Investing in stocks has traditionally been viewed as a hedge against inflation, and is one way to build wealth over time, especially if you’re looking to grow your savings in the long-term.
Over the past 35 years (since 1987), we have seen how our consumer price index has grown steadily by an average rate of 6.32 percent per year. Such growth in prices, if you are not noticing it, could create a negative compounding effect on your investment.
For example, if you had P100,000 savings in 1987 and you kept it in a bank account that pays an interest rate of 1.0 percent per year, the purchasing power of your money would have eroded to only P17,164 in today’s value.
But if you invested your money in stocks and held on to it for the long-term, you might have a good chance of protecting and even growing it over time depending on the quality of stocks that you bought.
This is because stocks, as shown by the historical growth of Philippine Stock exchange (PSE) index, have generated an average return of 8.07 percent per year, higher than the annual inflation of 6.32 percent, over the same 35-year period.
Investing in stocks that have provided good returns in the past can help lessen your risk of making mistakes. Although there is no assurance that the same growth will continue in the future, making safe bets on stocks like blue-chips is one good way to start off your investment journey.
Blue-chip stocks are generally well-established companies with a reliable track record of profitability and financial stability. They have flexible pricing power that give them the ability to pass on the effect of inflation to their customers over a period of time.
There are 30 blue-chip stocks that compose the PSE index, but for purposes of establishing a historical track record, we will consider only stocks that have generated the highest annual returns in the past 25 years.
Here are the top five blue-chip stocks that every investor must have… Click here to read more
