If you have decided that now's the time you want to invest, the next step is deciding where to invest. Given the availability and accessibility of various investment products that invest in local and foreign assets, you now must distinguish between the two options.
Choosing between the two depends on your needs and where you would like to invest your hard-earned money. Each venture also has its own advantages and setbacks, so it is best to weigh your options before you start or further expand your investment portfolio.
Invest in what you know
It is import to know your risk profile before determining which investment product suits you.
Warren Buffet, one of the world's most famous investors, has this advice for investors: "Never invest in a business you cannot understand.”
For beginner investors, these wise words are useful to remember, and the primary reason new investors are typically advised to start their investment journey locally. This means investing in corporate bonds, money market funds, and company stocks you are familiar with to build your portfolio.
Despite the setbacks of 2020, the Philippine economy has begun to recover. As it goes back to pre-pandemic levels, investment opportunities begin to present themselves. The government assumes that GDP growth for 2021 will be somewhere between 4.0% to 5.0%.
Before considering international investments, look at all the local options you have and see if any of these options suit your risk tolerance and your earning goals. Here are local investment options you can invest in:
- Unit Investment Trust Funds (UITFs)- UITFs are financial instruments managed by professionals who will help you potentially earn higher returns. By investing in equity funds, you can share in the potential earnings of the Philippines' biggest corporations such as PLDT, Ayala, SM, and Jollibee. UITFs also allow you to invest in bond funds, which are pooled investment vehicles invested in bonds or other types of debt securities. Bond funds can come in different forms, such as government bonds or corporate bonds.
While UITFs contain a certain level of risk (they can go down in value as the market moves), a simple Suitability Assessment will ensure you only invest in UITFs that match your risk appetite.
- Blue chip stocks- If you are an aggressive investor, you can go for blue chip stocks that normally make up the Philippine Stock Exchange (PSE) index. Blue chip stocks are companies with a history of reliable earnings and large market capitalization. Statistics show that the stock market has increased by an average of 9% every year since 2010.
During this period, several blue chip stocks have increased in value. Among the notable ones include Ayala Land, Universal Robina, SM Prime, and Jollibee. Buying blue chip stocks from these companies is good if you are willing to invest your money for the long term.
- Bonds- A bond is an investment security where an investor lends money to a government or company issuer for a specific period, in exchange of fixed interest payments.
If you invest correctly, the returns can easily multiply your investment.
Work towards global diversification of your investment portfolio (Overseas Markets)
While it is a clever idea for Filipinos to start their investment journey locally, restricting your portfolio to local investments comes with its own set of limitations. Of course, this will depend on your investment profile too. For many investors, local investment opportunities are already suitable while for some, having foreign holdings is better.
As consumers, many of us already spend money on overseas e-commerce sites and subscribe to streaming services from international brands. If that is the case, why then should you restrict your investment options to just locally listed companies?
Many companies with a global footprint can offer you greater opportunities for diversified and higher returns, especially in an era where disruptive innovation, technology, and ESG are rising in popularity and influence. While there is always risk to be expected, investing globally gives you the opportunities to improve returns by dipping into global trends (e.g., robotics, advances in the medical field, and digitalization).
Additionally, global diversification in your investment portfolio helps ensure that even if the Philippine economy experiences a downturn, your total portfolio would not be impacted as much, and can even provide you with an uplift.
Invest locally or internationally: Why not both?
When you first start investing, you may be more comfortable investing in stocks of companies you are familiar with. Go for it! The Philippines is a good place to look for investment opportunities, with many qualities blue chip companies in the real estate, consumer staples, and manufacturing industries. To help you start on your local investment journey, you can check out the UITFs available at Metrobank.
As you gain experience, you can work towards expanding your investment portfolio by investing in foreign markets. The good thing is, because of the various platforms available online, time zone differences and distance are no longer hindrances. With a stock brokerage house such as First Metro Securities Brokerage Corporation, you can execute your investment plans, gain access to top-tier investor insights, and subscribe to mutual funds available on FundsMart platform.
If you have any questions about local and foreign investment opportunities, do not hesitate to reach out to Metrobank today.
