Most Filipinos learn the value of investing too late.
And sadly one of the reasons why is fear.
Just thinking of the possibility of losing your hard-earned income puts a big horror to people. No wonder many lose the opportunity to earn more than just their savings.
According to Robert Kiyosaki, “The primary difference between rich and poor people is how they handle the fear of losing money.” You will never win if you’re too scared to lose. It is not easy to overcome the fear of investing, but we hope the tips below will help you build up the confidence to reconsider. Let’s begin.
Combat Your Fear with Knowledge
Fear of investing comes from not knowing what you are doing.
So how do you overcome this? Gain as much information as you can.
Learning the secrets to making financial investments will help you become braver and lessen your worries when you start investing.
Reading financial books or personal finance blogs are great sources of knowledge. You can also attend financial literacy seminars for free. Below is a list of must read money books for beginners:
- The Total Money Makeover by Dave Ramsey
- Rich Dad, Poor Dad by Robert Kiyosaki
- Grow Rich While You Sleep by Ben Sweetland
- The Millionaire Next Door by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D.
- Your Money or Your Life by Vicki Robin and Joe Dominguez
- You are a Badass at Making Money by Jen Sincero
- Thinking Fast and Slow by Daniel Kahneman
- Secrets of the Millionaire Mind by T. Harv Eker
Did you know? First Metro Asset hosts free financial literacy seminar for companies. If you want us to visit your company just send an email request to email@example.com. We all do FAMI Live! A monthly live streaming via FB. This addresses clients’ queries, financial dilemmas, or those seeking basic financial advice—straight from FAMI’s experts. Do follow First Metro Asset on Facebook.
Have a Ready Emergency Fund
An emergency fund acts as a money buffer you can use in case of emergencies – loss of job, an illness, death in the family, or a major home/car repair.
Individuals, especially those who consider themselves as beginners, should consider building an emergency fund first before venturing into any investment vehicle. The rule of thumb when it comes to emergency fund is an amount equal to three to six months’ work of expenses put in a savings account that is readily available should an emergency happen.
How to build your own emergency fund?
Starting an emergency fund is actually easy. The key really is to have the financial discipline to achieve the goal. There are two simple steps you can begin building your own emergency fund:
1. Determine a percentage of your salary each month for savings
In this method you will begin by setting aside a comfortable amount from your salary each month. Then, open a dedicated savings account apart from your payroll where you can automatically save the said portion.
It can be as low as Php 1000 each month or even Php 500. Others save 10% of their salary for an emergency fund. Note that it is okay to start your emergency fund small and build it up slowly until you reach the recommended amount.
2. Use your extra money or bonus
Contribute whatever extra cash from bonus, side hustle, discounts or refunds you have toward your emergency fund. This is one of the fastest ways you can build your own buffer fund.
An emergency fund helps you not be fearsome even if you lose some amount. Remember that investing money entails some risks. This emergency fund will be your fall back if anything happens beyond your control.
Once you’ve built your ideal emergency fund, you now have that added confidence to invest the extra money for your long-term goals.
Have you heard of Save and Learn Money Market Fund? Save and Learn Money Market is also known as your better savings account. This fund is built to provide investors the opportunity to invest in a relatively low-risk, short-duration securities suitable for those who are looking for safety, liquidity and potential higher yields.
The good thing is that investing nowadays doesn’t cost much. A mutual fund, for example, starts at just Php 5000. Your Php 5000 can already buy you shares from the top companies available in the Philippine Stock Market.
Begin with tiny sums of money so you don’t put yourself into too much risk. As you learn, your confidence will also grow which will enable you to invest larger amounts in return for larger profits.
When it comes to investing, time is on your side. Those who invests early, will reap better rewards later. Simply put, the longer you stay invested, the larger your investment will grow thanks to compound interest.
Diversification is a technique that reduces risk by putting your money in different investment vehicles, industries, and other categories.
By diversifying, you’re making sure you don’t put all your eggs in one basket.
How does diversification works?
Let’s say you choose to invest in one stock alone, an airline. Now a news broke that there is an ongoing employee strike in the airline company and flights will be cancelled. This will put your investment at risk and you may experience a noticeable drop in the value of your shares.
But, if you choose to invest in a pooled of fund that consists of other stocks from different sectors such as food and beverage, bank, construction, etc. the risk becomes manageable.
Diversification is one of the key advantages of investing in mutual fund. When you invest in a mutual fund, you are investing in a pooled fund invested in a collection of stocks, bonds, or other securities. A beginner-friendly way to grow your money over time.
Thankfully there’s Mutual Funds
You don’t have time or knowledge to start investing in stocks?
No worries. You can still make your money work for you by investing in actively and passively managed funds. Entrust your hard-earn income with fund managers who have the time, education, experience and resources to make the difficult investment decisions on your behalf.
First Metro Exchange-Traded Fund (FMETF), is the first and only exchange-traded fund in the country today. It is a fund and stock in one that tracks the performance of the Philippine Stock Exchange Index (PSEi).
Instead of letting fear stop you from investing, jump in with the assistance of a fund manager you can trust.
Investing is not an overnight decision– you should think before you decide to invest.
Before you even consider investing, sit down (alone or with your spouse) and write down clear goals you have. Goals will help you strategize and better invest.
Here’s the truth:
Not investing can put more danger in your finances in the future.
The biggest villain we all have in common is inflation.
Inflation means prices in the future will be higher than they have today. If today you can buy a kilo of rice for Php 50, in 10-20 years from now that price will bubble. So how do you attack inflation?
You need to be wise with the money you have today choose to invest in vehicles that can provide you with better purchasing power in the future.