Popularizing investment options to the Filipino

MANILA, Philippines — Investing your money is one of the best ways to increase your wealth. If you are in your 20s, then congratulations as there’s plenty of room for you to grow your retirement fund. Whether you’re the one enjoying your salary or not, it’s time to take charge as an adult by investing part of your income for your future. If you are in your 30s to 40s, this article could be a reminder that you may be at the peak of making so much money now, but one day will come when someone younger and better could take over your high-paying job. Soon you will have to face the question, “Are you financially prepared and have invested part of what you regularly receive?” Now, if you’re in your 50s or getting near the retirement age, take this article seriously because if you haven’t done anything yet in terms of preparing your retirement fund other than waiting for the pension that you will receive, then you might be in financial trouble. This is not to scare you but to make you realize that your pension may only last for a couple of years. By this time, you should have already started a better game plan for your retirement.

So how can you start investing your hard-earned money? What are the things that a newbie investor should know?

Here are some guidelines to help you with your journey towards financial freedom:

Financially educate yourself first. The best investment for others may not always be the best for you. If you ask a stock broker, he would surely recommend you to invest on stock market. A real estate agent might say that the best way to grow your money is through real estate. A successful franchisor would tell you that franchising business is your best option. This means that we all have different views of which is the “best,” so knowing what will truly work for you is the first step.

Know your risk appetite. Any type of investment must fit within your risk appetite. There are three types of risk appetites: conservative, aggressive and balanced. Conservative investors are those who are not into high-risk investments. They are willing to lose only two to three percent of their money and are happy to have this percentage as their investment return. Aggressive investors are those who can manage losing more than 10 to 50 percent of their investment because they believe that the higher the risk, the higher the potential return. This type of risk appetite is mostly attributed to stock market investors. Balanced investors are comfortable losing five to 10 percent of their investments but somehow able to manage the risks.

Set a timeline as to when you are ready to cash out your investment returns. Entrepreneurs must not only have the passion to run their businesses; they must also have an exit plan when they are ready to sell what they have created. Same with your investment plan, always know your goal and determine when you are ready to sell whatever you’re holding. I know people who have invested in Jollibee stocks a few years ago and made more than 500 percent of investment return but haven't sold out their position yet as they aim to sell on a higher profit. While I know someone who was able to buy her mom a house because she sold her investment in Jollibee from the time the Mang Inasal deal was finalized.

Let me give you a list of investment instruments with estimated annual returns which could serve as your investment options:

A. Savings account (average annual return of .09 to 4 percent per annum) - Savings account should be your first option especially when it comes to building your emergency fund. Most Philippine banks already have mobile banking features which provide convenience with the capacity to pay utility bills. Check also those “all digital banks” with savings products that offer at least 2.5 to 4 percent p.a.

B. Retail treasury bonds and corporate bonds (Average Annual Return of four to six percent) – In the first quarter of 2019, the Philippine government released an RTB of 6.25 percent, while big corporations like Ayala Land, PNB and other multinational companies opened their corporate bonds that ranged between four percent to as high as eight percent but subject to withholding tax. This is still a good deal especially if you are a conservative type of investor.

C. Mutual funds/ UITF - This investment is a pooled fund type with dedicated fund managers to take care of your money. The four most common forms of mutual funds/ UITF in the Philippines are Equity Fund (stock market), bond fund, money market fund, and balanced fund (combination of equities and bonds).

D. Stock market - Though considered as a high-risk investment, the PSE has recorded at least 10 to 15 percent average annual return in the last 15 years which is far better than the annual average for savings account of at least .09 percent p.a. less withholding tax. If you are a newbie investor, it is recommended to research more about investing in the stock market and long-term blue chip investing approach so you could leverage on the country’s top corporations.

E. Cooperative investing - Investing in cooperative-related projects is common in provinces. Some cooperatives offer good returns with six to 10 percent of dividend payouts per year. If you plan to invest in a cooperative, ensure that it is registered and recognized by the Cooperative Development Authority.

Investing your money doesn’t really require a huge beginning capital. In fact, some of the instruments mentioned above start with an average capital of P1,000 to as low as P50. While these are just some of the investment forms that I can recommend, it is best to do your own research before investing your money. Lastly, always choose a long-term type of investing approach and look for ways to diversify your investment since creating wealth takes time to grow. - Floi Wycoco