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Investing in the stock market offers a multitude of options for wealth seekers. As common shares are what most invest in, preferred shares are often overlooked. Preferred shares represent a unique asset class that combines elements of both stocks and bonds. 

Let’s dive into what preferred shares are, their advantages and disadvantages, and if they’re worth investing in!

Understanding Preferred Shares

Preferred shares, also known as preferred stocks, are a type of equity security issued by corporations. They sit between common stocks and bonds in terms of investment characteristics. When you purchase preferred shares, you are essentially buying a stake in the company, but with a few key differences from common stocks.

Typically, preferred shares are more dividends-oriented. They have higher dividend rates versus common shares. Not to mention, dividends are also more consistently given out to preferred shareholders. Due to the consistent nature of dividend payouts, preferred shares usually experience less volatility since investors already know what to expect. Price movements often occur mostly due to changes in the country’s prevailing interest rate. Lastly, they have no voting rights unlike common shares. However, it should also be noted that they usually offer options to convert the shares into ordinary ones at a later date.

Advantages of Investing in Preferred Shares

Here are some of the advantages to having preferred shares:

• Steady Income: The fixed dividend payments and lesser volatility associated with preferred shares can provide a stable and predictable income stream, making them attractive to income-oriented investors.
• Priority in Distributions: Preferred shareholders have a higher claim on company assets in the event of bankruptcy or liquidation, providing a degree of safety compared to common shareholders.
• Diversification: Including preferred shares in your portfolio can help diversify your holdings. They do so by providing yields that are consistent, adding only a small amount of risk while still providing respectable returns.

Disadvantages of Investing in Preferred Shares

Of course, preferred shares also come with some disadvantages.

• Limited Capital Appreciation: Preferred shares tend to offer limited potential for capital appreciation compared to common stocks. Even if common shares go up by a lot, preferred shares will barely move an inch. 
• Interest Rate Sensitivity: They are also sensitive to changes in interest rates. When interest rates rise, the value of existing preferred shares may decline.
• Lack of Voting Rights: Preferred shareholders have no voting rights, which means they have no say in the company’s management or major decisions. 
• Subordinate to Bonds: In the event of financial distress, these are safer than common shares. However, it isn’t guaranteed that no losses will be incurred. Bondholders still hold a higher priority among the list of stakeholders to be paid.

Should You Invest in Preferred Shares?

Given that some preferred shares offer high dividend yields, scouting for solid preferred shares to invest in isn’t such a bad idea. It allows you to diversify your portfolio since it has relatively low risk, while still offering a sizable reward.

As always, conduct thorough research first before choosing one to invest in. Make sure to consider your overall investment strategy as well so that your decisions align with your goals!

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“CONGRATULATIONS! YOU WON 1 MILLION PESOS”

Imagine you were to actually win 1 million pesos, either from a raffle, the lotto, or whatever lucky reason. What would be the first thing that comes to your mind? It’s hard to admit, but many of us will initially start thinking of all the things we can buy. Oftentimes, the money will be spent on luxuries or even extravagant vacations. For others, winning a lump sum of cash is seen as a solution to problems.

While winning any amount of cash will induce a feeling of happiness, studies have shown that the reverse happens in reality. Results show that lottery winners often go broke in a few years. While a significant amount of the population will still stay afloat, generally lottery winners don’t experience an overall improvement in their finances. As this pattern frequently occurs, the term “sudden wealth syndrome” was created.

What is the Sudden Wealth Syndrome?

This is a term used to describe the psychological and emotional challenges that can arise when individuals come into a significant and sudden amount of wealth, such as winning the lottery or receiving a large inheritance. This syndrome is not officially recognized as a medical or psychological disorder. But, it is often used colloquially to highlight the common issues faced by people who experience such windfalls. 

There are a lot of reasons why this frequently happens. However, one common culprit is often lifestyle inflation. The temptation to upgrade one’s lifestyle often leads to financial problems and potential depletion of wealth. It’s similar to how corporate workers have trouble saving and investing even after promotions and salary raises. The saying “money moves from those who do not manage it to those who do” stands true.

How to Keep the Money

Not all benefactors of sudden wealth fail to improve their finances. There are some who are able to make good use of the money. Here are some of the advice financial experts suggest when facing these situations:

Save and Invest: Make sure to prioritize saving and investing. Sudden wealth can quickly disappear if you focus on spending it. However, the reverse is also true. When correctly done, saving and investing a big portion of the money received can significantly boost your wealth with the help of compound interest.

Seek Professional Guidance: Engage with professionals that can help you manage your savings and investments. Especially if you have little to no experience in investing, having trustworthy people helping you will make sure that you’re not just gambling away your money.

Manage Expectations: Whenever large sums of money are won, people often overestimate how far it can go. Always make sure to manage your expectations and to think of the long-term. 

Can we apply these to ourselves?

Not everyone can win the lottery or suddenly receive a huge inheritance. Most of us probably won’t encounter the sudden wealth syndrome. However, most of us will encounter instances such as receiving bonuses, salary increases, or promotions. The same mentality can still be applied – invest as much as you can and let your money work for you.

You may not feel the repercussions now, but your future self will undoubtedly thank you!

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In recent years, ESG investing has gained significant traction and attention. ESG stands for Environmental, Social, and Governance, and it represents a paradigm shift in the world of finance. 

How does this relate to the financial markets? Will it have an effect on how I invest in the near future? Let’s dive into these and more.

What is ESG Investing?

ESG investing is an investment approach that considers Environmental, Social, and Governance factors alongside financial criteria when evaluating and selecting investments. 

These three pillars represent a framework for assessing the sustainability and societal impact of a company or investment.

1. Environmental (E)

The “E” in ESG focuses on a company’s environmental practices and its impact on the planet. Investors consider factors such as a company’s carbon footprint, energy efficiency, resource conservation, and commitment to environmental sustainability. Companies that prioritize reducing their environmental impact are typically favored in ESG investing.

2. Social (S)

The “S” in ESG takes into account a company’s social responsibility and how it treats its employees, customers, communities, and other stakeholders. This aspect evaluates diversity and inclusion, labor practices, community engagement, and product safety. Companies that prioritize social responsibility and ethical practices tend to perform well in this category.

3. Governance (G)

The “G” in ESG examines a company’s corporate governance structure, including its board composition, executive compensation, shareholder rights, and transparency in financial reporting. Strong corporate governance ensures ethical decision-making and reduces the risk of fraud or misconduct.

Why Does ESG Investing Matter?

While it might seem mundane to some, ESG investing matters for several compelling reasons:

1. Alignment with Values

ESG investing allows individuals and institutions to invest in companies that align with their ethical and moral values. It enables investors to support businesses that are committed to positive social and environmental change.

2. Risk Mitigation

Companies with strong ESG practices tend to be better equipped to manage risks related to environmental, social, and governance issues. By investing in such companies, investors can potentially reduce their exposure to risk.

3. Long-Term Performance

Numerous studies suggest that companies with strong ESG performance may perform better in the long run. The assumption here is that sustainable business practices can lead to improved financial performance and resilience. While the past years have been brutal for all funds alike, some results have shown that ESG investing has the potential to fare better yields.

4. Impactful Change

ESG investing encourages companies to adopt sustainable and responsible practices. Investors can play a role in driving positive change by supporting companies that prioritize ESG factors.

How to Incorporate ESG to Your Investments

If you’re interested in ESG investing, here’s how you can get started:

1. Educate Yourself

Begin by learning about ESG principles and how they apply to investments. Understand the specific ESG criteria that matter most to you.

2. Assess Your Values

Identify your personal values and priorities. What environmental, social, and governance issues are most important to you? This will help you align your investments with your beliefs.

3. Research Investments

Look for investment options that meet your ESG criteria. Many financial institutions offer ESG-focused funds and portfolios. You can also use ESG ratings and research tools to evaluate individual companies.

4. Diversify Your Portfolio

As with any investment strategy, diversification is key! Avoid putting all your funds into a single investment. Try to spread your investments across different asset classes and industries.

5. Stay Informed

Keep up with the latest developments in ESG investing and the performance of your investments. As the ESG landscape evolves, your investment choices should also be adjusted.

Conclusion

ESG investing represents a progressive and conscientious approach to investing that goes beyond financial returns. By considering environmental, social, and governance factors, ESG investors aim to make a positive impact on society and the planet while potentially achieving strong financial results. 

Whether you’re motivated by personal values or a desire to mitigate risk, ESG investing offers a unique opportunity to invest with purpose and contribute to a more sustainable and ethical future.

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When it comes to building wealth, compound interest is the most powerful tool you’ll have, All of the richest people you’ll ever know about will all have made use of compound interest.

But what exactly is compound interest, and how can it help you grow your wealth over time? Let’s dive into understanding what it is, and how you can use it to your advantage!

What is Compound Interest?

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.

– Albert Einstein

At its core, compound interest is the interest you earn not only on your initial investment or deposit but also on the interest you’ve previously earned. In simple terms, it’s “interest on interest.” This compounding effect can turn even modest contributions into substantial wealth over time. Rather than growing your money linearly, it will allow you to grow it exponentially.

Employing compound interest is also straightforward. Invest your money, and keep on reinvesting your profits.

Things to Take Note of

Here are some important things you need to take note of:

1. Time is Your Ally

The longer your money is invested, the more significant the impact. Starting early allows you to maximize its benefits. Even small, regular investments can lead to substantial wealth accumulation over time.

2. The Rate Matters

The rate at which your money compounds (the annual interest rate) significantly affects your earnings. A higher interest rate results in faster growth, while a lower rate will require more time to achieve the same results. Of course, there are also risks involved with investments that offer higher yields. Don’t worry though, starting with even just a small rate of return is better than not starting at all.

3. Compounding Frequency

The more frequently interest is compounded, the greater the effect. Common compounding periods include annually, semi-annually, quarterly, and monthly. The more frequent the compounding, the more your money grows.

Tips to Fully Harness the Power of Compound Interest

Now that you understand the power of compound interest, here are some tips to make the most of it:

1. Start Early

As mentioned, the earlier you begin investing, the more time your money has to compound. Make consistent contributions to your investments over the long term, and do it as frequently as you can. The importance of starting early cannot be overstated, which is why you’ll often hear it as well from others.

2. Invest Wisely

Choose investments that offer competitive yields and have a history of consistent growth. Make sure to know about the risks involved. Always remember that higher yields usually come with higher amounts of risk. But, if you’re savvy enough you can utilize higher yield investments while still managing your risks well. Of course, keep in mind to diversify your portfolio as well.

3. Reinvest Earnings

Instead of cashing out your earnings, reinvest them to take full advantage of compound interest. This is what allows your money to grow exponentially over time.

5. Avoid High-Interest Debt

While compound interest can work in your favor when investing, it can work against you when you have high-interest debt. Prioritize paying off high-interest debts to reduce interest expenses. Or even better, try to be as debt-free as you can.

Moving Forward

Compound interest is a powerful tool that can help you build wealth over time. It rewards those who start early, invest wisely, and allow their money to grow over the long term. By understanding the mechanics of compound interest and implementing the right strategies, you can secure a brighter financial future and achieve your wealth-building goals. 

Remember, time is your greatest ally when it comes to harnessing the incredible power of compound interest. Start today, and watch your wealth grow exponentially over the years!

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The financial landscape is evolving at an unprecedented pace. To succeed in this new era of wealth, you need to stay informed, adapt, and thrive. 

The Investa Summit 2023 is Investagrams’ flagship event. Every year we gather the best and most inspiring individuals in across industries. It is designed to show Filipinos that we need to be ready for new opportunities, new trends, and a new era of wealth. With over 7 successful summits previously held in the Philippines and Singapore, this time we are bringing in more value, more learnings, and definitely more impact to the lives of our attendees. 

Investa Summit 2023 will cover a wide range of topics that are shaping the future of wealth creation:

• How To Stay Prepared and Spot The Next Bull Market
• The Rise of Digital Banks: A Paradigm Shift in Financial Services
• Innovation and Disruption: Running a Business in a Rapidly Changing Business Environment
• Building Wealth for the Future: Key Principles of Financial Planning
• The Power of AI: How to Take Advantage of AI to Drive Profitable Business Growth

Investa Summit 2023 Speakers

This event will feature a lineup of industry-leading experts who will share their knowledge and experiences. Some of the speakers include JC Bisnar of Investa, Akio Kashiwagi of Money Growers, Nikki Yu of Awesome 10x and RJ Ledesma of Mercato Centrale. We’ve gathered experts from the world of trading, business, real estate and more to provide a holistic experience on what the world of finance is today. 

Meet Everyone IN-PERSON!

For the first time in three years, we’re going live! Our physical event will be held on Saturday, October 21, 2023, at the AIM Conference Center in Makati, Metro Manila. This exclusive gathering is open to VIP Ticket Holders who will also have access to the online event.

For those attending the physical event, you can get to witness panel discussions from the best and the brightest about the state of the market today and the future of the Blockchain industry. You can also meet industry-leading experts and be able to network and meet them all together in one space. 

Investa Summit 2023 offers you the opportunity to gain invaluable knowledge and insights that can shape your financial future. 

Be ready for new opportunities, new trends, and new shifts in mindset. 

Be ready for the New Era of Wealth. 

Get your tickets at investagrams.com/investasummit

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Investing in the stock market can be both exciting and intimidating, especially for beginners. There are countless metrics and indicators to consider when evaluating potential investments. One such indicator that can provide valuable insights for novice investors is a stock’s relative strength. 

Popularized by renowned market wizards such as William O’Neil and Mark Minervini, a stock’s relative strength can let you know which stocks are of higher quality through price action.

Let’s dive into relative strength and how it can help traders perform better!

Understanding Relative Strength

Not to be confused with the RSI, a stock’s relative strength compares its performance to a broader market index. This comparison helps investors gauge how well a particular stock is doing in relation to the overall market.

In portfolio management, this can be likened to a stock’s alpha. The higher the alpha or relative strength, the stronger a stock has been compared to the market as a whole.

Why a Stock’s Relative Strength Matters

“I made 99% of my profits in the stock market by trading in leading names.”

– Mark Minervini

One of the primary reasons investors look at a stock’s relative strength is to identify if it outperforms versus others. When a stock consistently shows strong relative strength, it suggests that the company is doing better than others in the same industry or sector. This can be a promising sign for traders and investors.

Furthermore, a stock’s relative strength really shines during market retracements. A stock with strong price action during a broad retracement indicates the potential to be a market leader. This is due to the fact that when the market experiences downturns, fund managers will usually cut off lower quality stocks first. In effect, higher quality stocks will experience a weaker selldown which causes them to have a high relative strength reading. 

Using Relative Strength in Your Investment Strategy

Now that you understand what relative strength is and how to calculate it, here are some practical ways to incorporate it into your investment strategy as a beginner:

• Screening for Strong Performers: As you regularly screen through the market, you can make it a habit to look for stocks that have a high relative strength or appear to be stronger than others. When the market is rallying, the stock shouldn’t be lagging behind others. On the other hand, as other stocks break below support levels during market turns, the stock should be staying strong above key levels. These stocks may be worth considering as top options for your investment portfolio.

• Confirmation of Buy or Sell Signals: When you’re considering buying or selling a stock, check if it’s significantly lagging behind other stocks. It’s normal to break out or rally a bit later than the broad market. However, if the delay is significantly long, it may be a sign that the stock’s relative strength is low.

Conclusion

Relative strength is a valuable tool for anyone, from beginners to experts, in the world of investing. It provides a simple yet effective way to assess a stock’s performance compared to benchmarks. By understanding and using relative strength, you can make more informed investment decisions as you add an extra layer to your stock picking criteria.

Remember that while stock’s relative strength is useful to know, it isn’t the holy grail of trading. It should always be used as a tool within your strategy.

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We all face countless decisions every day. From choosing where to eat for lunch to deciding whether to invest in a new car or stick with the old faithful. These choices often involve weighing the costs against the benefits. It isn’t that hard when the decisions are low-stakes. However, things become difficult when bigger decisions need to be made, such as buying a car or a house.

That’s where a personal cost-benefit analysis comes into play. Let’s break down what a cost-benefit analysis is, why it matters, and how you can conduct one to make informed decisions about your finances.

What Is a Cost-Benefit Analysis?

A cost-benefit analysis is a fancy term for a simple concept. It’s a way to compare the benefits and costs of different choices before making a decision. This is often done within businesses and corporations. However, it can also be a powerful tool for one’s personal finances.

Why Is It Important?

Making informed financial decisions is crucial to achieving your financial goals. Whether it’s buying a home, going back to school, or planning for retirement. Here’s why conducting a cost-benefit analysis matters:

• Clarity: A personal cost-benefit analysis helps you see the full picture. It forces you to list all the costs and benefits, making it harder to overlook different factors.
• Avoiding Regret: By analyzing the potential outcomes in advance, you can avoid making impulsive decisions that you might regret later.
• Efficiency: A personal cost-benefit analysis can save you money and time by helping you choose the option that offers the most significant benefits relative to the costs.

How to Conduct a Personal Cost-Benefit Analysis

Now, let’s dive into the steps for conducting a personal cost-benefit analysis:

Step 1: Identify Your Decision

Start by clearly defining the decision you need to make. It could be anything from buying a new phone, to changing where you live.

Step 2: List the Costs

Enumerate all the costs associated with each option. This includes not only the price tag but also any ongoing expenses or potential hidden costs. Make sure to be thorough in your assessment. 

Step 3: List the Benefits

Then, list all the benefits you expect to gain from each option. For example, if you’re buying a vehicle you can list how much you will save versus using ride-hailing apps. You should also list down financial benefits that involve any business endeavors with the purchase.

Step 4: Assign Values

Assign a monetary value to each cost and benefit. This step may require some research or estimation. It can also be especially hard for intangible benefits such as time, but try your best to come up with a value for it. Make sure to be as objective as possible, and keep it aligned to your personal values and goals.

Step 5: Compare and Analyze

Now, it’s time to crunch the numbers. Subtract the total costs from the total benefits for each option. The option with the highest positive balance represents the best choice. From this, you can make an informed decision. 

Should You Conduct a Personal Cost-Benefit Analysis?

Conducting a personal cost-benefit analysis might seem like a daunting task at first, but it’s a valuable tool that can empower you to make well-informed financial decisions. By breaking down your choices, considering all the factors, and assigning values to costs and benefits, you can make choices that align with your financial goals and lead to greater satisfaction and success in the long run. 

So, the next time you’re faced with a major decision, give a cost-benefit analysis a try – your future self will thank you for it!

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