Making investment easy for you

You know that there is a need to invest. And you know that investing is a sure-fire way to increase your income in the future, as well as answer for future needs.

But sometimes, investing feels like… a chore. Or it becomes a broken record of promises like “I’ll start investing in the future,” or “I’ll start investing if…” only to finally see that not just time but great opportunities have already passed us by. Sometimes, our own worst enemy when it comes into investing are not external factors like the market, economies, recessions, or other people. Most of the time, our own worst enemy is ourselves.

For example, we lack inertia. We put off investing far off into the future, and often we anchor them depending upon certain events. “I’ll invest when I have money,” “I’ll invest when I have time,” “I’ll invest when I am ready,” are just some of the usual rationalizations that people have when it comes to investing. Another thing is that we feel that money invested is lost money.

It feels “lost” because it is not being felt and enjoyed at the present. But we all know too well that setting aside money for the future is the best way to ensure it; but still, we’d rather spend and feel the rewards of our hard-earned money today, as if the future will take care of itself already. Or, we hold-off investing until “the market is ok,” in which case, delaying investment when the market is going down because “it can still go down.” When it goes up, the same reason is invoked, and when it is at all-time highs, investment is held because it is ‘too expensive” and will just buy when it goes down – the cycle again continues, and investment is never made.

Given these, investing is therefore greatly influenced by our behavior. And for us to be successful investors, we have to deal with these behavior as well. 

Luckily, I had the opportunity to learn more about Behavioral Finance in one of my continuing education webinars as an Accredited Investment Fiduciary®. The webinar is based largely on the work of Thaler and Benartzi (2003) ”Save More Tomorrow” and gave some techniques to improve our own decision-making, and thus make better choices when it comes to investing.

For instance, in order to overcome inertia, you may go for auto-enrollment of your investments. It is good nowadays that you can enroll mutual funds, UITFs and even direct stocks in automatic investing through on-line portals. With this, investing already becomes automatic, and not subject to irrational emotions like fear or greed; you can already add up on your portfolio even if you totally forget about it on a very busy day.

Part of our handicap as investors is being present-biased (a.k.a. temporal myopia) where money is preferred to be enjoyed at the present, rather being saved up for the future. To solve this, you may commit for a future enrollment scheme, like starting off stock purchase program in your company that is dated some time into the future. In a similar way, a financial institution’s on-line portal can also accommodate investment months ahead into the future. This way, your money is already safe from being spent unnecessarily.

Loss aversion – the feeling of losing the money invested – is very hard to win against, most especially if we are already used to our current level of expenditures. But this can be remedied by increasing our investments in sync with pay increases. Having said that, a part of the pay increase should also be allocated for investments.

Yet the number of investments choices can be quite overwhelming, and studying them one by one would be time-consuming. Analysis paralysis then can happen. But to make it easier, it would be recommended to have a shortlist of funds – the top 25% best performers in their own category. Websites such as PIFA and UITF provide figures on pooled funds in our country today and is a great way to start your short-listing off.

Lastly, think of your investment’s effect in the future, and how each amount of moneywill contribute for your retirement fund, or even your kid’s education. Always remember: a peso invested today is a peso that would grow far into the future—your fund to buy medicines, send kids to school, and your fund to enjoy life at its fullest. – Rappler.com

Got a question about personal finance? Tweet @rapplerdotcom or email us at business@rappler.com. 

Rienzie P. Biolena is registered financial planner of RFP Philippines, a professional group of financial planners in the country. To learn more about RFP, you may email info@rfp.ph.

Rienzie is also an accredited investment fiduciary of Pennsylvania-based fi360 and an international member of the Financial Planning Association, the largest association of financial planners in the US. You may reach Rienzie at rienzie.biolena@gmail.com, his Facebook account or Twitter @rbiolena.

Hand and investment sign with dark background from Shutterstock.