How to make your money work for you: Tips for smarter financial decisions

The pandemic has brought with it a newfound interest among Filipinos to learn how to make money work for them by participating in the stock market. Data from the Philippine Stock Exchange (PSE) showed that the average daily number of trades in 2020 soared 33.7%, while retail participation surged by 47.8%. This follows an increase in online accounts by 19.7% to 936,000, while non-online accounts grew by 3.3% to 460,553.

In this B-Side episode, Ruben L. Zamora, Metrobank’s First Vice President and Head of the Institutional Investors Coverage Division discusses with BusinessWorld why more Filipinos are more willing to “let their money work for them,” as well as how to start investing and how the beginner investor can sift through their options to start their financial journey.

Investment tips for beginners

You can be doing more with your savings

“Putting your money to work is really about making your savings earn more and do a bit more work to build and accumulate wealth through investing,” Mr. Zamora said. “The days of earning interest from a simple savings account, those days are long gone. And that goes for everyone in the world, not just here in the Philippines.”

Investing is [not] a rich man’s game

Whether with P10,000 or P100,000, there are good asset options for income generation to choose from for beginner investors.

“The good news here to those who are just starting out: You don’t need a big pot of money anymore to start the investing journey,” Mr. Zamora said. “Now more than ever, there are so many investment options for you to choose from. If you want a little bit more return and you’ve done your homework, and feel like you can tolerate and accept a bit more risk with your investments, start with an index tracker fund on the whole market that you know.”

To maximize your investment success, understanding your investment approach is crucial. Active investing involves frequent trading to outperform the market, requiring extensive research and time. Passive investing, on the other hand, focuses on mirroring a specific market index like index tracker funds, offering steadier returns with less hands-on management. Your chosen strategy, whether active or passive investing, should align with your financial goals, risk tolerance, and available time.

Your participation matters

Investing in the stock market is not zero-sum game. More local investors in the market can help its general health in the long run.

“This is something healthy, something that we would welcome for our local capital markets. And the reason is that with the base of retail investors broadening out, more local investors participating, it means that we are not as reliant as we used to be on foreign investors or foreign capital flows,” Mr. Zamora said. “These flows can get pretty cold very quickly and we’ve seen that in this crisis, with foreigners exiting both the stock market and the fixed income market.”

Do your homework. Especially if it’s about cryptocurrency

“As a beginner investor, you don’t really want to invest in something you don’t understand well enough. You need to do a lot more homework, especially as you move up the risk ladder. And risk ladder-wise, I would put cryptocurrency right at the top,” Mr. Zamora said.

Putting these investing tips to use

The increase in retail investor participation in the Philippine stock market is a positive development for the country’s financial outlook. By arming themselves with the knowledge of investment fundamentals, Filipinos can make more informed investment decisions.

This article was first published on BusinessWorld.