Reader Mail #33: How Much Can I Earn From the Stock Market?

Posted by Fitz Villafuerte under Investing, Reader Mail on June 14, 2016

According to a recent study done by the Shareholders’ Association of the Philippines, less than 1% of Filipinos are invested in the stock market.

The reasons vary but the primary cause would be the lack of general knowledge on how the stock market actually works. After all, this is not something being taught in our school system.

In my opinion, if more Filipinos can realize how much one can potentially earn in the stock market, then interest and participation would certainly grow.

But how much can you really earn from the stock market? That’s what we’re here for today, thanks to a reader who sent me this question:

From Mark A.

I have P300,000 just sitting in my bank account. Can I put this in the stock market? If so, how much will my money earn per year?

stock-market-earning

Your money can grow an average of 12% per year in the Philippine stock market.

So if you put P300,000 in the stock market, then your money can grow and have an estimated value of P528,000 after five years.

In contrast, if you put P300,000 in a time deposit with 4% annual interest, you’ll only have around P364,000 after five years.

Now, before you withdraw your money from the bank and open a stock market account, there are several things that you should know.

Growth will fluctuate and is not guaranteed.

Bank interest rates are guaranteed returns, that’s why people feel safe putting money in savings accounts and time deposits. In the stock market, that 12% is not guaranteed — the growth will depend on the Philippine economy.

Sometimes, the growth will be negative and you’ll experience paper losses. And sometimes, the growth will be phenomenal and your money can grow by as much as 20% (or even more) in a year.

But historically for the Philippines, the stock market index has grown by around 12% per year in the past five years; around 13% per year if we account for the past ten years; and around 11.5% per year if we look at the past fifteen years.

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The value of your investment in the stock market will go up and down, and the best way to minimize your risk of losing money is to be prepared to be in it for the long-term.

Invest only what you can afford not to touch for a long time.

There’s no way to predict how exactly the stock market will behave in the future. That’s why you should be willing to ride the ups and downs of the economy until significant growth happens.

This means you should not put in the stock market any cash that you plan to spend in the near future. For example, that money for your house renovations next quarter or that fund you saved for your wedding next year — just put the money in the bank for these cases.

You can’t just buy any company and expect to make money.

There are more than 250 publicly-listed companies in the Philippine stock market — some of them are stable companies like Ayala Land and Jollibee, while some are young corporations such as Double Dragon and Xurpas.

Businesses come and go. Some will grow to become a market leader for decades to come, while some will eventually become bankrupt or be acquired by its competition.

Because of this, there is a need to be careful in choosing the companies that you’ll invest in, because you don’t want to buy shares of a company that will close down after several years.

But if you choose wisely, your money’s growth can be remarkable. For example, if you invested P300,000 in Jollibee shares back in November 2000, then your money today would now be worth P7.1 million (June 2016) — that’s around 21% compounded annual growth.

How much can you earn from the stock market?

There is no simple way to answer this question, but if we look at historical data for the Philippines then it is safe to assume at least 12% per year.

But there are no guarantees — there will be bad years and there will be good years. Your income will mostly depend on how long you’re invested and more importantly, which companies you will buy in the stock market.

It’s like buying a piece of art. There’s no guarantee how much its value will be in the future. But the longer you hold on to it, the more expensive it becomes especially if the artist is somebody well-known in the art world.

Lastly, just like most things in life, the better you understand how something works, then the higher your chances are of making money from it. That’s why it’s important to learn first, before you invest.

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2 Responses to “Reader Mail #33: How Much Can I Earn From the Stock Market?”


  1. Ian says:

    Hey Fitz, I’ve been subscribed to your newsletter for a while now. This might not be stocks-related, but I’m going to ask you this anyway. What’s your take on bitcoin? It’s been on an uptrend the last couple of weeks and it doesn’t seem to be slowing down.

  2. Mario Ramirez says:

    Hi Fitz, Wilson Sy in his book Opportunity of a Lifetime just recommends using Cost Averaging (vs SAM), because he projects a continuing bullish market for the Philippines for some time into the future, for very good reasons. My question is how many companies do you invest in with CA method? For example, if I were to invest P20,000 per month, would it be your recommendation to just invest in two companies to minimize transaction costs? And how do I choose which blue chip company to invest in? Like, if I do invest in only two? Mr. Edward Lee, when he gives a talk always starts with the two big “families”, the Sys and Ayalas. So, can I just invest in AC and SM using CA for years and years? Thanks!

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