A Complete Stock Market Investing Guide For OFWs6 min. read
One of the many reasons why Filipinos work abroad is to provide a better life and secure a sustainable future for themselves and for their families.
However, earning well abroad and saving is not enough to fund your future needs. Your hard-earned money will just be eaten up by the inflation rate. So, it is a wise step to invest and look for an additional source of income.
One way that an OFW can make their money work for them is to invest in the stock market in the Philippines.
Investing your money in the stock market may seem intimidating at first, especially if you do not have any idea how it works. The stock market is often seen as a gamble since there is no guaranteed return on investment. However, with the right knowledge and right investment strategy, risk can be reduced.
We have provided this comprehensive guide on how an OFW can start investing in the stock market and reach financial stability.
The Philippine Stock Exchange
The Philippine Stock Exchange (PSE) traces its roots back to 1992 when the Manila Stock Exchange (MSE) and the Makati Stock Exchange (MkSE) were unified into Philippine’s only stock exchange. Both former stock exchanges traded same stocks of the same companies back then before they were combined to become the oldest stock exchange in Asia.
PSE offers products and services that address the needs of the investors and stockholders. The organization ensures the fairness and accuracy of the available information about the listed companies. Additionally, they provide market education and awareness programs to their investors to increase their financial literacy.
Today, the PSE has more than 300 listed companies where people can invest their hard-earned money and fulfill their financial goals.
Why invest in the stock market?
One of the essential steps in effective financial planning is investing. Of all the investing instruments available today, why should an OFW invest in the stock market?
1. Make money
One of the common reasons why someone opts to invest in the stock market is to grow their money. OFWs can do the same even if they are not in the Philippines. Investing in such an instrument vehicle is one way to diversify their investments and reach financial stability earlier than they have planned.
Stock market investors can earn money in two ways—capital appreciation and dividends. Capital appreciation refers to the increase in the value of stocks. Dividends, on the other hand, is the money paid to shareholders that comes from the company’s profits.
2. Liquidity of funds
Being a stock market investor enables you to have an easy access to your funds. Unlike time deposits in banks that require minimum time periods for investors, a stock market investor can get his/her funds during trading hours. Plus, they can invest for as low as P5,000.
3. Ownership of company
Apart from growing your money, being an investor in the stock market allows you to have an ownership in the company you have chosen. An investor is entitled to benefits, such as voting rights and a share of the remaining assets in case the company needs to be liquidated.
Stock market investing basics
- Know your investment profile and limitations
- Identify your investment strategy
- Enter the market by choosing your broker
- Conduct the trading
- Monitor your investment portfolio
Stock market investing guide
Stock market investing is a risk because stock prices can fluctuate sharply at any given time. This may result in a huge financial loss if you do not know how to play the game right.
To guide you accordingly, here is a list stock market investing tips that you can use to start your investment journey.
1. Know your investment goal
In any form of investment, you must first know your investment goal. What are the goals you want to achieve? And since this is a goal, it should be time-bounded.
List all the dreams and goals you have and the specific time you want to accomplish or reach these desires. For example, when are you planning to retire? How much money do you need to fund your retirement years and that can sustain the lifestyle you have right now? How many years left before your desired retirement?
Asking these questions to yourself will help you think how much money do you really need and realize how much time you must achieve these financial goals.
2. Identify your risk profile
There are two types of investors—conservative and aggressive. The conservative investor has a low-risk appetite and wants to guarantee the return of his/her money by investing in low-risk financial instruments, such as bonds and mutual funds.
On the other hand, an aggressive investor wants to maximize the returns of his/her money by investing in high-risk financial vehicles, such as stocks. This type of investor is comfortable dealing with risks and fluctuations in the market in exchange for a potentially higher and longer term return of investment.
Hence, identifying your risk profile first is essential since it will guide you in selecting the right investment avenue and executing the right strategy to help you reach your financial goal.
3. Educate yourself
One of the basic steps to take before you start investing in the stock market is to understand how the market works and how to execute your investment strategy.
There are many stock markets investing for beginner’s guides available online and free webinars for OFWs to guide them on how they can start investing and grow their money in the stock market.
As mentioned above, it is important to identify your risk profile first. By identifying your risk profile, you can determine the investment strategy that you will use.
Hence, a thorough understanding, right strategy, and timing are the keys to reduce the risk of losses.
4. Select a legit stockbroker
Once you are the done with the first three steps, it is time to find a credible stockbroker who will help you in your financial journey. PSE has a list of the accredited stock brokerage companies and trading participants who are certified and trained to conduct trade securities.
5. Complete the necessary documents to the accredited stockbroker
To start trading, the stockbroker will require you to fill out a Customer Account Information Form together with documents that will verify your identification. Then, your chosen stockbroker will assign an agent or trader to assist you in the trading of the stocks.
6. Deal with licensed agents and traders only
Since money is involved, you want to ensure that you are dealing with a credible and trustworthy agent or institution, right? Make sure that you will only be doing transactions with legit stockbrokers and licensed agents. You can always check the agent or trader’s connection through the institution you have chosen. Additionally, you may request help from PSE.
7. Pay directly to the stockbroker firm
Make sure that you pay directly to the stockbroker you have chosen. Investors can check the monthly statements from their chosen stockbroker firm to see if there are any discrepancy.
8. Stay informed and updated on the stock market and news
The stock market is dynamic, so it is essential for investors like you to monitor your portfolio regularly and be updated on the stock market news. Doing so will let you know if the company you are currently investing in is still profitable or not. Hence, it will guide you on how to change your strategy to minimize losses.