Thursday, March 1, 2012

Why Filipinos are not Investing in the Stock Market?

One night my uncle and I were stuck in a heavy traffic. Running out of stories to share, our topic arrived at the possibility of investing in the stock market. He asked me a number of questions such as “Ano ba ang produkto nyan?,“ “Paano yan ibebenta?,” “Kanino yan iaalok?” etc. Though apprehensive, I tried to answer him to the best of my knowledge. I guess my answers were fairly compelling since in the end he agreed to do so. However, his questions couldn’t get of my head even after we parted ways.

Base on an article posted in PSE Academy website, the Philippine Stock Market has 498,838 accounts in 2010 which means not even 1% of the country’s 94 million population has invested in the stock market. There are so many stories in the internet testifying that investing in the stock market has a powerful potential to earn great returns. If the stories are true and verified, what are the possible reasons why only few Filipinos are into stock market?

Just a Personal Analysis
1. Lack of knowledge. I remembered recently that stock market was actually one of the topics that I reported in a Management subject way back in college. I started and ended it reading a number of paragraphs scribbled in a Manila paper. Totally forgettable. It was a subject matter that even my professor couldn't give a speck of input.

We don’t really study stock market in school. PSE’s Market Educator, Jay Penaflor, even admitted that his primary purpose of taking up a masteral degree was to learn how the stock market works. He was delighted when he heard his professor utter “stock market” on the first day of class only to realize it was also the last time that he would hear it. Thus, if stock market is not taught in regular school (even in much higher education), how would we know that stock market is a great avenue to create wealth?

Good news for this generation, I learned in one seminar that there is a proposal in our government education agency that a subject about financial literacy would be very beneficial specially for the youth. In this subject, all forms of investment will be discussed and other money matters. Perhaps, this plan is formed with an intention to help put a solution to every human’s problem: money.

2.  Stock Market Looks Intimidating. I’m sure you have seen or heard the term stock market in all forms of media. Economic issues are usually discussed by English proficient people in corporate attire. Personally, this example leaves me an impression that stock market is just for the society of the rich and famous. This explains why it took me years before I had the guts to attend a seminar fully concentrated about this matter. Just the thought of being surrounded with English speaking men in black suit pretty scares me. Worst, the speaker in front would ask me “Do you have any idea how the stock market works?” Let’s just say, I didn’t wish to humiliate myself in front of the members of the high society. With this in mind, I felt that my ability to learn the stock market is limited to reading informative articles and hearing news. But I was completely wrong. If you wish to educate yourself through seminars, all you need to do is register, appear on the scheduled date, sit and listen. And by the way, blue jeans are not prohibited inside the training room. And most importantly, there are various seminars that are free of charge.  PSE, for instance, conducts basic stock market seminar every last Tuesday of the month. Online Stockbrokers, Colfinancial and First Metro Securities Brokerage Corp or FirstMetroSec, also have set of free trainings. Just check out their website for more information. 

To put this long story short, education plays a vital role to help increase awareness about the pros and cons of investing in the stock market or any other forms of investment. But as a popular saying goes, It takes two to tango. I believe that the government and private sectors actually have numerous projects underway. But it will only take effect, if we Filipinos will respond to the call.

What Have I Learned in Seven Months?

Yesterday, I sold one of my most sluggish stocks few minutes before the market closes. Then I opened my Twitter account and was greeted with this quote:
Don't settle for less, just because you're too impatient to wait for the best!                                                                                                            
What an opening salvo?! Bull's Eye! Now, I can only hope that it will not soar high tomorrow (I mean at least not too soon). It happened to me before. I sold some stocks in negative so I can catch those in sale with much better fundamental or at least the ones in upward price movement. The next day, BOOM! The market price skyrocketed and I lamented. Blame my short thread of patience.

Last week, I accompanied a friend to the seminar I mentioned in my previous post. Same speaker. Same speech. Different effect. The seminar was actually sweeter the second time around. Why? (1) My industry vocabulary has improved and; (2) now I know what he meant by this: “At some point you will lose money. If you can’t accept this, stock market is not for you.”

No investor in his right mind will rejoice if he loses money either in the stock market or even literally but behind this heartbreaking fact are valuable lessons. In my seven months of investing, I have learned that losing money has two different meaning: (1) You lose money when you sell your stocks at the current market price lower than your average market price. As a result it decreases your actual balance as well as your purchasing power; and (2) You lose money in paper once the current market price of your stocks becomes lower than your average market price. This is a common phenomenon. Price will move up in time (unfortunately no one knows exactly when). Here, no transaction is executed.

In my case, my most recent transaction falls under the first definition. Since there were no signs of progress in weeks (as far as the chart is concerned), I took a difficult decision. Instead of waiting for the boost, I thought of looking for other companies that are technically performing better. And hope that this risk will bear better fruits in shorter period. For investors/traders with limited resources like me this is one risky strategy that at one point you might just have to consider than lose money in paper for uncertain time.
Flashback. In my first month, I was able to savor the feeling of earning money (in paper) without a sweat. Ecstasy. And then August came, my portfolio suddenly turned bloody red. I experienced definition no. 2: losing money in paper. Just when I thought I was about to make a breakthrough, the stock market got terribly affected by the European economic crisis. And I tell you, losing money in paper is no joke. It’s tragic. Scary.
Today, I’m gradually learning from research and actual experience (mistakes included). Looking back, the effects of the European economic crisis in the Philippine Stock Market were actually not as bad as I thought. The wiser and more experienced investors probably consider it as a blessing more than a tragedy. For the well-offs, Christmas sale started in August. In January, when the market started to bounce back, I bet many rejoiced. Indeed, patience is a virtue. And that’s one thing that I have not learned by heart in seven months. But I really wish I will...SOON.

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