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John Padilla of Metrobank shares important things to remember when investing

So you’ve managed to take the first step and enter the world of investing. Congratulations on beginning your financial journey! To reach your end goal, however, there are some key things to keep in mind. For one, what is your purpose?

Before investing, make sure your goals are set clearly why you are investing. What works for a friend or a colleague may not work for you; his risks are not the same as your risks in the same way that what excites you is different from his. I believe every person is motivated to invest because of the future. However, investing is a discipline and entails diligence. Having a clear goal sets your journey in investing in the right direction.

A long-term goal should be supported by a long-term strategy, a short one supported by an equally short game. Achieving your long-term goal using short-term tools may succeed but may also lead to disappointment.

Having a crystal clear goal and purpose on your investment is the first step. The whys will determine your desired return on your investment, your investment horizon, and risk tolerance, among others. Guided by these, you may seek advice from your friendly bank who will direct you to the appropriate fund/s.

Metrobank has tons of free webinars on this and our staff is equipped to help go through this process. The second option is to do the fund-hunting yourself. To do this, you must be prepared to devote time and effort to scan the market for all the available funds, study their characteristics, past performance, fund strategy, and fund house itself, etc.  

Second, make sure to follow through on your investments. Investing your own money demands absolute commitment. Task yourself into knowing where you are at any given point in time. Assess the environment which may have changed and check your own goals if they too have moved. Continue learning, explore other products, and challenge the norm. These are some of the building blocks for a more fruitful and enjoyable investing journey.

There is a saying that “the trend is your friend.” I think this is especially true if you are a short-term investor. For most investors, a more deliberate approach may be suitable such as keeping your investment goals in terms of return and time horizon.

But any investor should be observing the trend and continuously learn about the dynamics in the markets such as the interplay of key macro figures like GDP, forex, OFW remittances, and the impact of COVID-19, among others.

Following the trend should not be misconstrued as “bandwagon investing” which puts you behind the trend. Rather, “following” the trend should mean a more deliberate and analytical approach, which puts you ahead of the trend. 

The truth is this is easier said than done because of the noise going on around you, but a disciplined approach allows the investor to gradually gain savviness and muddle through the market.

Long term is investing, short term is trading.

Investing for the long term requires discipline on the part of the investor to stick to the plan; usually involves maintaining an investment horizon of five years and longer. Hence, the money committed here should not be for immediate needs such as school tuition, house purchase, or wedding. To maximize your return, be prepared to commit for the long haul. Do not be rattled by wild swings in the market and accept that volatility is part of investing especially if its equities.  

Likewise, as a committed investor, it is imperative that an understanding of investments is clear from the get-go. This will ensure that your goals and the investment outlet or instrument are in synch. It is not uncommon to discover later on that there is disconnect between the two. Part of the discipline calls for a regular assessment of your investment, annually at the very least.  

Initially, an investor may target to buy government bonds, say a 10-year bond and all the investor needs to do is wait for periodic (usually semi-annual) payment of coupons over the life of the bond. GS are essentially risk-free, making this a safe strategy.

However, applying a buy-and-hold strategy may not be the smartest way to invest as you may miss out on the re-investment of the coupons. A professionally-managed UITF Bond Fund does this exactly for you. In a fund, the fund manager employs tactical measures (short-term initiatives) together with the long-term strategy as part of the bond fund’s mandate.

Investing in stocks may likewise qualify as a legit long-term investment. What to buy and when to buy and sell, however, may prove to be tricky. As they say in investing: “Timing is everything.” A professionally-managed equity fund is the most efficient vehicle because this gives the investor access to a diversified portfolio of stocks, which may be close to impossible to achieve given the size of your fund; not to mention dealing with the unfamiliarity with the stock market trading itself. Remember, the key to successful stock investing is committing for the long haul.  

On the other hand, short-term investing responds to a different type of need. Here, the investor is either looking for a quick gain or simply has a limited time horizon. If you’re the first type, I suggest you pack in a lot of courage because your journey may be rewarding to the pocket as it could be brutal to the emotion. If you’re the second, perhaps instruments like treasury bills, money market funds or instruments or special savings deposits may be more applicable. A short-term investment is generally known to have an investment period of less than one year.

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