I like playing the guitar. In fact, I had been playing that musical instrument since I was a teenager. After all, it was a natural thing for my generation to be fond of rock bands in teenage life; what more if you could play one of their beloved musical instruments. And believe it or not, in my teens, I was able to buy an amplified Gibson guitar through the fruits of stock market investing.
As I grew older, I mellowed down and focused on the genre I loved the most, jazz and pop. But guitar playing also went into hibernation until I was in my mid-40’s when I asked permission from the commander-in-chief (CIC) of my household if I could rekindle my passion with the purchase of a Php3,000 guitar.
The CIC supported me and even encouraged me to take guitar lessons, which I did. And it was through my awesome guitar teacher that I was introduced to the right way of buying guitars.
At first, I ignored my teacher’s advice and just bought one guitar after another that looked and sounded “good enough”. But he taught me that the older and branded the guitar, the better. Such guitars would have been made by companies that have withstood the test of time and would have perfected their craft. Needless to say, such guitars appreciate in value over time. And true enough, when I bought so-so guitars and had to get rid of them to buy the better ones, the resale values were so low.
Finally I was able to buy an electric guitar for a hefty sum of Php43,000. But it was the easiest and best sounding guitar I had ever played. Plus, it was branded and a bit rare. Recently, my guitar teacher called me to say that the same guitar, just two years later, was selling at Php65,000 and asked if I wanted to sell it. That’s a 23% p.a. compounded return over the two years. The only question is will I get too attached to the guitar to let go.
Buying and selling guitars is just like investing. You have to study well what you will be buying. When I am in the dark with guitars, I give my teacher a call. The same is true with investing. If you don’t exactly know what you are getting yourself into, ask a professional.
You also have to have a target return so that you will know at what price to sell. With guitars, if it happens that the price did not appreciate and you are forced to sell at cost, at least you would have enjoyed years of playing sweet music. Similarly with investing, if your stock pays good dividends or your bonds meet your minimum interest payment requirement, you would not mind selling your stock at cost or just holding your bond to maturity to receive the principal you invested.
I hope you will enjoy investing like I enjoy playing the guitar.
(Originally written by Efren Ll. Cruz, RFP at http://www.savingstips.com.ph)
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