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A peek at investing in the Philippines

Here in the Philippines, majority of the population invest their money on


deposit. As according to the survey of the Bangko Sentral ng Pilipinas (BSP)
consumer finance survey. Only a small percentage of households had investments
in stocks, mutual funds and/or fixed-income securities. While according to Money
summit and Wealth expo, less than one percent of the Philippine households in
Metro Manila owns stocks, mutual funds, bonds and or government securities.
Some of the reasons on why most of the Filipinos do not invest are the
following. First, Filipinos are risk averse. They would rather put their savings in
banks than in other instrument for fear that they might lose their savings. Second,
they do not have the proper know how on how to invest. This article would give an
idea on how mutual funds, and stock markets works.
Mutual Funds/UITF
A mutual fund, according to investopia, An investment vehicle that is
made up of a pool of funds collected from many investors for the purpose of
investing in securities such as stocks, bonds, money market instruments and
similar assets. Mutual funds are operated by money managers, who invest the
fund's capital and attempt to produce capital gains and income for the fund's
investors.1 While a UITF (Unit Investment Trust Fund) is an open-ended pooled
trust fund denominated in pesos or any acceptable currency, which is operated
and administered by a trust entity and made available by participation. 2

In laymans term, Mutual fund and UITF will invest your savings or money
in different financial instruments catering to your financial needs and appetite.
They will invest your money in bonds, stocks, money market securities. Mutual
1 http://www.investopedia.com/terms/m/mutualfund.asp
2 http://www.uitf.com.ph/faqs.php#gsc.tab=0

funds are usually offered by a licensed mutual fund agent and is regulated by
the SEC (Securities and Exchange Commission), while UITF are offered by Banks
and is regulated by the PSE (Philippine Stock Exchange).
Stock Investing
Meanwhile, according to Investopedia, a stock is a type of security that signifies
ownership in a corporation and represents a claim on part of the corporations
assets and earnings. There are two main types of Stocks. Firstly, a common
stock which entitles the owner to vote at shareholders' meetings and to receive
dividends. Secondly, Preferred stock generally does not have voting rights, but
has a higher claim on assets and earnings than the common shares. For
example, owners of preferred stock receive dividends before common
shareholders and have priority in the event that a company goes bankrupt and
is liquidated.3
A person would need to open up an account with a stockbroker in order to
participate in the Philippines Stock Market.

Learning the basics


There are two main kinds of approach in stock market investing. The first
would be those who use Technical analysis which are usually short term traders
and Fundamental analysis which are usually used by long term holders.
People who uses the technical analysis rely on the day to day or even
every second movement of the stocks prices. These movements indicates
whether they should buy or sell a stock. They use charts and tools such as
candlesticks pattern, MACD, RSI indicators to generate patterns that gives
forecast on the movement of the stocks.
On the other hand, fundamental analysis involves looking at the company
in general. Preferably their financial statements. They look at the companys
capabilities and uses ratios such as Financial Ratios, liabilities, revenues,
earnings, growth rate, dividends, competitors, outputs, earnings per share,
price/earnings ratio and others. Fundamental Analysis also looks at the
companys management and how they handle the company, what their future
plans are. Those who uses fundamental analysis even goes outside the company
and looks at the economic perspective of not only the country, but worldwide.
For example, in mining companies, they look at the supply, demand and prices
of commodities and even into future forecast of the said commodities.
Comparison of Banks, Mutual Funds, UITF and Stocks rate of return
rates
3 http://www.investopedia.com/terms/s/stock.asp

Banks An ordinary bank savings account usually gives .25% per annum
rates in its minimum while a time deposit would give out .25% to 1.125% per
annum
Mutual funds and UITF varies from -5% to 16%4
Stocks - -59.62% to 674.55%5

4 http://philpad.com/
5 http://www.pinoymoneytalk.com/top-pse-stocks-performance-2014/