Updated: January 17, 2016
The Philippine stock market has fallen almost 6% last week, and has already lost around 10% of its price since last year.
Many say that we’re now in the bear market, which is making a lot of new investors fearful, confused, and anxious about what would happen next.
In fact, numerous people have been asking me what should they do and where should they invest.
Personally, my advise for everyone would be to stay calm, avoid making rash decisions, and just stick to your investing strategy. Indeed, during these times, following your financial plan is the best course of action.
But in case you’re among those who invested without defining a strategy first; those who simply put their money in the market without a financial plan — then it’s a good time to make one now.
Because the best way to keep your cool during market downtrends would be to let your needs, goals, and time horizon decide your actions.
Goals Are Important
I invest because I want to be able to afford my dreams such as a home theater next year, franchise a business in 2018, and to travel around the world before I hit 45.
Why do you invest? If you simply want to grow your money, then you’re doing it wrong.
Define your financial goals, and it will be easier to choose the best investments that you should have.
Make it concrete and put a date on it. If you can estimate the costs, then you’re already halfway towards achieving them.
And with that said, we can now better answer the question:
Where should I invest in 2016?
Below are my suggestions based on your target date.
If you plan to use the money within the next two years, then only put it in low-risk investments.
The presidential elections will cause volatility in prices, and unless you’re good at timing the market, the best course of action would be to put your money in bank deposits or fixed-income securities such as:
- Time deposits
- Short-term government bonds
- Low-risk investment funds
If you plan to use your money within 3-5 years, then you can consider moderate-risk investments.
By the time your reach your target date, the Philippines would be in a post-presidential election economy, which has historically been good barring any instability in the country’s leadership. And thus, it would be fitting to invest in:
- Bond funds
- Balanced funds
- Index funds
If you plan to use your money after more than five years, such as for your retirement, then you can go for high-risk investments.
Nobody can accurately predict what will happen to the Philippine economy after five years. All we know is that we’re currently on a downtrend, and there’s no sign yet when it will go up again.
My advise is to invest defensively for your long-term goals. This means putting your money in:
- Long-term government bonds
- Dividend equity funds
- Stocks of blue chip companies
Advise from a Financial Expert
When it comes to financial experts in the Philippines, Rex Mendoza is among those whom I trust. Below is what he has to say about the current downtrend.
It will be prudent to stick to one’s financial plan. And if it was done right, this plan will be “goals-focused” rather than plainly opportunistic.
Times like this can be viewed a good period to accumulate on sound investments. History always repeats itself but many seldom learn.
Sticking to one’s plans and being more confident in going against odds, as they say, is easier said than done. Now is a great time to test that conviction.
Invest in Knowledge
It’s always a good time to invest in your financial education, and one of the best sources of knowledge are books.
So I hope you can check out my ONLINE BOOK STORE HERE.