invest in a bank or the stock market?

In my opinion, many people from the Philippines have missed an investing opportunity that could increase their cash - be it capital or savings. Some even think that investing can only be done through savings or time deposit accounts in banks; aside from investing in a business - store, boutique, restaurant, or franchise. The avenue for investing that I am referring to is the Philippine Stock Exchange or the stock market. While some may have heard of the stock market, many have wrong notions about it. People think that it is very risky (although that is partly true) and can spell disaster for their hard earned cash. However, investing in banks do entail a level of risk and at some point worse than investing in the stock market.

Now, why am I sounding as if the stock market is the better option of investing over banks? Because in the long term, you can earn more in the stock market. Consider a savings account in a bank which earns an annual interest of 1% or a time deposit account which earns 5% per annum - if I had 10,000 pesos in the bank, after a year I have an additional 100 in my savings account and 500 in my time deposit account. Looking at it, the earnings are not that much.

In the stock market, on the other hand, one can earn as little as 20% annually; in some cases, some earn more than 200% of their invested amount - which spells, from an initial investment of 10,000 pesos to an additional 2,000 for 12% earnings and 20,000 for a 200% increase. Now that is much!

While this might seem very attractive, let me spoil it with the reality that its not easy to invest in the stock market because there are risks involved. However, the key to minimizing these risks is not expertise in how to trade, rather, an investor must develop the most important trait - discipline.

More on this in the coming posts...