Make Your Money Work for You!

In the Philippines, most people view dabbling in the stock market as a form of gambling and as a result avoid investing therein. In fact, several years ago, I asked my dad, who is arguably the most successful Filipino executive in the international pharmaceutical industry of his time, why he hasn’t considered investing some of his retirement money in the stock market or in other similar financial instruments. He told me that the reason why he does not is that he wants to have absolute control over his money and he cannot have that with the stock market because placing your money there is just exactly like gambling where other people and circumstances dictate the condition of one’s investments. Unfortunately, I believed him.

Ironically, for a lot of Filipinos, this way of thinking about investing in the stock and money market has led them to investing in get-rich-quick scams offered by unscrupulous persons. I mean, who hasn’t heard of Multitel, Aman Futures and the like? Instead of getting themselves financially educated and patiently investing in legal and time-tested ways to grow their money, they gullibly hitch on the bandwagon of these allegedly “safe” and “high yielding” investment vehicles such as the Ponzi Scheme, also known as the “pyramiding scheme.”

Now, some people might think that I am referring to Multi-Level Marketing (MLM) businesses. I am not. Pyramiding and MLM are not necessarily synonymous. While Ponzi schemes take people’s money and use them in paying the referral commissions of those who joined earlier without trafficking any actual product whatsoever, legitimate MLM companies carry tangible products such as food supplements, skincare and cosmetics, clothing apparel, and household stuff, to name a few. To know if you are joining a legitimate MLM company, make sure that the same is a corporate entity registered with the Securities and Exchange Commission (SEC) and a member of the Direct Selling Association of the Philippines (DSAP). Moreover, be wary of MLM companies that sell cheap products at exorbitant prices. Check the prevailing market value of similar products before jumping in. In other words, don’t just rely on the testimonies of certain network marketers, even if they are your family members, but do your own research. Due diligence is the key.

As for the stock market, when you buy the shares of stocks of a certain corporation, you actually become a part owner of that business. As a part owner, you get to have a share of the business profits, called dividends. In addition, you are also entitled to voting rights, provided that your shares are common stocks. Getting into the stock market only becomes as risky as gambling if you are involved in stock trading, where stocks are bought and sold within a short period of time through the use of market trend speculation. However, this is not the case when it comes to stock investing. Although investing in stocks still carries a higher amount of risk compared to fixed income securities such as government bonds and cash deposits due to its volatility, the same can be managed through the use of the Peso Cost Averaging method. Peso Cost Averaging works by investing a fixed amount money in stocks of great Philippine corporations in regular intervals instead of just on a one-time-big-time basis. In this manner, there is no need to time the market conditions because as you buy more units the average cost per unit of investment becomes smaller. Moreover, unlike stock trading, you invest for the long term, preferably a minimum of ten years so as to realize the positive yields of your money. Investing long-term greatly lessens, if not totally eliminates, the risk of devaluating your money because instead of focusing on the present and immediate situation of the market, you look at the bigger picture where, historically speaking, stock prices of great companies always rise in the long run even after a hard fall. Nevertheless, if you are still afraid of investing in the stock market directly or do not have enough money to invest yet, then you can consider investing in pooled equity or balanced funds through Mutual Funds, Unit Investment Trust Funds, or Variable Unit-Linked Insurance. However, that will be the subject of another article!

The bottomline is, in making your money grow, financial literacy is indispensable. So before investing your hard-earned money in any of these instruments, make sure that you invest in yourself first. Read books, attend seminars, watch video lectures, consult expert professionals, or if you’re up to it, go back to school and enroll in a business, finance or law related course. In this time and age of information technology, knowledge, nay, applied knowledge, truly is power; and with great power comes great responsibility!

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