Why invest in securities, such as stocks and bonds?

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One of the common questions I get is, why should you take the chance to invest in securities? And I think it’s commonly asked because most of us know little about them. As mentioned earlier about investing, securities are paper assets. That is, unlike real estate where you can survey the land and view the house, they are wealth that are recorded in writing.

Their value is realized, that is you get your money and whatever earnings, when you either sell them or once they hit maturity.

There are two types of securities that you can buy in the market: stocks and fixed income. If you want to learn more about stocks and fixed income, I have a post dedicated for stocks and another for fixed income.

So I thought of bringing together benefits in investing in securities.

1. It requires little capital

The typical response that I get when I tell people that investing in securities requires little capital is one of surprise. You might even think that only the super-rich can have the means to participate.

But why is this possible? Because of the rise of managed funds, including investment-linked insurance policies, the market is able to offer low-cost products to the public. In fact, you can start with a minimum monthly contribution of P3,000.

On the other hand, the costs of starting your own direct investments with stocks in the Philippine Stocks Exchange has minimized considerably over the past few years due to the rise of online brokers like First Metro Securities.

 2. It has various types that suit you.

If you are into direct shares, consider the risks that you take in whenever you acquire new equities. They are going to be exposed to higher volatility, but offers higher possibility of earnings.

You can also look for preferred shares, which offer rather less risks than common stocks. 

3. It earns income.

You can actually earn income by buying low and selling high. That means, you buy stocks when their prices are low and sell when they are high.

You can also do the same thing with bond, although they are not traded directly to the public like stocks do. Instead, bonds are traded in Philippine Dealing and Exchange Corporation, where banks are the only participants.

4. It preserves and build your wealth.

There are two things that investing can possibly do for you. The worth of your net worth could be preserved by having earnings that match inflation, which can then maintain the purchasing power of your peso through the years.

Moreover, it can even increase by exceeding the rate of inflation depending on the returns that your investing provides.

5. It can be a savings vehicle for medium- and long-term goals.

It can be used as a means for saving up for your child’s education and preparing for your retirement needs. In this way, you can open multiple accounts with different financial goals tied to each one of them.

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