In the news is the start of government bonds auction through an electronic network system. This means government borrowings will be auctioned off to accredited buyers and the transactions will be speedy. With an enhanced system it will not be long before a secondary market for government bonds will be established. This will result to increased domestic borrowings by the government complementing fund from other sources. The secondary market hopefully will fast tract the scheme to enable not only institutional investors but individual investors as well and attract people with surplus to invest in government bonds. Align with this development is the opening of the stock market in October. Trust in the market is an important element as private companies move towards a regulated market.
To attract investors and generate funds, the companies are expected to be more transparent with its governance and management practices. Any uncertainty or suspicion of wrongdoing will eventually scare the investors away. The stock exchange is presumed to be doing the policing and ensuring that listed companies are transparent, not practicing insider trading and accountable to its investors. Credibility will be the cornerstone of the stock market for it to fourish.
These initiatives boost the gradual development of capital markets in the country.
There will be more options for investors to park their money and generate higher yield with manageable risks. Institutional investors like insurance companies will initially beneft from these developments. As the needs for more funds escalate, other instruments will also be introduced to motivate individual investors to invest their money in these markets.
In most countries with robust capital markets, mutual funds develops as the instrument for individuals to invest in these markets and partake of the advantage of higher yield. Mutual funds are companies whose main business activity is investing in capital markets. It allows individual investors to avail of the higher yield compared to normal bank products like savings deposit or long term deposit. It derives its income from the yield of the bonds and the stocks of the companies where it has investments. Investors buy a share of the mutual fund company and its yield is determined by the net asset value per share (NAVPS) of the company. Mutual funds are advantageous to individual investors since it take out the complexities of directly investing in bonds and stock markets.
An individual will not have to crack his head selecting the ideal companies to invest in since professional analysts in the mutual fund company are doing it for them. Mutual funds also are able to manage risks by designing products that meet the individual investor’s risk appetite. One product may be mainly government bonds that have predictable returns. Another product can be mainly stocks whose yield will be tracked based on the performance of the companies in the stock market, suited for those with higher risk tolerance.
The development of capital markets and fnancial instruments and making it available to individuals is timely for an emerging economy like Myanmar. As the number of middle class and the young urban professional increases, the level of fnancial literacy is also improving. The need for more information on how and where to invest will be greater and hence a need for more information.
Those with large amount of surplus, this will be part of their wealth management portfolio. For those with minimal surpluses, maximizing yield for their savings will be a priority. As the people are becoming investment savvy in the midst of various investment instruments, personal fnance as a service and a discipline will emerge. Personal fnance as a discipline covers skills on how income will be managed. This covers activities like allocating funds so as not to overspend, enjoying the fruits of one’s labor, savings for the future and investing for maximum yield, all within the context of the existing income of the person. Savings and investment is particularly the hardest part of the discipline as individuals are more tempted to spend and enjoy their income instead of setting aside for the future. With the variety of gadgets, coffee shops, fashion and other amenities of modern living widely available, the temptation to buy is more than the incentive to save for the future.
More extreme is the situation where individuals spend more than what they earn through credit cards. Plastic money, as credit cards are also called, allows the holder to spend money even before they earn it.
Sad stories of bankruptcies abound not only in developing but in developed economies as well. Some people maintain a lifestyle that cannot be fnanced by their income and are using credit cards without thinking of its consequences. Credit cards in Myanmar are still limited, with even less than 10% of the people have bank accounts. It will not take long as the banks began to upgrade their products and services, credit cards will be one of the services that will be highly promoted and marketed.
It is in this perspective that the demand for fnancial advisors and fnancial planners will emerge. More people will require expert advice on how to manage their fnancial resources. There are four main items that will be covered by personal fnance not necessarily in this order are as follows:
The frst is retirement. People who have worked for decades would like to live off in calm and serenity in the remaining days of their lives. Some would like to go on tour around the world and see the places they only see in television and magazines. While some would like to embark on enterprises.Whatever the plan, the nest egg should be enough to provide for the activities during retirement.
The second is housing. One of the main basic needs is a place to call your own. With the current prices of real estate in Yangon and in other cities, it will be very hard to have a house in the city. Living in the suburb will also require additional expenses like car and its maintenance. Third is college education for the children.
