Beginner's Guide for First Time OFW Investors
NOVEMBER 11, 2015 BY OFWGURU
What OFWs are worth
In 2014, OFWs remitted $26.93 billion mainly from the United States, Saudi Arabia, the United Arab Emirates, Singapore, Japan and Hong Kong. The latest Consumer Expectations Survey showed that the bulk of remittances received by households are used for food and other household needs, education, medical expenses, and debt payments. It also showed that only 5% of these remittances were invested, primarily because Filipinos are not fully informed of the different investment opportunities available.
Making remittances “work”
Simply defined, to invest means to purchase an asset or accumulate physical entities to gain financial return. One of the most compelling reasons to invest is the prospect of having one’s assets “work”. Investing remitted cash, no matter how large or small the value, generates more money by 1) earning interest above the bank’s savings rate or 2) buying and selling assets that increase in value. Another reason to put remittances to work is because there are a lot of investment opportunities available today, such as stocks, bonds, mutual funds, options and futures, precious metals, real estate, one’s own small business, or any combination thereof.
Goals and risk
A major consideration before choosing which type of investment to make involves outlining personal and/or family goals. This includes listing short-term and long-term priorities and expenditures, such as: buying property, supporting a family member through school, preparing for retirement, and other such scenarios. The shorter the time frame, the more conservative the investment, and the more liquid, or cash-like, the choice.
In addition to listing one’s goals, one other thing to consider is risk tolerance. Peter Lynch, one of the greatest investors of all time, has said that the "key organ for investing is the stomach, not the brain". In other words, one needs to know how much risk one can take when it comes to money matters. OFWs may choose lower risk instruments and be conservative, especially if one has a family solely dependent on foreign remittances. Still, investors who are single can always opt to be more adventurous.
With this in mind, a budget should be calculated, showing income less immediate expenditures, to show how much is left over for investing purposes. OFWs and their families can make use of the Financial Planner available on the Bangko Sentral ng Pilipinas (BSP) website (http://www.bsp.gov.ph/downloads/FinancialPlanner.pdf). This tool provides a simple and practical guide to manage budget and remittances within a framework of wise-spending, savings and investment. It includes tools on the budgeting process, planning for retirement, savings and entrepreneurial undertakings, cash flows monitoring, property acquisition, investment portfolios, and overall financial standing.
Know what’s out there
There is no such thing as a "sure thing”; there are always risks, but in varying degrees. The best way to start investing is to first become financially literate. One way of doing this is to ask experts and attend financial education seminars. Online sites are also a good resource. Some websites that can help are:
1. BSP website page that covers financial literacy: http://www.bsp.gov.ph/multimedia/ofvids.asp
2. Angat Pilipinas Coalition for Financial Literacy: http://angatph.com/
3. Angat Pilipinas OFW-specific Facebook Page: https://www.facebook.com/UsapangPiso/
4. OFWguru's Money Matters Section: http://www.ofwguru.com/guides/c/financial-guides/
One such expert is BPI Asset Management and Trust Group Vice President for Emerging Markets Ricky Espiritu who, in a January episode of “On the Money”, recommended that first time OFW investors go into funds. "Funds are managed by experts from the bank. They put the money in markets or assets that are perceived that are not as volatile, depending on what you choose, and trade it based on when they think is the right time to buy and sell. In that way, we are able to manage your funds better than you would," he said.
No matter what investment opportunity is chosen, it helps to remember that any amount of investment, no matter how small, will make a difference in any OFW’s life. The sooner an investment is made, the sooner the money will start “working” and the sooner one can reap the benefits
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