Latest posts by Kash Avena (see all)
For want of a bigger crown, the queen lost her entire kingdom. Could be how history boils down for some people, could be the exact opposite of it. We live in an era where rags to riches stories are as common as 10-peso coins stumbled upon on a beach on a typical sunny day. You either are very fortunate to come across them, or a go-getter who has the courage and the optimism to look for them (without the assurance of finding one) despite the heat.
And so I put myself in the latter category. Luck, for me, is a matter of cause and effect. So what am I trying to say here? Any person has the capability to become rich (in their own definition of rich) if they play their cards right.
For young Overseas Filipino Workers who believe that they will work for others forever, do not give up on your dreams! The smarter you work, the luckier you will become. If you have set aside serious amount of money from your years abroad, a good way to multiply your earnings is to invest them. Let’s see how starting young will benefit you:
You have years ahead of you to earn.
According to Albert Einstein, compounding — reinvesting assets to generate exponential earnings — is the world’s eighth wonder. He even went so far as to call it “one of man’s greatest inventions”. If you started at age 25 with P20,000.00 in your pocket, your money will grow to be P70,000.00 on your 65th year (with a 5% rate of interest). However, if you invested it in your 50s, it will only grow to P25,000.00. The longer you have invested your money, the bigger amount you will save.
There is greater potential for returns.
Shares declining in price, deteriorating geopolitics, corporate bonds in risk for default—all investments carry with them a certain level of risk to the capital. But more often than not, those with greater risks often lead to bigger returns. How can a common citizen with no head for numbers relate to this? You’ve been buying lottery tickets regularly in the hopes of winning instant cash, yet did not win a single peso up to now. But what’s the possibility of you winning it anyway when there are too many Filipinos who share the same prayers? That’s because no-risk activities often amount to no rewards. While putting your money in the bank is safer than investing, shares are more likely to yield significant growth over time. After all, any drop of stock price in the market can be a golden opportunity for an investor to buy shares at an affordable price.
You can take on more intelligent risks.
An investor’s age is reversely proportional to the amount of risk he can stomach. People on the verge of retiring often gravitate towards fire-proof (if there’s even a thing) investments such as money market funds, bonds, certificates of deposits, and treasury bills. Young adults, on the other hand, stand to gain larger payoffs by going for more volatile options such as stocks, mutual funds, fixed income investments, and microcap company stock trades.
Unlike many children’s songs, making a financial hit in the world of investment is deceptively complicated. But with the right moves, you can nail down the essentials and start off on the right foot even when you have zero experience in Philippine Stock Exchange. Check out the following techniques that even an ordinary Juan would have no difficulty mastering:
- Get financial advice.
With the right advisor, what sounds like alien talk to you will be simplified to a comprehensible level. While you may know what type of investments you are interested in, a financial advisor will evaluate your assets to determine which among them will fit your lifestyle. Surely, magazines are accessible and educational channels on cable television provide a wealth of information, but do you really want to lay down your savings based on these sources alone?
- Have enough funds before getting involved in stock trading.
Stocks will have fluctuating values. Their price can go up or down without notice. Even conservative options such as certificates of deposit are vulnerable to inflation risks. So you can have the freedom to play with your shares without having to worry about losing your fortune entirely, have enough funds before trading stocks. Aside from the money you have amassed while working overseas, find other possible financial sources. An OFW beneficiary loan can come in handy — it’s offered at low interest rates that may be lesser than the amount you will earn when investing the money elsewhere.
- Identify your risk profile.
We all feel differently about different things — spiders, death, taxes, risk. For you to get an objective picture of yourself as an investor and make the best financial decisions that will suit your taste, hire a risk profiler. That way, you will be able to identify your risk tolerance (intensity of risk you can put up with), risk required (risk necessary to take to achieve your intended profit), and risk capacity (how much financial risk you can afford).
- Plan to be there for the long haul.
Some great companies price their stocks at a premium. This may spook you out at first, but remember that these companies will be around 10 to 20 years from now. The earnings will eventually grow to catch up with their share prices. A single company can lose 10% of its market value in one day and gain 12% the next. Don’t get your knickers in a twist and run away at the first sign of defeat.
With as little as P5,000.00, you can start buying company stocks to be part owner of a large company. An ordinary Juan may steer clear of the stock market with it being a complex avenue, but with the right knowledge and with enough courage, one’s P5,000.00 can go a long way. Who knows, this may be the “hitting the jackpot” that will change your financial circumstances.