Securing your money during a pandemic: Is it a good time for Filipinos to invest?

We live in unprecedented times. A plague is ravaging us: leveling livelihood and economies, not just on a local, but global in scale. Our way of lives as we know it has been halted and upended. What we take for granted—malls, dining out, even hugs and kisses—are now anathema, and the way we socialize has been crushed by the “new normal.” It seems as though that the pandemic has driven the deepest wedge between the past and our present.

Some say that whatever we have now would persist and can in fact be a new reality: it could take years before we can go back to the semblance of normalcy and even then, that is not a guarantee. Lives have been lost, economies shattered, dreams tattered.

But this tumult does not change the fact that some time into the future, we shall still retire, we shall still send our kids to school—we shall still have dreams. Although the world we live in now has changed, our dreams have not. The longing for a secure life is still there: the road may have permanently changed but our destination remains the same.

Life will not stop; the years and days won’t. We need to live and we need to fund our future. We cannot control everything, but we can control something. And that something is the way that we manage our money now.

I have spoken to a lot of people during this market, and a common question is: “Is it a good time to invest?”

Be it due to fear of the market falling down again to levels we have seen during March, or even the volatilities ensuing after, to fears of the tidal wave that this pandemic would bring, people are anxious, fearful and unnerved if they should invest—and for a good reason. March has seen the local stock market nosedive as much as 10% during the day, with automatic circuit breakers halting trades—a thing not experienced in recent years. We have seen COVID-19 surge among countries, not discriminating between rich and poor ones, and we have yet to see the full effects in economies.

These, however, are times to take a step back from all the humdrum, noise and fears that the world has, and see it for what it is in investing: a limited opportunity to gather up the sticks blown by the wind, sticks that—as history has proved time and again—will again go up in value.

In retrospect, the local stock market has fallen 40.29% from the start of the year to its lowest level of March 19; but from there, it already went up by 29.08%. If you are a long-term investor—meaning, you are investing for a goal 10+ years down the road, this 40+% dip is really a very good opportunity to buy. If you have bought from the lows of the market, ignoring the fear and sentiments flooding it, you would have already gained by almost 30%.  

One need only look at the US stock market as a historical basis for the long-term proposition of equities investing. Since the 1900s, after experiencing two World Wars, Financial Crises and Recessions, it is still moving up, as seen in the Dow Jones Industrial Average. This cements the point that for long-term investors, times as these are indeed joyous times: the chance to buy the market at deep discounts relative to their values.

Context is key in investing: if you are setting aside for, say, your retirement or child’s college fund 15-20 years down the road, would a few months or a year of down market matter?

But if your goal is already a couple of years ahead, then this is an opportunity to take the profit that you have earned and reallocate to an instrument that are not subject to the huge swings of the equities market: bonds, fixed income or money market funds would be a good one in this regard. If you are still on the process of building up your fund which is a few years down the road, then these instruments would also be recommended. I would, however, position money market fund for cash needed in less than a year, as interest rate movements can still make bonds or bond funds fluctuate, although on a much smaller scale vis-à-vis equities.

The pandemic is no reason to stop investing or reallocating your money into instruments that can optimize your returns.

The key here is the Principle of Matching:

• Short-term goals in short-term investments — money market, bond funds
• Medium-term goals in medium-term investments — bond funds, bonds
• Long-term goals in long-term investments — equities (stocks) and real estate

Any mismatch in the instrument and goal (putting cash needed on the short-term in the stock market, for example), would only give the investor anxiety and risk the money, if not yield loss.

Investing outside the Philippines. The pandemic also exposes the risk of investing in just one geographic area—in this case, a country—whereas a failure of a government to provide policies and actions that could control the spread of the virus while balancing the demands of the economy can prove detrimental to its local market, of which investing offshore makes the case. Investing in countries like the US, regions like Europe, themes such as developed markets or flavors such as global technology can add diversification and returns to one’s portfolio. Just imagine: if you put your portfolio in just one country, then whatever happens to that country, your portfolio goes with it. But if you invest outside of that country, then that part of your portfolio offshore is immunized to domestic events and sentiments.

Investing with a purpose. The world will not stop; our goals and dreams as well. This pandemic and the varying iterations of quarantine should also not stop us from pursuing the activities that can make them come true. Investing should still continue, albeit more strategically, with deeper purpose and insight. The principle of matching will greatly provide the context with where to put our money, and investing in other parts of the world can give us the diversification and even the returns to pull our portfolio up and make it less risky as a whole. These strategies can greatly ease our investing fears and anxieties during these times, and make our hand steady on the till towards our dreams.

Rienzie Biolena, RFP, CFC is one of the pioneering registered financial planner the country. A former banker, he is president and chief financial planner of WealthArki & Consultancy, a financial planning firm aligned with international best practices. He can be reached at rienziebiolena@wealtharki.com.