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  • Beyond Cash Savings: A Family Investment Guide

    A guide to investment options and planning family financials.
    by Willeth Luarca-Laus .
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    Read more about stocks and bonds.

     

    When choosing the nature of your investment, you have the following classic options:

    STOCKS

    Stocks or equity investments refer to the buying of units of ownership in corporations that are legitimately listed in the Philippine Stock Exchange. Thus, when you invest in stocks, you automatically become a part owner of the company. This type of investment is considered high risk as prices of stocks fluctuate as a result of market conditions, current and projected corporate profitability, and other related factors. The law of supply and demand greatly affects stock returns.

    One way of earning profit is through dividends declared by companies from time to time. When the company you invested in made significant profits from its sales, they sometimes share this with their stockholders through dividends.  

    Getting into the stock market requires careful research and ample knowledge of its ins and outs. Fausto says, “It takes skill, experience, and patience to understand how the stock market works. You will have to meticulously analyze and constantly monitor the prices to gain from it.” Ask questions and research the company. The key is in picking the company with the most potential to gain.

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    Seek the help of an experienced stockbroker. The stockbroker opens an account and buys shares for you, and assists in dealing with stock exchange. You can start investing in stocks for as low as P10,000. Remember that the value of your investment may go up or down—this is part of the risk. A good stockbroker will help you choose a good and potentially profitable company to invest your money in, or advise you when it’s best to sell your stock for greater profit.  

    Cruz, who now invests in stocks, says anyone who decides to go into stocks should be a regular newspaper reader.

    Daily broadsheets are the best source of information when it comes to the economic status of the country. Now a learned investor, Cruz has come to learn that when investing in stocks, “Kailangan malakas ang pantunog mo.”  

     

    BONDS
    Bonds are fixed-income investments, usually documented in a formal certificate of indebtedness issued in writing by government institutions or business corporations in return for loans collected from private investors.

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    When you invest in bonds, you lend your money to these institutions who, in turn promises to pay you (the investor) a fixed amount of interest after a definite period. Investors can gain around 5% to over 10%
    in bonds.

    Security is usually pledged against a bond. Bonds without security are regarded as a long-term obligation on the capital of the issuing body. Some bonds may be converted into a stock of the issuing company upon its maturity.

    Government securities come in treasury bills or treasury bonds made available through accredited banks from time to time. Treasury bills are generally for short-term investments varying from 90 days to a year, while Treasury bonds are for long-term investment returns. Government bonds are backed by the full faith and credit of the government issuing them, including its taxing power.

    Investors should make sure they are not lending their money in companies without an established earnings history or with a questionable credit history.

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