With time and higher purchasing power on their side, Filipino millennials have become a sweet spot for the local investing industry, according to the umbrella organization of close to 300 fund management professionals across the country.
And while the popular saying “You only live once” may envision young, happy-go-lucky professionals, it is precisely millennials’ willingness to take risks that makes them ideal investors—not just for their retirement that will take three decades to come, but to sustain their desired lifestyle as well.
“While most millennials prefer to spend their money on ‘experiences’ such as traveling and food trips instead of investing, these are not mutually exclusive,” said Fund Managers Association of the Philippines corporate secretary Julio Bucoy.
“Money is required to indulge in many of these experiences, and investing actually allows millennials to afford more and thus make the most out of their finances. Millennials generally have high disposable income, which continues to increase. And they do not have significant financial responsibilities yet, such as dependents to support,” the 30-year-old Bucoy, a millennial himself, said.
Based on the Manulife Investor Sentiment Index released in February, few Filipino millennials regularly set aside money to prepare for what they expect to be a comfortable retirement.
The study showed that the “lack of discipline and planning” in investments is a concern, with only seven percent of millennials reported having a monthly savings plan.
The study also showed that Filipino millennials are at risk of being debt-strapped. More than four in 10 Filipino investors carry debt, with the mean debt level incurred by millennials below the age of 35 at P291,582 higher than the debt levels of those in the 35-49 age bracket (P207,428) or those over 50 (P143,958).
But for Bucoy, incurring a debt is not necessarily a bad thing, especially if the long-term returns outweigh the cost of the investment.
“A good debt is when the resulting benefits, either quantitative or qualitative, outweigh the actual cost of the debt. The convenience and security of owning a house, for example, may justify availing of a housing loan,” Bucoy said.
“Once a decision to incur debt is made, millennials must pay attention to the actual cost of the debt. I’ve noticed that the advertisements for various loans only focus on how low the down payments or monthly amortizations are, without actually showing the effective interest rate and the total amounts one ends up paying,” he said.
Bucoy said a key component to increasing the number of millennial investors is to incorporate financial education as early as possible at home and at school.
“Sometimes it is all about framing. Finance and investing tend to be intimidating or boring. So when discussing these, especially with millennials, it must be framed in such a way that makes it relatable and relevant,” he said.
“I would, for example, start by teaching them the importance of delayed gratification. As a kid, I was very much into video games, and I had to save money to buy the game console I wanted,” he said.
Bucoy, who grew up in a household where the purchase of stocks is discussed regularly, began investing as early as 12 years old through his parents.
“I got my money from savings and cash gifts from my parents and other relatives. My mom would regularly monitor the stock market and she explained to me how her shares were going up. I was thrilled with the thought that the money that I have, while small, can grow bigger if I invest,” he recalled.
The pay-off was higher given that his money had time to grow, and the experience likewise proved to be invaluable, Bucoy said.
“I learned that one must be consistent and patient. Expectations must be managed, too. Many inexperienced investors who are lucky enough to catch a good break early on tend to be unrealistic in their expectations, which may also cause them to take a lot of unnecessary risks,” he said.
“The key is to have fun while taking calculated risks. Personally, other than the obvious monetary and financial security benefits, I was also able to apply the decision-making process I go through when I invest to other aspects of my life, which has led me to make better decisions over the years,” Bucoy said.
The FMAP official underscored the need to have a sense of urgency in terms of investing as early as possible.
“People tend to keep deferring financial planning, thus failing to take advantage of opportunities that will pay off in the long run,” he said.
“The best time to start investing is yesterday, but the second best time is now,” Bucoy said.