and moderate-risk investments first.

Read Now: Where and How Much Should You Invest? Tips on Creating Your Portfolio


Reason #3: You don’t have an investment objective.

Why do you want to invest in the stock market? Don’t tell me because you want to make money. Have a more concrete reason than that; or to put it another way, ask yourself – where are you planning to spend the money afterwards?

Having a specific investment goal will help you determine if the stock market is the best option for you.

Read Now: A Beginner’s Guide To Investing In Anything and Everything

Reason #4: You don’t understand how the stock market works.

How do you know if you’re ready to invest in the stock market?

At the very least, you should be able to define and make a 12-year-old kid understand the following stock market terms:

  • Stock broker
  • Board lot
  • Fundamental analysis
  • Technical analysis
  • Price to earnings ratio
  • Support and resistance levels
  • Bull and bear markets
  • Cost averaging strategy

Read Now: Explaining The Stock Market To A 12-Year-Old Part 1

It’s okay to miss the party

If any of the four reasons above applies to you, then I advise you to just “stay home and miss the party”. I guarantee there will be another one waiting for you once you’re ready.

Lastly, should you want to learn more on how to invest in the stock market the right way, then please read through my collection of posts that’s guaranteed to help you understand how everything works: How To Invest In The Stock Market

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13 Responses to “Four Reasons Why You Should NOT Invest In The Stock Market”

  1. jehzlau says:

    Naku. Hinding hindi ako pwede mag invest sa stock market. Pero wala sa four reasons ng post na to ung reason ko. Haha! :p

  2. Raymund says:

    I prefer mutual funds than stocks but I want to try stocks too because I need to learn it.

  3. Jostine says:

    Awesome advice, Fitz! =)

    At the very least, folks who want to start investing in the stock market should first invest time in learning not only about the stock market, but over-all, in learning about personal finance.

    What’s so great about our time today is that information is readily available to us because of the internet. Personally, one my resources for such subject as Personal Finance is Ready to be Rich!

    Thank you for sharing your stories, knowledge, experience, and learning, Fitz! May you continue to be a guiding light to those embarking on their own journey towards financial freedom! =)

  4. Arnie says:

    Depende po kc sa tao, kailangan nyo mag-aral bago kayo pumasok dito…I’m a stock holder walang alam sa stocks dati, sinugal ko ang 5k ko, ehh naadik ako sa market kaya nagaral ako ng husto ngayon po ung 5k ko mahigit sa triple na po ngayon coz of the stock market. Lahat ng bagay napagaaralan, ang internet ay parang isang malaking quiapo lahat ng gusto mo makukuha mo…kaya mag-aral ka, mag research ka kung ayaw mong magpahuli sa mga kumikita na…

  5. Monique says:

    Sir Fitz,

    I have a feeling that those people are entering the market on the bandwagon basis and if the stocks goes down, they’ll soon panicked then pull out their funds without thinking.

  6. Carlo says:

    For those who are “stoned” with all 4, here are my tips:

    – Get insurance to cover Reasons 1&2.
    – Only YOU can help yourself for reason #3.
    – Don’t worry about #4! There are a lot of free stuff for you to learn. And people are willing to help you out!

    Sir Fitz,
    If I may add:

    Reason #5: You’re drowned in debt! Settle your debt first before venturing in any form of investment.

  7. Rupert Lanuza says:

    Actually gusto ko dati maginvest sa stock market, pero dahil limited ang knowledge ko tungkol dun mas prefer ko nalang ang mutual funds.

  8. Karyn S says:

    Stock market is all about luck, too. And in this day and age you can’t really afford to lose money.

  9. Very insightful, Sir Fitz. Just like you, I have gotten some inquiries from my friends about how to invest in stock market. I am thrilled that they are also interested but I am a little concerned because they are jumping into a bandwagon without really knowing what they are getting into. I am going to give them a some sort of informal lecture this weekend and I hope I can help them decide whether investing in the stock market is appropriate for them or not. Good luck to me.

  10. fafael says:

    if you know the risks and are willing to take it, dont let this article spare you the benefits that can be reaped if investing in the stock market is done correctly.

    this article should instead inspire anyone to learn more about how and the proper way to invest, when to enter or exit from a stock, know the variables and patterns, do research on a company before buying, etc. etc.

    one does not get rich quick without the proper experience. I have seen and met people who wildly invested and profited big, but because they lack experience, they also lost a lot.

    so, study, learn, practice. there are simulators that can help you learn without losing money. google them and you are one step into a profitable investing experience.

  11. Ha ha ha.. Meron pa pala akong kulang na dapat ginawa bago mag stock market 🙂

  12. Nice advice Sir Fitz! 🙂

    Make me realize lots of things. Thank you for this post!

  13. ALA says:

    Only enter if you have KNOWLEDGE. some investor will pull if the stocks goes down but those who knows better will take advantage of it. Buy Low Sell High = $$$$$

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