In the news in these Covid-19 days are stories and issues that have to do with what are called investment instruments. These are where people can place their money with the hope of gaining or multiplying it. A savings account is one, but the returns are hardly anything to really count on as these just give back about one percent interest per annum (p.a. or one year). That’s one peso for every P100 you put in the bank if you keep it there for one year. Recently there are a couple of digital banks – banks that operate purely online and have no physical bank operating – that offer up to four percent interest per annum.

There are a multitude of these investment instruments, but two types have come to make the news in a big way. First is the stock market. As of recent news reports trading in stocks seems to have leapt into life despite the negative effects brought by the pandemic. While certain businesses are closing, others seem to be thriving or at least have signs of growth with some reinvention, innovation and a lot of government assistance for being essential.

The idea behind buying stocks is that you are buying a piece of the company, and if it does well then you get part of the profits through dividends.

Others, though, trade the stocks. They buy stocks of a company, betting on the forces of supply and demand to make money. If a company is not so much in demand in the stock market then it will fetch a low price. Once demand builds up the price will go up, and the trader can sell his stocks at that higher price. Profit.

Serious fulltime traders maintain a whole set of stocks of varying companies. They call this a spread. It’s like betting on a number of companies where some win and some lose. That’s ok. What is important is that the wins are more or higher than the losses.

Companies get their shares or stocks listed in the Philippine Stock Exchange (PSE) to raise capital for their investments. Thus, while Jollibee was getting franchisees to finance their new stores, they quickly raised billions of pesos when they got listed or had what is called an Initial Public Offering or IPO.

A couple of months ago MerryMart, the new retail company of Injap Sia, had its IPO and it seems it was snapped up by buyers (the offer just ended last June 5 and listing started June 10). Of course, its attractiveness and viability as an investment depends heavily on its prospectus, which is a mix of its positive image like Sia’s business track record with Mang Inasal and Double Dragon, and its plans on how they will use the new investments.

If there is a recurring theme with investment instruments is that there are betting activities for investors. The truth is that this is gambling. You lay out your money, betting on a company and with that bet you have both the proceeds on the wins and share the risks in cases of loss. Now the bigger the risk, the bigger the possible returns. So, with stock trading the risks are higher but so are the potential returns while the basic savings account has a very low yield because the risk is kept at the bare minimum.

Another investment instrument in the news - - thanks to the issues surrounding the renewal of AbS-CBN's broadcast - - are Philippine Depository Receipts or PDRs. This is a financial instrument that many other companies use to raise capital without granting equity or ownership to investors. One other media company that resorted to this is TV network GMA. This is a purely financial instrument where the PDR holder basically placed a bet on somebody, but does not own that company.

Francis Lim of ACCRA law firm and former PSE president put it plainly: PDRs are like bets in horse racing. If the horse wins, the bettor shares in the winnings but does not own the horse or have a say about its management, conditioning and training.

Quite simple, right? Apparently not for some members of the House of Representatives who, despite the clarifications of the lawyers and regulators of these financial instruments such as the Securities and Exchange Commission (SEC), assert that these PDRs are to their view the same as shares of stock and ownership. Whether that is right or wrong is a subject for another time.