Is Pag-IBIG’s MP2 Program right for you? 3 factors to consider
The following does not constitute investment advice.
It’s usually easy to invest money in something that looks like it can generate some wealth. Experts, however, are advising new investors to practice caution and prudence before placing their money in a platform, program or vehicle that seems promising.
Trading and investment expert Marvin Germo said people should conduct their own research before entering an investment.
“Investments are based on skills, so people should first figure out what they know, what they are good at and what they can tolerate,” Germo said.
In the first part of this report on the Pag-IBIG MP2 program, we presented three main reasons why Filipinos are keeping their savings there. But how would you know if saving through MP2 is actually for you? And how would you know when it’s not?
Here are things to consider.
1. Its 5-year maturity period
Savings under MP2 are not liquid—meaning you can’t pull out your money right away.
Once you open an account, you can’t touch the money you placed until after five years. It also requires commitment—you have to be fairly certain you can regularly set aside an amount of at least P500 for it for the next five years.
Therefore, this program is not to be treated as an emergency fund.
You can maintain your emergency fund in your savings account in a bank. This bank account typically yields very little interest (below 1%) but it makes your money available whenever you need it.
Sure, investing in the MP2 program is affordable. You can remit a fixed amount monthly or a lump sum once a year as long as the total averages at least P500 per month. But treat your MP2 savings as an allotment you can tap as a last resort, that is when you have depleted your cash in hand for immediate expenses. Better yet, forget you have money kept away until you're ready to withdraw it after five years.
MP2 is considered a medium-term investment—which means it requires a few years before your money generates an additional sum. Germo reminds people to only save through the program if their goals are in line with this five-year maturity period.
2. Its varying dividend rate
While many of those who saved with MP2 did so because it’s a safe investment that can grow their money, it’s important to remember that the dividend rate varies every year.
This is not necessarily a caveat because the dividend rates of Pag-IBIG’s MP2 program have increased almost every year since it started.
But it’s also possible that the rate will be lower this year or the next, depending on the fund's financial performance, among other factors.
3. Your risk appetite
The interviewees featured in the first part of this report who are using the program found it advantageous that the MP2 is government guaranteed and that they would get their money back with the base intact.
They, along with Germo, said the MP2 program is perfect for investors with a low-risk appetite.
“Pag-IBIG’s MP2 program is for people who want a lower degree of risk, so if you are someone who is a risk-taker, MP2 might not be the best program for you,” Germo said.
Remember that in investing, the principle of “low risk for low reward, high risk for high reward” generally applies. So if you’re the type who's willing to risk an amount of money for a potentially higher gain, MP2 might not be for you. You may instead look at higher-risk investment avenues such as the stock market or a small business.
Germo stressed that people should only enter the MP2 program if it satisfies their expectations and goals.
For beginner investors who don’t want to risk their capital too much and don’t need the money in the foreseeable five years, the MP2 doesn't have other downsides. You can see your money grow after five years and it instills in you the discipline of regularly tucking part of your income away instead of spending it on online shopping on impulse. You can monitor your savings online on Pag-IBIG’s website.
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Read two other The Budgetarian reports on the Pag-IBIG MP2 program:
