Investing is Risky if you Don’t Save

Updated: February 17, 2023

Someone recently asked me where he should invest. Specifically, he’s asking me if putting money in the stock market is a good idea.

Ask me if it’s a good time to invest in the stock market, and I would always say, “YES!”.

But what’s important is not really the status of the market or the economy in particular — it is your own financial status that will dictate if it’s a good time for you to invest or not.

Below is his email. And my reply immediately follows.

Good day Sir Fitz.

I’m an OFW and would like to start investing in the stock market. Is it a good time to do so right now? I have friends who made a lot of money last year, and I’d like to be one of them. But they say it’s hard if you don’t have time to monitor.

However, I read in one of your articles that investing in the stock market is boring and it doesn’t really use up a lot of your time. So I’m now confused. My friends say that it’s time-consuming and yet you say it’s not.

I’m single and my family is not dependent on me, so I get to spend my income however I want. Moreover, after working here in Singapore for almost two years, I believe I’m financially okay and now ready to invest.

I’m now starting to save and already have P25,000 that I can invest. That’s why I’m asking for your advice. Where should I put this money, for someone who’s new to all this investing concept?

Thank you and looking forward to your answer.

Sincerely,
Mr. W.

My Response

Dear Mr. W.

If your friends made money last year in the Philippine stock market, then they’re definitely trading and not investing.

There is a big difference between the traders and investors.

A stock market trader buys and sells shares often, usually just a few days in between. However, a stock market investor buys and holds the shares for many years, at least 5 years for me.

Your friends are active traders, that’s why they say you need to constantly monitor the market. They are timing it to make money. They buy when the price is low, and then sell when the price goes up.

For beginners like you, my recommendation is to try investing first. There’s less time needed to analyze the market because all you need to do is buy a good company that you believe will grow in the future. Buy and hold — that’s why it is boring.

However, I want you to understand that investing is risky if you don’t save.

While it’s good that you’ve been able to set aside P25,000 already, I believe that in your case, you should first focus on maintaining that saving habit and building your emergency fund.

Financial freedom is a journey. It is a long trip with different routes and several connecting destinations. And investing in the stock market is something that you arrive at somewhere in the middle of that journey.

For someone like you who’s just starting, establishing good financial habits is the destination you should first focus on. And building an emergency fund is your first pitstop in your journey towards financial freedom.

This means you should continue in saving money, but also begin to track your spending so you can create and follow a budget. Put your attention on these tasks first and nothing else. Investing in the stock market can wait.

Once you know how much you regularly spend every month, multiply it by 6 and assign that number to be your financial goal.

For example, if you spend around P30,000 per month, then your goal would be to have P180,000 in your savings account, which will serve as your emergency fund.

I believe it will take you a few months before you can achieve this amount. During that time, my advice is to increase your financial knowledge by studying how different investment products work.

There are books you can buy, seminars you can attend, and of course — the archives of my blog that you can read through to educate yourself about personal finance and investments.

That’s it for now and I hope I was able to help. Please email me back once your emergency fund is complete and I’ll tell you the next step.

All the best,
Fitz

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