(If you want a quick guide for beginners how to start investing in the Philippine stock market, you can download your free ebook here.)
Why Invest in US Stocks (even if you’re in the Philippines)
Oftentimes, we start with investing in local companies we’re familiar with, having been exposed to and aware of their products and services.
This includes investing in so-called blue-chip companies we have in the Philippines such as SM, Ayala Corp, Jollibee, Meralco, and more.
And that actually makes sense.
In fact, a useful bit of wisdom is to NEVER invest in something we don’t understand.
So by investing in these giant companies, we protect ourselves from unnecessary huge volatility in companies we don’t have visibility on.
But there’s one huge problem with investing that way, or more specifically, sticking to one asset class – such as Philippine equities.
The first problem touches on the importance of diversification.
For instance, if our economy, or our politics, or our leaders, or any other factor is not aligning with our expectations in a company, it will shortly follow that our investments in these local companies will suffer.
And because all these businesses are operating in one geography under a single government policy, we as investors have limited if not zero control over how to “balance” the impact of these factors.
For instance, the rift between Philippine president Duterte and the ABS-CBN media company has brought the stock of ABS-CBN down by as much as 80+% through the years of the administration.
Even blue-chip company Ayala Corporation (AC) was not spared when existing deals of the government with Manila Water (a company under AC) began to have issues.
Things like these are really outside of our control as investors so when this happens, it’s only logical to PAUSE investing in them during those times and START looking at other better-performing assets elsewhere. This is exactly what diversification should bring us.
It could be another company in a different industry, or totally in a different geography/country.
And that’s what I wanna share in this blog.
I started diversifying into US stock market for now given that
(1) the United States has the biggest economy in the world and arguably the most powerful cental bank in the world which is The Federal Reserve System (FRS), often just called “the Fed”.
(2) US also contains the biggest and most innovative global companies too such as Apple, Google, Facebook, Amazon (and more) which we’re certainly familiar with. Imagine, these giant modern companies have the world as their client base which means a greater potential of growth of earnings for them.
In fact, below graph compares one stark difference in the way the US stock market index recovered during the 2019 COVID pandemic period as opposed to the Philippine Stock Exchange index (PSEi). While the US index has reached new all-time highs, the Philippine market benchmark index remained negative at -10%.
One primary reason for this difference is due to the nature of companies comprising the two market indices. While US technology companies under the FAANG group (Facebook Amazon, Apple, Netflix, Google) are clear beneficiaries of the shift to the online way of living and working, our top local companies in the Philippines (SM, Jollibee, Ayala Corp & more) are really of traditional brick-and-mortar type with huge challenges ahead before their full recovery.
So if you want to know how to invest online and buy or sell US stocks if you’re from the Philippines, you can follow the steps in this blog. I also shared a quick preview in this video.
The nice thing is you can create your online (FREE) practice account so you can explore this without any risk of losing money.
You’re given 100k virtual money you can use to invest in any available asset you want at their actual prices.
That way you see the actual profit/loss updates with your asset picks.
Global Investing Webinar
If after watching the video, you’ve got questions on how to start and more, then you can always join our webinar to find answers for those.
Register here for our Global Investing Walkthrough session (it’s free).
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Investing in global stocks means checking stock markets of other countries, which allows you to practically diversify in your portfolio.It's very similar to investing in local stocks, but since we're expanding on geography and other asset classes, we now have more stocks to choose from. Join our FREE webinar to learn more.
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