TAKE CHARGE OF YOUR MONEY: The perfect time to invest
(This is part of Take Charge of Your Money , a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)
Question:I’d like to start investing my money this year, rather than just letting it sit at the bank. However, with the way the world financial crisis is unfolding, I am a bit apprehensive. Some people said wait first before investing in the stock market. Others say take advantage of the low prices now. When is the right time to invest given our situation globally? I want to make sure my money will earn. – Eric
Answer: The world is indeed experiencing a financial crisis which some say is similar to the Great Depression in the late 1920s. Times are hard, and no one is immune to the crisis’ effects. But that doesn’t mean that it isn’t a good time to invest.
The truth is, there is no perfect time when it comes to investing. Some might say that when the market is down, you should buy and invest, and sell when the market is up. While this may be true, the fact is we can never tell how the market will behave. Also, there is unlikely to be an extended period of time without some trouble brewing on the political or economic or even environmental front – there simply is no perfect time when everything is going well and you’re sure to earn from your money investments.
For instance, in a 20-year period, there will always be price increases (inflation), political scandals, oil price fears, business slowdown, and more. But this should not stop the savvy investor in going into the market. Business tycoon Henry Sy, for instance, started his mall business via the SM North EDSA mall in 1983 when the Philippines was in turmoil politically and economically. But look where SM is today.
The present financial crisis is still not over, and we don’t know for sure until when it will last. Those who can should take steps to position themselves in the market so they will be able to take part in the market’s recovery. And stay invested.
Over the long term, markets tend to trend up. Also, in the long run, equities have outperformed all other asset classes in terms of returns.
So is this the best time to invest? There is no best time. But it would be good to be invested in the market at any time. The returns, for instance, may be more than what you may get if you just stay with bank deposits. There is a risk involved, as equities and bonds are not entirely safe investments. You may lose your capital. But you may also earn more in the long run.
To maximize your market investments, heed these tips:
1. Get into investments you know and understand. Study all investment options carefully before plunking down your money.
2. Deal only with reputable agents/banks/financial institutions.
3. Determine your investment persona, which is based on your appetite for risk. If you are conservative, make the bulk of your investment pot in more conservative instruments. If you are willing to take on more risks, you can put more money in riskier investments.
4. Make sure you have an emergency fund first. This should be at least 6 months’ worth of your expenses. This will be your safety net. Over this amount, invest.
5. Diversify your investments. Don’t put all your money in one type of asset class (stocks alone, for instance) or one type of currency. With this, if one asset class is down, the others can still earn for you.
If you are serious about investing, take time to talk to an investment specialist. Citibank clients can avail of its wealth management services. Non-clients are also welcome to schedule financial check-ups at no cost. Or talk to your bank manager and explore all investment options open to you.
We wish you the best this year!
(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to email@example.com or comment through our personal finance blog called MoneySmarts )
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