Investing has become the “in” thing today. It’s great seeing posts (online) or hearing people talk about stocks. Awareness has indeed grown compared to what it was when I started way back in 2010.
The number of stock market accounts has been growing double-digit in the past couple of years. This is proof that many Filipinos have already started investing in the Philippine stock market – whether they’re actively trading or simply monitoring their investments, they’re definitely making their money work for them while at the same time, working a day job or running a business. However, some people have thought of doing the extreme and that is to trade for a living – or getting your income mainly from trading.
Has it ever crossed your mind to become a full-time trader? If so, do you believe you have what it takes to become one?
Being a full-time trader can be very fulfilling for the following reasons:
I. You own your time. You are your own boss. No quotas, no inventories, it’s just you and your laptop. You don’t have to report to anybody and you work at your own pace. If you make money, great! If you lose money, nobody is going to reprimand you. Isn’t that great?!
II. There are opportunities everyday. One great thing that I really like about the stock market is the abundance of opportunities. Stock prices can be volatile and if you do your research, you can make money. Always think that you’re just one stock away from enormous gains.
III. Doing your passion. If becoming a full-time trader has crossed your mind, then you’re probably passionate about trading. Nothing is more rewarding than doing what you love.
IV. The potential to earn BIG. I’ve heard and read stories of people earning what they need for the year in just a month through trading. I bet you do to. In the stock market, there’s that possibility of doubling your money in less than a year.
However, becoming a full time trader requires skills and understanding of the market. Trading in the stock market can be very risky unless you know what you’re doing. So before jumping in, ask yourself:
.. Do I have the mental, psychological and emotional make up to become a successful trader?
.. Are the results I’m getting so far good enough?
.. Am I consistent with my trades?
.. Is my portfolio big enough? Are my gains enough to provide for my family on a regular basis?
If you answered no to at least one of those questions, then going full time as a trader might not be for you – maybe not yet.
Also, keep in mind that there are other things that are way beyond your control such as market conditions. What if the market suddenly turns sour and prices are just free falling? How can you earn and rely on it?
If you truly have the guts and confidence or at least you want to know what it takes to become a full time trader, I would like to share with you some steps to consider so you would know exactly how much money you may need and how much growth you should target:
1. Calculate the amount that you will need on a monthly basis. Make sure to include everything and add 20% to it for emergency expenses.
2. Multiply this number by 12 (for one year). For example, if your monthly expenses is P30,000, you must have P36,000 per month (after adding the 20%) and P432,000 in a year.
3. The PSE index has a historic average return of 15% per year hence by using it as a bench mark, you must earn at least P432,000 per year. P432,000 is 15% of P2,880,000. That means you must have at least P2,880,000 to begin with for you to earn P36,000 a month.
You may be asking – “What if I have less than P2,880,000, does it mean I can’t be a full time trader (assuming your expenses for a year are equivalent to P432,000)?” For me, I believe you can but your rate of return should be higher – and that makes it riskier.
For example, if you only have P2,000,000 in your portfolio and you spend P432,000 in a year, that means you have to make your P2,000,000 grow by at least 21.6% in a year to make P432,000. A 15% growth is more achievable than 21.6% in a year.
It’s not just about the money. You will also need to ask yourself – “Are my skills and understanding of the market enough?” Assess your trading performance. You must have a system and such system must give you optimum gains yet very minimal losses. Your performance must be consistent.
As I always emphasize, trading is just like any other profession. You have to improve your skillset in order to be paid well. Any professional can’t survive on his own if he or she doesn’t have the necessary skills.
Being a full-time trader can be lucrative and promising, but don’t be immediately swayed by its potential. Work on improving your trading skills first until you become a great trader – and then you can decide to go full-time.
Article by Makoy Velasco, Certified Securities Representative
Any views or opinions represented in this blog are personal and belong solely to the columnist and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.