Last week I showed you valuable information on how banking works. It is a two part blogposts where Part 1 shows the basic information while the Part 2 is more of choosing and protecting your money in the bank.
If you want to save then go to the bank. In my Emergency Fund article I gave a tip that a savings account in a trusted bank is the most ideal home for your emergency fund. However if you want your money to earn then investment is the key.
Save and Invest, remember?
Now our parents may have taught us that saving in banks will make our money grow. On the day of your retirement you go to the bank and withdraw your savings finding your savings enough to live for the rest of your life. But, today is a different era. Banks offer too little of interest for your money to grow.
Before investing I highly advise for you to determine your net worth first. This is to create a benchmark as to how much you can invest and how much you need to save. You will also have an inspiration to create your emergency funds or help you assess your debts and/or your liabilities that you owe big time.
Now let's move on to the different investment vehicles that you can ride on.
Traditional Investment Vehicles
1. Savings Deposit. This is the safest and most common type of investing vehicle. All you need to do is to park your money on your desired bank. This will cost you minimal opening fee, no risk at all but will also earn you little interest or growth. If you want to know more on how to safely park your money via savings account then click HERE.
2. Time Deposit. My father once advised me to open a time deposit especially if I already have enough savings. This yields better than a savings account but you can't use your money for a given time frame in order to get the benefit of the interest this means that if you decide to withdraw earlier than the maturity period you'll lose some money rather than gain.
3. Treasury Bills. This is an uncommon type of investment vehicles but may result to a higher return than savings account. You lend your money to the government so the risk is lower but then you need a higher amount to open an account.
4. Retail Treasury Bonds. This investment is like treasury bills wherein you are lending your money in the government. Retail Treasury Bond was created to accommodate small investors that can only spare a good 5000pesos in their initial investment. The result of continually investing in an RTB has way higher return than Time Deposit.
5. Stocks. This type of investment comes with the highest risk among every other investment vehicles but the return will amaze you just as long as you know how to invest intelligently. Owning a share of stock in a company means you taking an ownership stake in the company too. COL Easy Investment Plan is one of the main option when it comes to directly investing in stocks.
6. Mutual Fund. This investment vehicles allows small investors to put money on stocks indirectly. This means you will have to entrust your money on a financial institution and will be invested in a diversified portfolio depending on your investment characteristic. To know more about managed funds then make sure to visit my blog post, Understanding Managed Funds as an Investment Vehicle in the Philippines.
7. Unit Investment Trust Fund. Unlike a private financial institution in Mutual Fund, UITF or Unit Investment Trust Fund goes to the banks. BDO is known for their UITF account with as little as 1000pesos additional investment.
Non-Traditional Investment Vehicles
Real-Estate. If you want to invest in real estate make or property then make sure that you are renting it out. If you live in it then that's not called investing for you don't really add up growth in your money. It is also ideal to buy a property for a cheaper price like those that are in foreclosure bank properties. You can check PSBank as they have updated properties that are really cheap of an investment. Your money grow because you bought for less than the market value plus you rent it out adding additional monthly income in your kaban.
Jewelries. Buy and sell of jewelry could also be a good investment in the long run. At first you buy to look good but you may have an intention to sell them. This is where the higher price goes. You can store the jewelry you bought in a bank vault and in the future choose to sell them. Gold type of jewelries will always be the best option here.
I say this in most of my investment articles, but yes indeed, every investment vehicle you ride will always have a corresponding risk. Make sure that you are ready for emergencies if and then the ride comes in an accident. You also want to have enough fuel (fund) to maintain your investment and enjoy the financial journey on your wealthy destination.
What financial vehicle are you excited to ride on?!
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That's a lot and based on what you have listed out, I have done 2 out of 7 (Mutual Funds and Savings Account). I am contemplating about the other investment vehicles that you have mentioned.
ReplyDeleteThanks for the tip.
Btw, which one did you go for?