Are you a Filipino living abroad and looking for ways to invest in the Philippines financial market?
It was rainy Friday night and we’re having a dinner with Filipino friends in one typical English pub. Suddenly, the topic of our conversation change to something about finance and investment.
Talking about finance and investment is my cup of tea. Hence, I gave them some encouragement and advice to consider investing a portion of their funds to the Philippine’s financial market.
Most of my acquaintances and friends here in the UK are either raised or born here. It’s no surprise to me that almost everyone at the group doesn’t have experience in Philippines’ financial market.
In this article, I will give you 5 ways to invest in Philippines’ financial market specially if you’re living outside the Philippines.
1. Invest in Mutual Funds.
Mutual fund is an investment vehicle that invests your money for you. It is a pooled fund from many different investors and there’s a fund manager who actively manages the fund. The fund manager invests the money to either Bond, Stock, and Money Market or a combination of three.
Mutual Funds is distributed by a Certified Investment Solicitor (CIS).
In Mutual Funds, as an investor you don’t have to actively manage you own portfolio. Mutual Funds are intended for a passive long-term investment as it was already managed by the fund manager.
One best strategy you can apply in investing in Mutual Funds is to do Money Cost Averaging.
Money Cost Averaging is an investment strategy in which you invest equal sums or fix amount of money at a regular basis, regardless of market fluctuation.
You must allow your investment some time to grow and make sure your investment time horizon is somewhat long term.
Take note, most Mutual Funds do have entry fee, exit fee and management fee. These are fees charge by Mutual Fund companies to investors for their fund management services.
2. Invest in an Exchange Traded Fund or ETF.
Exchange Traded Fund (ETF) is another type of investment vehicle that invests your money for you.
Exchange Traded Fund (ETF) involves a collection of securities often tracks and mimics the performance of an underlying index or a basket of securities.
You can buy or sell Exchange Traded Fund (ETF) through a brokerage firm on a stock exchange. Just like any stocks or equities, ETF is listed and can be traded in the stock market. In our case in Philippines, we got the PSE or Philippines Stock Exchange.
All you need is to open a stock brokerage account and you can buy or sell ETF from their platform.
Exchange Traded Fund (ETF) is passively managed, that means the portfolio manager has less or no discretion on what securities to buy or sell. The ultimate purpose of the funds is to tracks the performance of certain index or basket of securities it mirrors.
You can do Money Cost Averaging strategy in ETF as well. Just make sure to allow your investment some time to grow.
If you’re into thrill, you can trade ETF in a short-term basis by taking advantage of the fluctuation. However, I will not recommend it as it is not market efficient to do so. If you are looking for a quick trade, better do that in individual stocks.
3. Invest in individual stocks.
To put it simply, a stock also known as equity is a type of security that represent ownership of a certain company.
Big companies sell part of the ownership of the company through public listing to raise funds for business expansion, product research, paying debt and many other reasons.
If you buy a stock or share of an issuing company, you are called stockholder or a shareholder.
As a shareholder, you may have the benefits of ownership in an existing business, earn part of company’s profit through dividend, have the right in the company’s asset, and can attend company shareholder meeting.
On some occasion, you can even cast your vote for the next president or board of directors.
There are two ways to earn in Stocks. Capital appreciation and dividend income. I will explain the details of these two ways to earn in a different blog post.
There are many strategies you can follow in stocks investing. You can do day trading, swing trading, trend follow, value investing and many more.
Just make sure to gain enough technical skills, as well as have the right mindset and right objectives before jumping into it.
If you want to learn more about stocks market you can start here for stock market 101
4. Real Estate Investment Trust or REIT
REIT or Real Estate Investment Trust is a new type of investment vehicle in the Philippines. This concept was introduced in the Philippines only in 2020.
REIT is an investment company that owns and operate income-generating real estate or any related asset.
Unlike other real estate companies, REIT does not develop real estate properties to sell them.
REIT companies buys or develop properties for the purpose of operating them and generate income as part of its own portfolio.
REITs provides a way for individual investor without big capital to participate into real estate investing. Investors don’t need to buy a property like condominium unit, warehouses, apartments to earn money in real estate.
REIT is managed by a fund manager and a property manager. Fund manager’s task is to execute REIT’s investment strategies, while the property manager provides property management and lease managements. That includes rent collection, tenant services, security, and many other related services.
You can buy REIT the same way you buy individual stocks. You need to open a stock brokerage account and you can buy and sell REIT from the platform just like ETF and stocks.
5. Invest in Bonds
Bonds are another investment vehicle that represent loans made to the issuer.
Bonds are loans made to a government or corporation and therefore need to be paid back with interest (coupon rate).
Bonds is a low-risk low-return investment best for conservative investors. The interest rate or coupon rate of a bond varies in relation to its pricing or quotation.
Bonds can be traded in the market just like stock, ETF and REIT.
Investing in bonds in the Philippines is easy. Most major banks in the Philippines offers RTB or Retail Treasury Bonds. If you have an account to any Philippine banks, you can contact them and inquire about RTB investment.
Don’t have account to any Philippines banks? Watch out for future blog post where I will give details on how to open a bank account in the Philippines.
Final Thought
Philippine’s financial market is gaining popularity among Filipinos living abroad. For me every Filipino should take this opportunity to participate on the Philippine’s economic growth story.
We are no longer the sick man of Asia. But a rising tiger.
Mutual Funds, Exchange Traded Funds, Stocks, REITs, and Bonds are just a few from many different investment vehicles you can take part of.
When you invest back in the Philippines, you’re not only building your financial future, but also building the future of our beloved country.