Dubai: So you’ve been working overseas for a number of years.
Overseas Filipino workers (OFWs) send home some $32 billion (Dh117 billion) each year. Most of that, however, goes to consumption — food, services (like education) and consumer goods.
In this article, we will tackle how you can invest in the stock market in the Philippines while you are away working in another country.
Investing in stocks is like putting up your own business, or raising a child. That can be difficult when you’re away because you’re an OFW. Fortunately, you can invest now through a broker, or even through the internet. It’s not rocket science, or the exclusive domain of a few.
Here’s a simple guide on how you, as an OFW, can do it.
Do your homework
Many people think or convince themselves that understanding the stock market is a complicated business. Not entirely true. It only takes some common sense to try to understand how it works.
There are a number of resources available online for you to bone up on the subject. You may also refer to online articles, YouTube videos, even blogs to get ahead and boost your knowledge from Grade 1 to masters. Educating yourself is the biggest investment you can make.
Start saving, follow the 10–20–70 rule
This simply means that if your salary is 100, you live only off the 70, save the 20 and give the 10 to those in need. It’s just a rule of thumb.
But it’s a good one to follow; adherence takes discipline and focus.
Deal only with a licensed broker
Unlike making bank deposits, which you can do directly by going to the bank, you cannot deposit your money with the Philippine Stock Exchange. Go only through a licensed stock broker.
Name of imageTraders look at the electronic board of the Philippine Stock Exchange in Makati city, Metro Manila. Reuters file
Again, make sure you deal with the licensed guys only. Don’t believe cheap talk by someone who professes to be a guru or well connected — because you may end up dealing with sweet-talking scammers.
These days, it's fairly easy to check the credentials of financial outfits, by checking with multiple sources, including the website of regulators.
Pick only giants
They are so called “blue-chip” stocks. These are financially-sound companies in the country that include Ayala Corporation, SM Prime, PLDT, Meralco, San Miguel, Aboitiz Ventures, Jollibee and the like.
Markets go up and down, depending on many factors including the weather, politics and, course, markets. In general, what’s good about these companies is that they've been tested by time.
The "blue chips" tend to declare dividends every now and then.
So there's a probability that you will get something back from them even if you don’t sell after investing in their shares (and see the stock price rise — or fall).
Deal with growing pains
You want to build some financial muscles? Take the trouble of doing regular money exercises. First, find out your risk profile as an investor. Are you a high-risk taker, or a low-risk taker?
Your fund manager or stock broker, if they are professional, will help you find out — perhaps by giving your a questionnaire.
This will allow you to determine your tolerance to the pain of loss in case the market goes against you — as well as your appetite for gains.
Trust fund, online trading platform — or mutual funds?
Trust funds, or more formally known as unit investment trust funds (UITF), have become very common and accessible to all Filipino investors.
Most bank branches in major Philippine cities have dedicated staff to deal with customers who want to invest using the bank’s trust fund offerings on the other hand, online trading platforms.
Trust funds are invested in different asset classes: stocks, bonds or commercial papers. The investment decision is made by the trust fund managers, who are usually employed by the bank specifically to manage investor funds.
For as little as 5,000 pesos, you can already start saving on investing in a UITF. There are certain fees that apply, including management and withdrawal fees. Fees vary from one fund to another.
The great thing about trust funds is that you’re able to benefit from the experience of professional fund managers. You can also monitor the daily performance of trust funds on their websites.
Some of the banks that offer UITFs include Metrobank, BDO, Union Bank, Philippine National Bank, China Bank, East West Bank.
Management of UITFs are regulated by the Bangko Sentral ng Pilipinas, the country's central monetary authority.
What about SSS Flexi Fund (FF)?
Yes, FF is another great way of indirectly investing in stocks (also known as "equities") in the Philippines. For as little as Php200 ($3.73) per month, you can start joining the ride through this scheme.
To qualify for FF, though, you must pay the full monthly SSS contributions of Php1,760 as an OFW. The Flexi Fund was launched in 2001 as a voluntary investment scheme for OFWs. What's awesome is that it offers a minimum guaranteed earnings of 4 per cent — plus an annual incentive benefits (AIB).
The rate of the fund's AIB, launched only in 2012 to draw more OFW investors, depends on its performance the previous year. Flexi Fund has a good record of giving out AIBs, in addition to the guaranteed earnings.
The best part is that SSS existence, created by law going back to 1954, is backed by the state.
What about online trading platforms?
Signing up with an online Philippine trading platform, like COL Financial, is quite exciting as it allows you to make buy and sell decisions directly through the internet.
But there are certain things you need to do and learn, including the sign-up formalities, to be able to trade using online platforms. There are also charges involved and you should understand those finer details.
And mutual funds?
Investing in a mutual fund allows you to mingle your money with the funds from other people or companies, which are then invested in stocks, government bonds, T-bills, and commercial papers.
For as little as 5,000, and with addition investment of 1,000 pesos, you can start investing in a mutual.
Ever wondered why even Filipino Catholic priests dabble in mutual funds to invest in stocks and other assets? Publicly-available documents show that directors and officers of this mutual fund and this other one are churchmen and women. This is not to denigrate this crowd of Filipino prelates.
But if those who made vows of poverty create/invest in mutual funds — though they're not very good in communicating that fact to parishioners who may also want to take a better grip of our financial future through MFs — then regular Juans and Juanas like us should start thinking about it, too.
All mutual fund companies are regulated by the Securities and Exchange
Commission (SEC) and go through regular audits. Fund managers charge investors certain fees. You can check their daily performance, based on net asset value (NAV). There are currently more than 30 mutual funds licensed by the Philippines’ SEC to operate.
The key: Time, not timing
Most businesses usually grow with time. The key is to start now and make it a long-term habit. Do not expect to hit the jackpot or make instant riches in the stock market.
Pick your broker (best to ask for advice from people who are already doing it), find out what investment vehicle that suits your risk profile the most and enjoy the ride. The key: decide and start today.
Disclaimer: The names of companies or funds mentioned in this article are not endorsements, but rather cited as examples. This piece is to be used only as a guideline and Gulf News is not responsible for any losses or damages through any misinterpretations or undue use of these generic tips.