What comes to mind first when the conversation turns to “long-term investment goals”? For those who want to tackle the subject with greater certainty of success, most potential investors think of real estate and the stock market.
And that’s not entirely unwarranted: they do have a considerable track record for growing investments, along with an undercurrent of risk. For now, let’s examine the virtues that prompt many to invest in real estate or cast their lot on Philippine stocks or both.
Smarter Property Picks
The property sector has become fertile ground for long-term investing in the country, following the local real estate development boom that kicked off in the early 2000s. Largely fueled by demand from families of overseas Filipino workers, it has resulted in a wealth of choices for aspiring real estate investors.
A total of 34 real estate companies are currently listed on the Philippine Stock Exchange (PSE). Many of these, like Ayala Land (ALI), offer the opportunity to directly profit from the company’s growth by investing in strategically-located property development projects.
Various investment possibilities—all with potentially good long-term returns—are available to prospective investors hunting for opportunities in real estate. Select PSE-listed companies, for example, have plenty of condominium developments located in high-demand areas for rentals. One can either buy into any of these companies via stock purchases or directly invest in its real estate developments, especially condos suitable for rentals.
Smart investors generally prefer to invest in condos for rent, which generate regular income. This strategy is preferable to speculative investments on a subdivision lot, which could take decades to deliver a payout. With a condo rental, your property appreciates over time. You can also use the regular income you’ll get for amortization and maintenance costs.
Best Stock Bets
Investors keen on engaging the stock market for long-term gains typically avoid speculative listed shares and pick “blue chips.”
Generally, blue-chip stocks are well-established corporations with a proven track record of financial stability and profitability. Their share price movements are less volatile, and their market performance is more dependable and steady over time. In one recent estimate, the average annual return on Ayala Land shares came out at 14 percent. It beat all types of investments in the money market, which registered an annual average return of 4 percent.
Individual merits and pitfalls
Bear in mind, though, that buying and selling of shares in the PSE follow a minimum trading lot, meaning the number of shares you can buy could be constrained by the amount of money you have. The minimum trading lot would depend on the price of a particular listed company, which could fluctuate on a daily basis. A stockbroker can help you come up with the right stock which suits your savings or resources and which is best for a buy-and-hold strategy.
Investing in either real estate or stocks each has its merits and pitfalls. For those with enough resources, having both as practical investments for long term goals is ideal. In this best-case-scenario, one mode could even serve as a hedge against possible losses on the other.
In the final reckoning, choosing between real estate and stock investments requires an educated reading of both avenues as well as the professional advice of experts in these fields.