‘Invest while you’re young’

CEBU, Philippines - Experts would say there is no ideal age to start making wise financial decisions. But, people who invest at an early age have an advantage over those who begin late.

One of the most vital decisions that stock investors can do is to get an early start on investing.

Young investors have longer investment horizon so they take advantage of making money over a greater period of time, said Norman Jay F. Go, head of Cebu Equity Sales of BPI Securities Corporation.

“I would say that it’s a good thing to invest at an early age considering that the market will have its ups and downs,” he told The FREEMAN in an interview. “It will allow you to recuperate your loss during market volatility.”

For instance, when one starts to invest at 25 with P10, 000 (the ideal amount for stock investing although stock brokers say one can even start with as low as P500) and manage to grow his investment by 8 percent a year, after 40 years, he will have around P217, 000 for his retirement.

On the contrary, if an individual decides to invest the same amount at 45 with 8 percent interest a year, after 15 years in time for retirement, he will have around P31, 000. This is much lower than the amount a person can gain if he invests early.

Go said there is nothing wrong with investing at an advanced age, but investors would have “little room” for growth.

Valuation

Before getting into the stock market, teenagers and young adults must first understand valuation and how it impacts their productivity. Valuation is an act of estimating the value of something. 

Go advised “Do your own research about the market. It has to be something you’re familiar with. Things have to make sense for you first.” He warned new investors to avoid listening to “hot tips” for investment decisions but instead told them to learn valuation.

For people who plan to buy shares of ownership of a corporation, the stock analyst told them to always know the “business”, explaining that they have to understand the growth story of a certain company.

Companies listed in the Philippine Stock Exchange, the firm that manages the Philippine stock market, have time to grow and so investors should put their money in great businesses and let money appreciate over a period of time.

While other stock brokers would tell people to invest regularly to add a significant amount to their capital every year for bigger returns, Go does not necessarily advise this to prospective investors.

“No, I don’t really advise because it really depends on the goals of the person. Well, that’s a good idea but you can’t exactly tell them that. That is more appropriate to bonds than stocks.”

Diversification of investment is also important because it lowers the exposure to risks, he noted. Investors must place their money in a number of firms in various industries so as not to establish big risk in one company.

Awareness

BPI’s Go also said a lot of people are still not aware of stock trading and other investment instruments as they are more comfortable with traditional banking which, he added, only guarantees one percent interest a year.

“Just the mere fact that a lot of people -- Filipinos in general -- are not going out to try investing and they don’t know about this,” he stressed. “They don’t even know how much money to put in.”

In a separate interview, Marco Nino Velasco of UniCapital Securities, Inc. said the problem with most Filipinos is that they want to earn but they don’t want to learn.

“Try to observe CEOs of different companies; solid kaayo ilang academic foundation,” he added. “We wonder why ingon ana sila, that’s because they learn; the same thing with stock market.” Velasco also explained that generally, the concept of stock trading is easy to understand but it is likewise not simple in the sense that people have volatility to deal with.

Stock traders and brokers in Cebu cited their community is growing but not as fast as they want to. Go said: “I wish it was. But too many people just really don’t want to be part of the stock market.”

Majority of stock traders here are business process outsourcing workers and a few of young professionals. “Most of the time, they become first entrepreneurs before investors,” he said.

The positive outlook of the country’s economy should push young people to get out of their comfort zones and start seeing the brighter side of investing. Aside from consumer spending and infrastructure, emerging industries -- mining is one -- are seen to boost further the economy. He said: “The performance of the market is just a reflection of our economy.” (FREEMAN)