You have seen the viral story on the 52-week challenge in which you consistently set aside a part of your salary or allowance. By saving Php10.00 per day, increasing by Php10.00 every week, you can save up Php13,780.00 in 52 weeks. What makes this story amazing is the fact that it’s not easy to save money consistently even if it’s only for several pesos. Sadly, many employed Filipinos are still surviving on a paycheck-to-paycheck basis. The Philippines has one of the lowest savings rate in Southeast Asia, according to the Bangko Sentral ng Pilipinas.
With a low savings rate, it’s no wonder why very few Filipinos bother with investing. Saving up is not the end of it all. You should be placing your money in investment vehicles that will reap returns. As the saying goes, let your money work for you.
It’s never too late to get your finances, and life, in order. What’s important is you commit yourself to your financial goal and keep on learning. Explore recommended investment tools for millennials.
Mutual funds in the Philippines for beginners
These recommendations are extended on the premise that you’re debt-free or at least keeping your obligations up-to-date. Remember that investing must only be done when your bills, loans, mortgages, and other obligations are taken care of. It’s also a rule of thumb in personal finance that sufficient health and life insurance coverage go before an investment portfolio.
Start your journey in stock investing with mutual funds. If you haven’t heard about these vehicles, think of it as baskets of stocks, bonds, and other investments managed by professionals. Your money, which buys you shares of the basket of your choice, is pooled together with other investors’ to purchase the “component” investments. A mutual fund allows you to participate in capital markets such as the stock market, for an affordable amount.
The concept of Unit Investment Trust Funds (UITFs) is similar to mutual funds. These bank-managed funds also pool investors’ money together to buy stocks, bonds, and other investments that make up an “investment basket.” In a UITF, you own units while in mutual funds, you own shares. As a shareholder in a mutual fund, you may exercise certain rights including the right to inspect the corporate books and the right to vote the board of directors. Both UITFs and mutual funds are managed by professional fund managers. These investment products offer the opportunity to boost your funds.
Variable life insurance policies
You should know that insurance companies today offer a variety of products that suit people’s changing needs. There was a time when there were only traditional insurance plans or those in which you pay fixed premiums for a fixed death benefit. But with the trend of a longer life expectancy, people want to enjoy the benefits of their insurance. Thus, there are insurance products that feature investment funds that boost both the death benefit and the cash value of the policy. If your fund performs well, you have the option of withdrawing a portion of the cash value. These insurance products, which are popular in the US, are referred to as variable life insurance policies.
A college pot for your child
Where to invest for your child’s college fund? Every millennial parent should have a game plan on how to fund his/her kid’s university education. If you want to send your son or daughter to medical school, it’s recommended that you invest early. Manulife GradMaker allows you to place affordable amounts, which shall be invested in securities, bank products, and others that offer higher-than-average returns. This product is designed for busy parents who need to track their investments with the most accessible channel — their handheld gadgets. You can start growing your child’s college fund for as low as Php10,000.00.
Stock investing made simple
Placing your money in a savings account is just the first step. You need to invest it in a product that will earn higher than the inflation rate. Inflation is the rise in the price levels of goods and services. Your investments should be beating the inflation rate, otherwise, there is a depreciation in the value of your money. When you’re depositing your money in a savings account, you’re effectively giving the bank a loan, which in turn offers you a 2% interest rate annually. It’s time to look beyond these products.
Be your own fund manager. For as low as Php5,000.00, you can start buying listed stocks on the Philippine Stock Exchange. Some of the popular online brokerages are COL Financial Group, First Metro Securities, and Philstocks Financial. You simply sign up, fund your account, and buy stocks using your smartphone or laptop. The brokers charge very minimal transaction fees in exchange for using their platform. If you want to sell your holdings, you can also do so online and the proceeds shall be deposited in your enrolled bank account.
Some words of advice
Do you know that billions of pesos are scammed out of Filipinos each year? Don’t just jump into an investment offer. Take the time to research the company. You may check whether the company is registered with the Securities and Exchange Commission and if there are pending cases against it and its officers. You can also search online for relevant information about the company. Many victims of fraudulent schemes share their experiences and frustrations online.
If it’s too good to be true, it must be. Remember that investing involves a risk-reward trade-off. You may earn as much as 100% of your money in stock investing, but you may also lose your entire placement. The key is in understanding your risk profile, matching it with the right investment product, and continuously educating yourself. And of course, allow your stock investments to recover — you’ll only lose money if you choose to “realize” the losses.
Stop making excuses. Begin your journey towards financial wellness today. If you think you’re earning enough to save and invest, you may need to reassess your lifestyle and/or consider getting a part-time job to boost your income. Put an end to your paycheck-to-paycheck lifestyle. Save and invest!