Which is better: trading in the US stock market or PSE? We know that investing in the stock market can be a great way to build wealth over the long term, but where should you invest?
Let’s take a look at the main differences between the two markets:
Market Size and Capitalization
The PSE and the US stock market have quite different sizes and capitalizations, which is one of the biggest disparities between the two. As of December 31st, 2022, the US stock market had a total market capitalization of nearly $40 trillion, compared to the PSE’s market capitalization of 305.645 USD billion as of February 2023.
Trading Volume
The volume of trading between the two marketplaces is another important distinction. The US stock market is one of the most active in the world, with a daily trading volume of about $250 billion. In comparison, the trading volume for the PSE is considerably lower, with an average daily volume of roughly $109 million.
Performance
The returns on investment can be considerably impacted by a stock market’s performance. The US stock market has fared remarkably well over the past ten years, with an average yearly return of almost 14.5%. In contrast, throughout the same time span, the PSE returned an average of around 5.8%. This comparison shows the potential for better gains in the US market, while previous performance is not a guarantee of future returns.
Investment Options
A wide variety of investment alternatives are available on the US stock market, including large-, mid-, and small-cap equities as well as a number of sector-specific mutual funds and exchange-traded funds (ETFs). On the other hand, the PSE in the Philippines is more concentrated on large-cap stocks. Its concentration may limit the alternatives for diversification even if it may offer investment opportunities for investors interested in the Philippine market.
Other thoughts
About the PSE
- I hate that there’s only one publicly traded ETF in the Philippines.
- There are no trading platforms that allow you to buy fractional shares.
- The board lot system when buying/selling shares is too restrictive.
- Lower tax on dividend earnings.
About the US stock market
- The tax on dividends that you get from US stocks is higher at 25% compared to PSE’s 10%.
- I like the fact that they have multiple ETFs that you can choose from.
- Most platforms that allow you to buy US stocks offer the ability to purchase fractional shares.
- Well-known big brands are in the US stock market.
Hands down, it’s clear that the US stock market is the better option. That said, I do own shares of companies listed in the PSE. I stopped adding fresh funds though because I’m focusing on the US stock market. However, the dividends that I get from my current portfolio on BPI trade get rolled back in for peso cost averaging.