Is it still profitable to invest in the PSEi?

This is a classic question, and there are many layers to any potential answer. At the bottom, at the foundation, is the notion that investing requires getting your financial house in order (building an emergency fund, saving enough to invest), and that’s always a profitable thing to do for yourself personally. Assuming you did those things in order to invest in the PSEi, I’d say it’s a worthwhile thing to do. 

Above that, the act of budgeting to be able to save the money and not spend all (or more than all) of your income, and developing that habit of saving and living within your means, are both things that would be profitable if they were done in order to invest in the PSEi. 

Now, with respect to what you do with your money for investments, this is where things get more complicated. By “PSEi”, I’m going to assume that you mean the index, which tracks the top 30 stocks on the exchange, and for the sake of this example, I’m going to assume that your approach to investing in the PSEi was to simply buy FMETF [FMETF 103.70, up 1.1%], which is an exchange-traded fund that invests in PSEi stocks to track the index as closely as possible. 

I don’t think that investing in the PSEi through the FMETF is automatically profitable. I don’t mean that from the perspective that all investments carry risk and that the FMETF is not guaranteed to deliver profits, though both are true; I mean that to say I’m not confident that money invested today in FMETF would grow significantly at some point in the future. Our broader equity market is notorious for moving sideways, as opposed to the US equity market, which has a prominent upward bias over long time periods.  

There are some sectors that are doing amazing, and there are some stocks within the PSEi that are doing very well, both from a price action/technical perspective (short-term) and a fundamental perspective (long-term). But I’m just not as confident in the argument for investing in the PSEI more broadly, like one might suggest to new traders in the US. “Time in the market” is not the way to beat inflation here.

I understand that my answer is cagey. Despite what I’ve said, I could get behind someone investing in the FMETF as a part of some savings habit that looks to push cash into the market with each paycheck. I could get behind someone investing in specific stocks within the PSEi (or outside of it) if they had the knowledge and experience necessary to fully appreciate the risks of doing so. 

Generally speaking, when someone asks a question like this, they’re usually not someone who is looking to leverage the FMETF as a savings vehicle or someone with enough trading knowledge to execute specific stock trades, so I’m going to adjust my answer to speak directly to the most likely context to the question.

I personally do not like the prospects of investing in the PSEi (the index) right now. There are fantastic stocks and great sectors, but unless you have the knowledge and time to place those trades, you are much better off putting your hard-earned money into something more defensive, like AAA Robo’s Passive Income Portfolio [link]. It’s a “set it and forget it” type of solution that aims to deliver an annual return of 6.0% by investing in a broad basket of dividend-generating stocks. It’s not going to make you rich, but it will (most likely) protect you from losing money on inflation and could potentially grow your money. For a deeper discussion of the Passive Income Portfolio, please check out the Inside the Boardroom interview [link] I did with AAA Robo’s Technical Partner, Michael Tan, and his answers to MB reader questions [link].