With the financial markets on the up and down over the recent months, people have excitedly, and often hastily searched for the next trend to invest in – exotic instruments, speculative stocks or “hot tips” from brokers, get-rich-quick schemes, or whatever is new in the market. Those who did take the chance on these investments are now experiencing huge losses.
These issues have caught the attention of lawmakers and government officials who are calling for more stringent measures in protecting investors and providing them with better financial education. Senator Juan Edgardo “Sonny” Angara and Vice President Leni Robredo were among those who underlined the importance of financial education for Filipinos to avoid financial distress caused by poor money management.
This view has always been supported by the private sector.
“Filipinos should not be discouraged from utilizing different financial solutions in building their life plans,” said BPI-Philam Head of Business Development and Strategy Management, Yvette Yao. “The first step is to learn about different financial products and getting familiar with financial jargons and how the product works. With sound financial advice and due diligence, availing of these solutions can prove to be rewarding and allow Filipinos to achieve financial freedom. This will give them more power over their money to build wealth and prepare for the future while allowing them to practice better judgement over potential investment opportunities.”
Finding the right investment opportunity
One of the prevailing misconceptions about investments is it requires huge sums of money and involves overwhelming loss.
"The Philippine financial market has been very flexible in providing financial solutions that are “lighter”-on-the-pockets of average wage-earners. Technology also plays a key role in making these products more accessible. Now, Filipinos can avail of financial instruments with a lower entry requirement of a thousand pesos or less for different investment funds. Over the years there have also been pocket offerings for government papers for as low as 5,000 pesos. Microinsurance products have also been promoted by the government to narrow the local protection gap in the low-income sector as well." said Yao.
She highlights that having more options to utilize is a good thing, but a better understanding of each instrument is a must. One should know what their risk appetite is and which investment better complements it - conservative, moderate, or aggressive. The higher the risk appetite, the higher the potential gains, but the higher the potential loss as well. This is called the “risk-reward trade off.”
On her investment experience, Yao explains, “I have had my share of bad calls when I was enticed by the potential rewards of a particular investment instrument without understanding the magnitude of the potential loss – that is why weighing an investment instrument’s risk-reward trade-off is crucial.”
"Having a financial partner really helps with the process,” she adds. “Looking out for experts for different types of financial solutions will provide Filipinos better insight on the tools at their disposal. It’s just like when we seek the expert advice of our doctors, dentist, lawyers, or accountant for matters pertaining to their respective fields."
She notes BPI-Philam’s Banacassurance Sales Executives can provide solutions depending on a client’s need - may it be preparing for protection or lifestyle continuation for the family, setting up emergency funds for future medical needs, retirement, or education, and wealth transfer.
BPI-Philam encourages their clients to keep investments for the long term and be well-informed investors. In light of the relatively higher inflation environment of 4% per annum, securing a unit-linked product can help a client achieve their financial goals as it helps beat inflation. Yao mentions acquiring a unit-linked plan can be rewarding. Aside from covering the insured's life and health needs, it invests a portion of paid premiums to equity to give investors more value for their pesos.
"What ensnares Filipinos to take the hasty route is the temptation to get ‘rich quickly.’ A sound financial plan follows the growth of the market and may move at a moderate pace. Building wealth is a process and investors should exercise patience, allowing their seed money to grow," she said.
Filipinos can take their first step to building wealth by visiting any BPI or BPI Family Savings bank to approach BPI-Philam's team of Bancassurance Sales Executives for sound financial advice.