A friend asked me why one should invest in the stock market. There is no single “RIGHT” answer but one thing is for sure, with today’s (Global) market situation, we will eventually “HAVE TO” Invest in the Stock Market. Whether the market goes up or down, buy anyway. Because there is no other instrument that can help you break-even or beat inflation.
There was indeed a time where Banking interest rates for savings accounts were as high as 3-5 percent (or even higher, I was told). Today, it has been shrinking with a savings account giving you less than 1 percent (0.25 percent at best after taxes).
It is not impossible for interest rates in the Philippines to eventually reach zero. Some European countries and Japan have already negative interest rates, meaning: instead of receiving money on deposits, depositors must PAY regularly to keep their money with the Bank.
Last week, I was able to attend the Smart Investing Wealth Building Summit for the Filipino Investor by an online brokerage firm, COL Financial together with financial institutions: FAMI, ATRAM, PhilEquity Management Inc, Sun Life Asset Management Company Inc (SLAMCI), Philam Asset Management Inc (PAMI), and BPI Investment Management Inc wherein they emphasized the great opportunity people are missing in the Philippine Stock Market.
Aside from beating inflation, here are other reasons why one should invest in the Market now:
* Consumption Driven Economy – With rising income, increasing consumption on goods and services, the economy grows which also makes businesses grow.
* Demographic Sweet Spot – Our people is our greatest asset, more so if majority are young, educated and are working compared to other Asian neighbors facing aging populations and labor constraints.
* One of the better performing economies – Our economy just grew 7 percent, the fastest in 2 years and exceeding that of China and has proven to be resilient to global uncertainties such as the oil price fluctuations, brexit and the like.
How can you take advantage? Here are different ways to participate in the market:
* Direct investing – Through a Broker. Did you know that less than 1 percent (700,000+) of the PH population invest in the Stock Market compared to at least more than 10 percent across Asia?
* Guided-direct investing – you hire a financial planner/firm or fund manager to help you in building your investment portfolio as well as a financial plan.
* Pooled Funds - about 350,000+ for Mutual Funds & UITFs (Unit Investment Trust Funds)
* VUL (Variable Universal Life or Unit Linked Insurance) – with over 1million participating
Like all investments, there are no guarantees. So here are some reasons you should NOT invest yet, unless you want to lose your hard earned money fast.
* You don’t have an emergency fund – Before investing, get into the habit of saving first (3-6 months of your expenses). Also, there are no guarantees that there will be returns all the time.
* You don’t have an investment objective – Making money should not be the end goal. Knowing your goals will help you choose which form of investment you need while considering the risks.
* You don’t understand how the stock market works – Not understanding what you are doing or leaving it to chance is gambling and not investing.
But don’t forget, Caveat Emptor!
The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
Originally Published in Philstar - The Freeman Newspaper last August 30, 2016.