As people grow older, their priorities change a lot. Most of the time, it is about having a stable life and comfortable retirement years ahead.
Knowing that these people care for their future is an indicator that securing one’s future through valuable investments always has a significant impact on everyone.
If you are financially literate, you are most likely to be investing your money instead of putting the whole amount at the bank, which yields lower interest rates than most investments today.
Regardless of the amount, if you don't know what to do with the money you have on hand, everything will just be wasted.
Do not let your hard-earned money go to vain.
The best advice for beginners is to save according to what you can. Do not rush everything and make sure that your money does not sit in the bank - it is always better to invest it into something more valuable.
Invest early. This is one of the best pieces of advice that every young Filipino professional and entrepreneur should know.
Most people say that now is not the time to invest in something, but that is a common misconception.
There is always no “perfect time” to invest because every day is always an opportunity if you are ready for it.
Before diving into the topic any further, here are the things that you will learn.
- Types of Investments
- Compound Interest Defined
- How much should I invest now?
- How to invest wisely?
- 20 Best Investments for Filipinos this 2021
Types of Investments
Investments come in many forms.
There are many types of investments you can explore and invest in depending on your interest and capability.
Things like stocks, bonds, real estate, and insurance are just some of the things that you may have heard about already.
But, there is always more than that. Take a look at their differences and learn about other different types of investments in this guide.
Annuities are insurance contracts. They provide a fixed income stream for a certain time in a person’s lifetime or until death, depending on the agreement. Just like regular life insurance, annuities require you to pay premiums within a specific period or pay it in full in one go.
In the Philippines, an annuity is governed under Sections 181 and 182 of the Amended Insurance Code, which provides the provisions for contracts of annuities.
Annuities are created and sold by financial institutions, which accept and invest funds from individuals and then, upon “annuitization,” issue a stream of payments at a later point in time.
The most popular insurance companies in the country like Sun Life, Manulife, and Pru Life offer annuity products.
2. Bank Products
Banks are known for offering investment products to the public and, most of all, their clients. However, banks do not provide one type of investment only. They have a lot to offer to you aside from a savings account, such as certificates of deposit (CDs), money market, bonds, bank-granted insurance, UITF, and mutual funds.
3. Bonds and Stocks
Bonds are technically loans offered by an investor to governments and corporations. The borrower will pay the specified interest on the borrowed amount within a predetermined timeline in this scheme. This is because the principal amount should be returned upon the maturity date.
On the other hand, stocks are units of ownership in a corporation. You technically buy “units or shares” to become one of its “owners.” With this kind of investment, you are gaining interest in the money you invested depending on the daily stock market forecasts while giving you the spot as one of the company’s owners.
4. Investment and Retirement Funds
The best example of an investment fund is the mutual fund. In this kind of investment, the funds are sourced from various investors. On the other hand, a retirement fund ensures that you have a steady cash flow or pension upon retirement.
Insurance is the most common type of investment among Filipinos. It protects the insured person against potential financial loss and damage by charging the policyholders premiums.
6. Real Estate
For others, owning several properties means investment. This notion is still correct because real estate properties have huge value in the market. This form of investment generates income through purchasing, leasing, or selling a property for a higher price than the original. This is because the real estate value appreciates fast all the time.
What is compound interest?
For sure, you are already familiar with what interest is. Pretty much, it is the amount earned over a certain time.
However, it is not similar to compound interest at all.
This is because, unlike the normal interest, compound interest is the resulting interest based on your initial investment plus the accumulated interest gained in compounding periods like daily, weekly, monthly, or annually.
Another way to understand it is by using the concept of “interest on interest.” It always grows double because it affects both the principal amount and its earnings.
Furthermore, three things are required to make compound interest work: money, earnings, and time.
Money will serve as your initial investment, and the earnings represent the compounded interest that continues to grow over time.
Hence, if you want to get the best out of your investment, availing those with compounded interest is not a bad idea at all.
How much should I invest now?
This question is tricky, but a straightforward answer is this: you do not need a million to get started.
To be honest, you can start investing based on what your current budget can afford.
But, if you want to get some benchmark figures, here are some numbers you can work on.
- Mutual Funds - minimum of ₱100 to ₱5,000
- Stocks - minimum of ₱5,000 to ₱1 million
- Time Deposit - minimum of ₱1,000 to ₱100,000
- Unit Investment Trust Fund - minimum of ₱25 to ₱10 million
Here is a piece of advice, though: start investing with the minimal amount of money required. After, give it some time and evaluate how well it performs before adding more money to invest.
How to invest wisely?
Investing wisely is more about utilizing your free will and common sense. You always have the judgment to say no to any good-to-be true investment schemes.
So, there! If you can have this kind of mindset, trust yourself to invest in something worthy.
Moreover, it always pays to do your research and convince yourself that everything is good and will yield good results in no time.
20 Best Investments for Filipinos this 2021
So much for the types of investments to explore; what about the best investments to check? Brace yourselves with this list of 20 investments this 2021.
1. Exchange-Traded Fund (ETF)
Exchange-Traded Fund or ETF requires a minimum investment of ₱2,000 to ₱5,000. However, this amount still depends on the market price.
The concept of ETF is similar to stocks, although it is most similar to mutual funds (MFs). The ownership of ETFs is also in the form of shares, but they can be traded anytime in the market within the trading hours, unlike the MFs.
2. Social Trading
As the name suggests, social trading allows traders to interact with fellow traders. The exchange and interaction between the investors are done through an online platform. The usual minimum amount for investment is $100.
In the Philippines, platforms like eToro and ZuluTrade are the most prominent in making the investing process simple and accessible to everyone.
However, you should understand that it is not always possible to gain too much from it unless you fund your account with a huge amount of money.
3. Modified Pag-IBIGFund MP2
This new offer from Pag-IBIG provides Filipinos with the opportunity to invest as low as 500 pesos a month. It is a savings program that promises higher dividend earnings (8.11%) than the regular Pag-IBIG savings program.
To avail of this, you should be an existing or former Pag-IBIG Fund member with at least an equivalent of 24 monthly savings. You can withdraw your earnings annually or get them in full after five years.
4. Insurance (VUL)
As you may know, insurance these days are offered as VUL or Variable Universal Life. the minimum investment is ₱2,000 to ₱3,000.
To better understand what VUL is, here is a definition from Investopedia: a VUL is a form of cash-value life insurance. Frequently, it is offered as a death benefit and an investment bundle.
As for the bonds, the minimum amount required to get started is 5000 pesos. Technically, the concept of bonds is similar to loans, and the only difference is based on who the borrower is.
It is generally grouped into two:
- Maturity-based bonds such as treasury bills and treasury bonds are classified according to the length of time they will mature.
- Issuer-based bonds such as treasury securities, government bonds, municipal and corporate bonds are classified based on the issuing institution.
To avail bonds, you can go to most local banks that offer bonds or inquire directly to the concerned agency.
6. Micro and Peer-2-Peer (P2P) Lending
The minimum amount of investment required for any micro and P2P lending is around P1250. These two other options are enticing to most millennials and other investors because they invest their money on a platform with ensured users.
For example, in P2P lending, the system is simple because borrowers will just have to go to the website or apply for a loan. On the other hand, investors wait for the borrowers to pay them the interest and grow the money exponentially.
Through the years, the stock market has shown promising results. With just a minimal amount (usually P5000), you can already explore this investment opportunity in one go.
However, others are still afraid of its concept, especially those who have no idea how this works. But, it should not be the case because learning stocks and their fundamentals are not that hard.
Stocks technically mean buying shares of the company you are interested in investing in. Companies that offer stocks are also diverse - ranging from the big conglomerates to the small to medium enterprises.
8. Mutual Funds and UITF
If you are looking for a way to invest with just a very small amount as starters, try mutual funds and Unit Investment Trust Fund or UITF.
In the Philippines, the company that oversees mutual funds is the Philippine Mutual Fund. It is an investment company under the Securities and Exchange Commission (SEC) that manages the money from the investors.
On the other hand, UITF is somehow similar to mutual funds, except that banks manage it than a mutual fund company.
Here are the four types of mutual funds and UITFs offered here in the Philippines.
- Money market funds
- Bond funds
- Balanced funds
- Stock or equity funds
9. Real Estate
With real estate, you always have higher chances of gaining significant profits through the buy and sell scheme. That is if you do not own foreclosed properties.
But do not get this wrong. There is always a big opportunity waiting for investors interested in foreclosed properties.
Filipinos who are financially literate know that being an employee is not forever. It is important to look for ways to have a steady income without relying too much on employment.
Like the usual investments, it is also a risk to start a small business, but you should not give up. There are so many options available for you to get started.
One of these options is franchising. Starting your own business from scratch is tedious and entails much work and business model testing for years. However, with franchising, you are assured of having a company with a proven business model that works and generates income.
It is a safe way to keep your life going even after you stop working already.
11. Real Estate Investment Trust (REIT)
REIT is a company that operates income-generating commercial spaces such as office buildings, hotels, and shopping malls.
In short, REIT allows the investor to earn money through the rent collected from tenants that occupy their spaces at the specified location.
This process allows investors to generate income without actually buying a property and leasing it to a tenant.
All you need is just a stock brokerage account and platform to buy and sell stocks issued by REITs.
Ever since the era of bitcoins, the idea of cryptocurrency has been thriving until now.
In a nutshell, cryptocurrencies are virtual money. They are not tangible and not regulated by the Bangko Sentral ng Pilipinas. Given this, they are not technically accepted as a form of payment, although some merchants allow that as a medium of exchange. Most of the time, these are used as payments when trading.
Here is one thing you should remember when it comes to cryptocurrencies: use them at your own risk. Although the features of cryptocurrencies are enticing, you have to understand that there are still risks associated with them.
So, always do your research first before investing in this one.
13. Passive Income
If you wonder why passive income is on this list, just think about investing in something that will generate extra income.
You see, having a side hustle is not always about working for another person to get paid. Sometimes, this extra income comes in the form of investment.
But, do not be afraid. The kind of investment you need to have for any passive income is not big - only a minimal amount to get started.
For example, if you want to start a website for blogging, you will need to pay for hosting and domain registration at one point in time to launch the site properly.
From there, you can start monetizing it by putting relevant content, creating an AdSense account, and wait for the money to come in!
14. Forex Trading
Like stocks, forex is a captivating investment option for investors because you can start exploring this market for as low as $100 or ₱5,000.
Unknown to many, the forex market is the largest and most liquid market in the world. There is so much opportunity going on here that Filipino investors should also explore.
If you are interested in forex trading, the best way to get started is to find a legitimate and trusted broker to help you.
15. Venture Capital and Private Equity or Angel Investing
One thing you should know about the three terms above is that they differ from each other.
Venture capital is an investment that is quite risky because the investors here literally start with huge amounts of money. Often called venture capitalists or VCs, they are open to investing the payment to the company or business after a thorough evaluation of your business proposal.
Again, this investment is risky on the investor’s side but always opens the potential for significantly higher returns than usual. So, it is still worth a try.
Private equity or angel investing are composed of angel investors. They are business professionals with high net worth investing in promising companies. If you want to invest in this one, check out Angel Invest Network, which connects Filipino entrepreneurs to angel investors.
16. Personal Equity and Retirement Account (PERA)
The PERA investment is a government-initiated scheme that follows the 401K and Individual Retirement Account (IRA) of the United States.
It is governed and established through Republic Act 9505 and is defined as a voluntary retirement investment program.
Somehow, it is a long-term saving program that aims to serve as an additional source of funds upon retirement, aside from GSIS or SSS pensions or any form of retirement benefits from an employer.
17. Skills Enhancement
As they say, it pays to invest in yourself.
Well, other than investing in your looks and other things, why don’t you consider improving your skills? Invest in some online courses that promote personal development or skills training that will further add value to your value in the workforce market.
Remember that there is always competition in the corporate world. You need always to be the best version of yourself to beat the competition.
18. Land Partnership
If you want to invest in real estate in a less complicated way, consider doing a land partnership. All you need to do is look for a real estate development company that offers this kind of partnership.
Given the booming e-commerce market, dropshipping remains one of the best businesses to invest in. It is one way to secure a better future for yourself since it gives you a steady income without manufacturing the products by yourself.
Lastly, you should not forget the cooperatives or COOPs. There are many kinds of cooperatives in the Philippines to look into, offering products and services to members, including deposit accounts that can earn interest. You may want to check one located near you.
So, here you go. You have got this long list of investments to check on, but what’s next?
Unless you act right on and do something for yourself, these suggestions are just written words. You need to ensure that you have a solid action plan beforehand before starting the investment, and it is best if you can have that as soon as you decided to invest.
Remember that this is money - something that you should know how to handle properly.
In the end, we hope to see you have a better life after making wise investments. Cheers!
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