I. What is Financial Security?
Many people believe that financial security only comes when you become a millionaire, but its meaning can vary from person to person. Financial security refers to a state of having enough money to meet your basic needs, such as food, shelter, clothing, transportation, healthcare and other essential needs. Financial security represents the ability to live comfortably and provides peace of mind, which means you do not constantly worry about money because you are in control of your financial situation.
II. How to achieve financial security?
A). Assess your financial situation
A sound financial plan is the foundation to achieve financial security, and it starts with a thorough analysis of your current financial situation. Everyone has a different financial situation, and understanding your expenses is essential for achieving financial security. Your income, expenses, assets, liabilities, risks and goals are all components of a successful financial plan.
B). Set financial goals
Once you've assessed your current financial situation and identified any immediate needs, the next step is setting clear financial goals. Whether buying a house, purchasing a car, taking a vacation or helping family members financially, your goals should be specific and bound to a timetable.
C). Track your income and expenses
The next step after assessing your situation and setting goals is to track your income and expenses. This process helps you understand where your money is going to and allows you to manage it more effectively. It will also help you prioritise your spending and adjust unnecessary spending habits and avoid the mindset of “a low salary/income is enough; a high salary/income is equally enough”. To track your finances, you can use a mobile app, record your income and expenses in a note book, or any other method that works best for you. Consistency is key, so practice regularly and adjust your strategy as needed to make tracking more effective.
III. Investing in the Stock Market
Investing in the stock market is an excellent option that offers the potential for high returns in the long term and can help you achieve financial security.
1. Stocks
A). Capital Gains: are the profit earned from the increase in the price of a stock from the time of purchase to the time of sale.
Example: An investor purchased shares of the Sihanoukville Autonomous Port for 5,040 riel on May 8, 2017 and sold them on March 3, 2025, at11,840 riel. The capital gain is 6,800riel per share.
B). Dividend: refers to the distribution of a company’s earning to its shareholders and are determined by the board of directors as stated in the disclosure documents. Dividends are typically paid quarterly, semester or annually which depending on the number of shares held and multiplied by the dividend per share.
Example: an investor buys 50 shares from a company that has announced it is to give a dividend of 500 riel per share, so the dividend received is 25,000 riel.
C). Ownership: by purchasing shares, you gain partial ownership of the company, entitling you to a share of the company’s profits. As a shareholder, you also have the right to vote on certain company decisions, with voting power proportional to the number of shares you hold.
D). Diversification: involves spreading investment funds across various financial instruments or companies from various sectors. In the stock market, diversification is a strategy that helps reduce investment risk and increases the potential for profit by investing in a variety of financial instruments or companies and minimizes losses.
E). Tax Incentives: is a crucial strategy in development of the securities in Cambodia. Public investors shall gain a 50% reduction of withholding tax on interest and/or dividends earned from holding and/or buying-selling stocks.
2. Bonds
In addition to investing in stocks, bonds provide another solid investment option for achieving financial security. Bond investments offer several key benefits:
A). Fixed and regular interest income: bonds are low-risk investments that pay regular interest, also known as coupons. Furthermore, the issuer is obligated to repay the principal amount when the bond reaches maturity, which typically ranges from 1 to 10 or 20 years.
B). Tax incentives: Similar to stock investments, public investors receive a 50% reduction in withholding tax on interest and/or dividends earned from holding or buying and selling bonds.
C). Tradability: bonds are tradable in the securities market, which means you can sell your bonds before maturity at a negotiated price. This provides liquidity, allowing you to convert your investment into cash without losing interest, unlike a fixed deposit at a bank.
D). Priority in receiving repayment: in the event of an issuer’s bankruptcy, bondholders receive priority in payment.
***Disclaimer: This article has been compiled solely for informative and educational purposes. It is not intended to offer any recommendations or as investment advice. The Securities and Exchange Regulator of Cambodia (SERC) and the Phnom Penh Post are not liable for any losses or damages caused by using it in such a way.
Prepared by ៖ SecuritiesandExchangeRegulator of Cambodia,
Department of Research, Training, Securities Market Development and International Relations
Email៖ [email protected]
Telephone៖ 023 855 611
