The Investing Perspective: Should students join a "Paluwagan"?

What is "Paluwagan"?

      Paluwagan is a Filipino term for a saving or investment method commonly practiced in the Philippines. Paluwagan comes from the root word "luwag" which means loose or allowance.

How does it work?

      It starts with a group of people who will pool a fixed amount each week. This amount will be given to 1 member of the group and that will be his income from the paluwagan. On the next week, the group will be giving the same amount in the pool and this amount will be given to the next person on the list. How much you earn from the paluwagan depends in how many yo are in the group and how much you put in it each week. most of the time, the main person in-charge keeps track on who and when someone will be getting his share and will inform that person.

Is this a good investment option?

     Some analysts or advisers might tell you that paluwagan isn't a good investment option since it doesn't really have a clear sense of the time value of money and, that because the pool will be given to different persons each week, it would seem that the first money will be benefitting the most.

   

     But to me, I don't like to think of it as an investment because it's NOT! It won't be sufficient for you to finance your goals and if you only have a paluwagan as your investment then you've got to think of other ways to grow your money.

    I like to think of it as more of a saving method than an investing one. The money you put on the pool will be  keep for safekeeping and in a few weeks time it will be returned to you. If your give 100 pesos of 10 weeks in a paluwagan, you will be getting 1000 pesos on the 11th week. in that case, you don't really earn anything instead your only saved the 1000 pesos from getting used for you current whims and wants.

When should students join a paluwagan?

   Paluwagans aren;t necessarily a bad thing, but what students should understand is that before joining anything that involves your finances, make sure that you have gather all the important details such as how much you will be needing to contribute and when or how you will be getting the income. The most important tip that I can give you is only join a paluwagan if you have SPARE MONEY or SPARE ALLOWANCE. 

   Don't join one just because everybody else is doing it. Join for the experience, yes, but don't venture on something that you can't commit to. Remember that this involves a group of people and they are dependent on your contribution as you are with theirs.

Disclaimer: This post is based on my options only. The images is from google and from a site called onlinepaluwagan.blogspot.com so credits to them! :)

The Investing Perspective: When Should You Start Investing in the Stocks?

To start, let's answer the following basic questions:

1. Are you knowledgeable of basic stock trading principles and terms?

2. Do you have investable money?

3. Are you aware and/or ready for the risk that comes with investing?

4. Ready to make it a long term trading a habit?

If you've answered YES to all four questions, then its evident that you should be starting NOW. If you've confidently answered YES, it means that you have the capacity to properly establish and monitor an stock and is more likely to gain profits than those that a not knowledge but a investing.

However, if you don't feel confident enough to answer 'yes', it is never to late for you to learn and

have a change of heart. Here's how:

Knowledge

If you are a student, I suggest you join or attend seminars conducted by the finance organization in your school -- if there are any. Most seminars are about the basics of investing. If you are a working professional, you will find that a lot of banks and financial institutions hold free investing seminars for you the attend to. Most of them also have investment products or funds where you might want to invest on. Stock brokerage firms will conduct seminars to teach you the basics of the market as well as how to use their trading platform. And lastly, if you are an OFW, there are webinars and live stream seminars conducted by banks or financial institutions that you will be able to watch online. 

If you want to test your trading skills without actually investing money in the market, you may want to try the Free Trials offered by online stock broker. You can also enroll in a stock trading school,if you have the time and resource to do so. In this case, try looking up Caylum Institute, a stock trading institute in the Philippines which caters courses and seminars to help you learn about the investing. I personally haven't enrolled in it. But I've seen it featured in some conferences I've attended and its key officers are well respected figures in the financial industry

Money

I want to emphasize the term 'investable'. This is very important especially if you are a student with no means of steady income yet just like me. Make sure that the money you will invest in stocks are surplus money (income or allowance less all deductible expenses). In short,  it should be your spare money. We don't want you borrowing money just to be able to invest or worst starve yourself just to save up for investing money.

Risks

As the saying goes, "the higher the risk, the higher the returns". This is very true in the stock market, which is one of the riskiest asset classes due to high volatility (degree in price changes) of the stock prices. This can make some stock prices rise 20% today and fall 15% tomorrow depending on market movements. 

with that bring said, if you plan to invest in stock, you have to be ready to won some and lose some. The key to lessening losses is  diversifying you investment portfolio. Invest in different market industries such as services, banks, property or gaming and also make sure to invest in strong and reputable corporations over fly-by-night ones.

Habit

If your starting early with investment horizon of 5 or more years, make sure to make investing a habit -- inculcate it in your lifestyle. I would recommend over investing a one time big time lump sum investment. This method will  better mitigate your cost in the long term. Remember to make it a habit to invest monthly, quarterly of yearly. It doesn't matter if the amount is small, what is important is that you create an attitude of habitual investing.

Time vs Timing

It's very important to distinguish this two concepts. I use the term "Time"to mean the actually start of your investment relative to how long you plan to keep yourself invested in the market. For example, the time I started investing was when I was 20 years old and I plan to stay investing in the stock market for the next 40 or 50 years.

I tend to use Timing to mean the market condition by the time you invested. Will you be starting when the market is high or low?  It is preferable to start buying when the market is low because stocks are cheaper but do not be discourage to invest even if the market is slightly higher because over the long term, there are still a lot of profit potentials especially for good stock picks.

Do you think you're ready to invest? Let us know! Leave your comments and questions below!



Happy investing!

Disclaimer: The article is based on my personal opinions and experiences. the post is not sponsored or any of the sort.