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These days, it is more and more common for Filipinos scrolling through their social media feeds to chance upon pages that peddle various types of financial “investments.” These pages have foreign-sounding names with dubious links and even more dubious promises of dollar earnings. There are also the usual Filipino Financial Adviser pages that, more often than not, try to create “guilt” in their followers, telling them to be more “financially wise,” and to subscribe to their services and avail of their packages.
With so much conflicting information regarding financial literacy readily available online, it is not surprising that a lot of people harbor misconceptions about proper investing. This article will help you sift through the misconceptions and provide the real deal with regards to investing here in the Philippines.
For this piece, we enlisted the help of Mr. Christopher Cabognason, the Chief Distribution Officer of Allianz PNB Life, Inc. With his more than 20 years of experience in the industry, Cabognason’s insights will really help clear these investing misconceptions.
1. You will double your money or get rich quickly with investing
The old adage, “If it’s too good to be true, then it most likely isn’t” applies here. People fall for this scam or believe this misconception most probably because they want it to be true or they lack financial education. While we might scoff at these scams and think that we’ll never fall prey to them, a surprising number of victims happen to be educated individuals, businessmen, teachers, and agents. There are also the usual targets of con artists like the elderly and the truly desperate.
How can you steer clear of these scams, then? According to Cabognason, “An offer of higher than average returns over a short period of time (ex. 400% in 30 days) is already a red flag.” Furthermore, check the credentials of the “financial advisor.” Cabognason shared that “Legit financial advisors will usually have their company ID’s, calling cards, and proprietary software or tools in assessing your needs and providing a customized solutions.” Also, the sales illustrations of legit financial advisors are professional-looking, neat, and show the name, contact details, and their credentials.
2. You need a large amount of money to start investing
This misconception is actually something that we also used to believe in before. The stock market, investments, funds, etc. all sound like things that only the rich can dabble into, not us middle class petiburgis. However, as we became more financially literate, mainly through our trusted financial advisors, we’ve come to appreciate the fact that we can also do some investing on our own. Also, the amount doesn’t have to be a crippling percentage of our rather measly take home pay.
Cabognason further clarified that if someone were to approach him or any other legit financial advisor with the express intent of investing, he would ask that neophyte what is the budget that they would be working on. Informing the prospecting neophyte what the minimum amount should be is counter-productive.
“Psychologically speaking, it’s hard for us to part with money, and customers usually settle on what’s the minimum investment rather than addressing the need or the financial gap. For reference though, the minimum premium of regular pay investment-linked product would be around PHP 1000 to PHP 3000. Request your advisor to provide a breakdown of upfront and recurring charges for transparency,” shared Cabognason.
3. Financial Advisors are just out to get you to sign up
If your Financial Advisor comes off as a bit pushy and seems only interested in having you sign up, then you’re probably talking to the wrong one. This is also true even if that financial advisor has vaunted credentials and comes from a reputable company. The right financial advisor, according to Cabagnason, is someone that doesn’t peddle nor product-push. “As financial doctors, I expect them to diagnose and probe first before they make a prescription or a recommendation. In the same manner, Financial Advisors solve problems by asking the right questions. They will help you identify the need, quantify it, and generally ask you to prioritize based on your budget.”
Basically, the legit ones usually listen more to the client rather than trying to sell upfront. The client would want, first and foremost, to be educated with regards these things and not just be told as to what steps to take. The right financial advisor would guide you and provide you with their professional insight, not needle you into signing up for packages that you don’t want or need.
4. My savings in my bank account is enough
It might be surprising to most people, but Millennials with savings exist. While we tend to prefer to live in the moment and choose experience any time of the day, we also have enough sense to know that the measly state pension that we’d be getting in our twilight years isn’t going to be enough. Thus, saving accounts. This is different from an emergency fund, mind you.
However, one thing that slowly chips away at this retirement fund that we’re building is the ever-present inflation. To date, the inflation rate in the country stands at 2.4% while the average interest rate for saving accounts hover at 0.75%. This means that we’re basically losing money every year even if we religiously portion a part of our earnings to our savings. This is where investments, even the most conservative, come into play.
There are a couple of options for people who just want their nest egg protected from the ravages of inflation. “There are several fund options that one can choose from and if our client is risk averse and looking for returns that simply offset or cover for inflation, then the fixed income funds would be the natural selection. Exposure is another consideration; there are local peso and dollar denominated fixed income funds and there are Asia and Global fixed income funds,” shared Cabognason. These fixed income funds are usually invested into bonds and debt instruments that have fixed rates of return over a specific term.
5. Put off investing for now since there is a pandemic
Basically, this misconception stems from the fact that nobody is sure right now when things will go back to normal. While some were delighted at the prospect of buying stocks at bargain prices, some people are quite leery when it comes to investing now since they’re thinking that the investment prices would go lower and they would lose money in turn. This is understandable, but current developments suggest that, for all intents and purposes, things are starting to get better now.
“The value chain is severely disrupted by COVID and this will have lasting effects on economies, and the current value of stocks represents this. This is also a great opportunity of a lifetime, buy low and sell high,” shared Cabognason. Indeed, if you’re in it for the long haul, now is an ideal time to start, the stock market is starting to recover and stock prices are beginning to pick up once again.
Investing is something that shouldn’t be taken lightly since this involves real, hard-earned money. It takes commitment and diligence on your part. You can’t just decide to throw money at it and expect it to grow. There are choices that need to be made and this is where legit financial advisors enter. Their expertise and education will help you come to a financially sound decision. However, do keep in mind that at the end of the day, financial advisor or not, the choice still rests with you.