Stock Market Investing for Seafarers
Posted on May 17, 2016
by ENGR. ARJAY “RICH” MAGPANTAY, CIS
I am an active seafarer for more than 10 years and I’ve been saving in the bank for the last 20 years of my life and it’s really worth it to save my hard-earned money as I get guaranteed earnings but then I realized how losers I am if I just save it for retirement!
Through the financial intelligence I acquired by attending financial literacy seminars, reading finance books and mentoring by truly rich people, my wisdom transform into new set of financial advocacy.
The truth is I love saving in bank but the reality bites because the bank use my hard-earned money to earn more money through either lending it to other people i.e. car loan, house loan and business loan, or investing to securities such as bonds and stocks.
The earnings received by the bank through lending and investing are enough to pay the depositor the guaranteed saving accounts or time deposits as they earned a chunk of money. Well it’s good since they are the one who managed the risk of lending and investing.
But the reality is that my money losses it’s purchasing power to buy more products because of the inflation rate in the Philippines. If I just save my hard-earned money in the bank that gives me a guaranteed interest of 0.25% per year and inflation rate of 5% per year then the value of my money losses by 4.75% after a year.
So it’s really true that savers are losers in the bank!
Therefore if I want to earn more money, I must do what the banks do by lending or investing. Since I’m not allowed to do lending business if I’m not registered business in DTI or corporation in SEC, then investing is the right thing to do.
Investing in bonds or stocks is a smart way to do. The difficulty with bonds such as corporate or government securities required big amount of money to invest. Therefore stocks is the solution in investing as it only requires 5,000 pesos to start with.
New investor in the stock market can invest either directly or indirectly approach. Direct approach will be by opening an account with Online Stock Brokerage. Indirect approach will be by Mutual Funds, Unit Investment Trust Funds (UITF) and Variable Universal Life (VUL) Insurance.
Earnings in the stock market is not guaranteed but the history have shown that if you invest in long term, it offers true wealth building potential and can make your money works for you.
Stock Market Investing Through Mutual Fund
For seafarers who are newly investor in the stock market, the best way to invest is through Mutual Fund. Here are the advantages of Mutual Fund:
1. One of the main attractions of Mutual Fund is that it affords its investors, particularly the small ones, the services of full time professional fund managers whose job is to analyze the various investment products available in the market and select those that would give the best possible returns to the fund and its shareholders.
2. Direct investments usually require substantial capital like Treasury Bills and commercial paper. But for Mutual Fund, you may start a minimum initial investment amount of only P5,000.
3. There is a saying that goes, “Do not put your eggs in one basket.” An important investment principle that requires holding several securities to reduce the risks associated with investing in individual securities is called diversification. When people invest in a mutual fund, they achieve instant diversification because the fund is usually invested in a wide array of securities.
4. Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For instance, with its millions of pesos under management, it can negotiate for lower stock brokerage fees or higher interest rates on fixed-income investments. Because very few individual investors can match the experience and skill of full time professional fund managers, the investing public is well advised to invest in a mutual fund itself as it gives potentially higher returns.
5. Liquidity is the ability to readily convert investments into cash. Mutual Fund is ready to buy back these shares at the prevailing Net Asset Value Per Share (NAVPS) and which the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request.
6. Safety is a very important consideration for most investors. Mutual Funds are highly regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act thereby prohibited from investing in particular investment products and engaging in certain transactions. They also have to submit reports to the SEC as well as to their shareholders.
7. Mutual funds are purchased directly through SEC-Licensed Certified Investment Solicitor (CIS) only who normally provide personal financial planning service as well. Most major fund offer extensive record keeping services to help investors track their transactions and follow their funds’ performance via phone, text message or the internet.
Steps in Investing Through Mutual Fund
In the Philippines, Mutual Funds are generally sold by Certified Investment Solicitor of the fund’s distributor. The basic steps in purchasing mutual fund shares are as follows:
- The Certified Investment Solicitor (CIS) gives the prospective investor a prospectus of the fund. The prospectus is the official document that describe the fund and contain enough information for the prospective investor to assess the suitability of the fund for his particular needs.
- The CIS explains the features of the fund particularly its investment objectives, the sales charges and redemption fees and the risk of investing in the fund.
- The investor accomplishes an Investment Application Form and signature cards. Choose STOCK or EQUITY FUND type as your investment objective for long term.
- The investor issues cash or check payable to the fund and receives provisionary receipt from the CIS.
- The CIS submits the payment and the document to the fund’s principal distributor who in turn deposit the money to custodian bank.
- The investor receives a Subscription Confirmation or Official Receipt from the custodian bank.
- The investor receives an evidence of ownership in the Mutual Fund in lieu of a stock certificate. However if the investor requests for a stock certificate, the cost of the issuance thereof will be charged to the investor.
When it comes to investing in stock market, time is your most precious asset. The longer your time horizon is, the more time you have to make your money grow. Compounding is, in fact, the single most important reason for you to start investing right now in stocks. It is the multiplier effect that occurs when earnings or dividends on your investments begin to generate their own earnings.
Wealthcome to the world of stock market mates!
ENGR. ARJAY “RICH” MAGPANTAY, CIS
Certified Investment Solicitor of Premier Mutual Fund Company in the Philippines
Contact # +63-921-9809173
Inspiring Seafarers Lives