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Got a 100k and don’t know what to do with it? Well, you’re lucky because we’re giving you the 17 best ways to invest and grow that money!
Our first advice: Don’t let it just sit in the bank. With low-interest rates ranging from 0.5 to 1.5%1, you’re better off investing it elsewhere.
Even if you don’t have a lot of cash saved up, there are still many ways to let your money work for you.
For many young Filipino professionals and entrepreneurs, most especially in this era, it’s conventional wisdom to consider investments early. The time to think about investing is NOW.
If you want a more secure and brighter future for yourself, you shouldn’t put investing on hold.
What is an Investment?
Buyers identify an investment as a purchased item or asset that would grow its value in the future and can be sold at a higher price. It can also be viewed as a property that enables its owners to generate passive income and create wealth over time.
What is Investing?
Investing is using your money as capital to buy assets that can produce more money for you in the future.
It’s basically letting your money do the work for you.
What are the Types of Investments?
Stocks, bonds, annuities, commodities, real estate—I bet we all scratched our heads the first time we tried to know more about these financial terms. If you’re anything like me, you also probably got overwhelmed with all the technical jargon and got buried with a ton of information that didn’t make sense.
This guide aims to shed light on the different types of investments available out there to help you achieve your financial goals. Learning about them will open ways and ideas for multiplying your money quickly.
Here’s our quick rundown of the different types of investments:
1. Bank Products
Perhaps the most popular and common of all investments, bank products come in different options.
The money you deposited are federally insured to up to a certain limit and can be easily withdrawn. Some examples are savings accounts, certificates of deposit (CDs), money market, and federal insurance.
Bonds are loans offered by an investor to governments and corporations. In exchange, the borrower must pay the interest on the borrowed money at a predetermined schedule (annual or semiannual) and will need to return the principal on an agreed upon maturity date.
Put simply, stocks pertain to units of ownership in a corporation. This means that if you own or invest in stocks of a company, you become one of its “owners”.
4. Investment funds
Investment funds come or are sourced from different investors. A mutual fund is one of the most common types of investment fund.
Annuities promise to pay you a regular or fixed-interval income either immediately or in the future. You must first pay for the annuity in one lump-sum or through a series of payments also known as premiums.
6. College fund
College fees are notoriously expensive, and many people opt to invest in college funds to save money for the future. Depending on the location, earnings from this fund are not subjected to Federal and State taxes, as long as the funds are strictly used for college expenses.
7. Business capital
Simply put, business capital is money that you put into a business to gain active or passive earnings or income.
8. Retirement fund
Retirement funds come in handy as a way to have continuous cash flow. While still able, workers can save money and receive pension upon retirement.
9. Commodity Futures
This agreement or contract allows a person to buy or sell a specified amount of a commodity at a fixed price and future date. This helps protect buyers by negating risks caused by fluctuations in price of the commodity in the future.
10. Security Futures
Similar to commodity futures, security futures lets you purchase and sell a fixed amount of shares of a particular stock at a specified price and future date.
Insurance protects you against potential financial loss, damage or harm. The insured or policyholder pays premiums to buy a policy that states the terms and conditions in which the insurer is required to pay.
12. Real estate
Real estate investment generates income or profit through purchasing, leasing, managing or selling a piece of realty property for a higher price than it was acquired when the property’s value appreciates over time.
13. Alternative and Complex Products
Alternative and Complex products offer optional investment vehicles outside of traditional stock and bond investments. Some examples of this include notes with principal protection and risky high-yield bonds that have low credit ratings. Most are risky but provide high rates of return.
What is Compound Interest?
Compound interest is the resulting interest based on your initial deposit/investment plus the accumulated interest gathered from the number of periods it was compounded (“compounding schedule” — e.g, daily, weekly, monthly, annually, etc.,).
And that’s why it’s also called “Interest on interest”, since it piles on top of both the principal and its earnings.
In comparison, simple interest is calculated only on the principal amount, which does not include everything the money gained so far.
Compound interest requires three things to work its magic: money, interest (earnings), and time.
To explain this better, let’s do a quick analogy.
Imagine a snowball rolling down a hill.
As it rolls down, it continuously picks up snow, making it grow bigger.
With each revolution, the more snow it absorbs.
And the longer it rolls down, the bigger it gets.
Now imagine that money is represented by the initial snowball before it rolled down the hill (principal)
The accumulated earnings is represented by the amount of snow it gathers as it rolls.
And time, of course, is represented by the time it takes to reach the bottom of the hill (investment timeline) and the frequency of the snowball completing one full revolution (compounding schedule).
Compound interest occurs when that initial snowball starts rolling down and begins absorbing snow with each revolution.
Each revolution results in the snowball having a wider surface area (bigger snowball = wider surface) which means it will absorb even more snow on the next revolution.
This is similar to how “interest on interest” works, since the compounding will be based on the new size of the snowball (principal + earnings) and not just on the original snowball.
And the longer it takes for it to roll down the hill, the bigger it will get.
Why is it important to start investing now?
The answer is simple:
When it comes to compound interest, it’s not about how much money you’re investing, it’s about how much time you’re allowing that money to grow.
Let’s say that when you were 20 years old, you wanted to save for retirement. You decided to put 500 pesos per month on an account (or an investment) that gives an average annual interest rate of 7%.
At age 60, you retired. And you also stopped the deposits into your savings account.
Here’s what you were able to save in the past 40 years:
|Initial deposit||Php 500|
|Total Monthly deposits||Php 240,000|
|Total Interest||Php 964,798|
|Total Savings||Php 1,205,298|
And to illustrate how crucial the length of time of investment is in compound interest, let’s modify our scenario a bit.
Instead of saving at 20 years old, you started at age 35.
How does a 15-year difference affect your overall savings results?
|Initial deposit||Php 500|
|Total Monthly deposits||Php 150,000|
|Total Interest||Php 231,708|
|Total Savings||Php 382,208|
As you can see, the difference is huge.
As a kicker, even if you tripled your monthly deposits to Php1500 when you started at 35, you still won’t get as much versus if you started 15 years earlier.
The total earnings are still significantly lower compared to the results when you started at 20 years old.
That’s the power of compounding.
The moral of the story?
Start saving and investing early. In time, the value of your interest will be bigger than what you’re putting in. And when that happens, your money will experience exponential growth.
What is an Investment Strategy?
An investment strategy helps an investor achieve their investment and financial goals. It is a plan based on the investor’s goals and risk tolerance, and it guides the investor in making investment decisions.
Ideally, an investment strategy is consistent and methodical. It can be conservative (the investor uses a low-risk strategy focusing on wealth protection) or highly aggressive (the investor focuses on capital appreciation with the aim of rapid growth).
Investment strategies can be used by individual investors to create their own portfolios or by a financial professional assisting an investor. It is important to note that these strategies are not static, so they have to be reviewed regularly, especially when circumstances change.
Types of Investing Strategies
In this section, we’ll look at the different strategies that investors utilize for maximizing profit and managing risk levels.
Growth investors look for investments that have good upside potential in terms of the stocks’ future earnings or the “next big thing.”
However, this does not mean that they recklessly embrace speculative investing because growth investing actually involves evaluating the current health of a stock and its potential for growth.
The industry where the stock thrives is also considered by growth investors. They look at its prospects. For example, before making an investment in a tech company, they will consider the possibility of A.I. becoming a fixture in people’s daily lives.
If a company is going to grow, there has to be evidence that the appetite for its products or services is widespread and robust. The company’s recent history should consistently show strong earnings and revenue. This signifies that the company can meet growth expectations.
A lack of dividends is a disadvantage of growth investing. Capital is often needed to sustain the expansion of a company that is in growth mode.
This means there is not much cash left to pay dividends. In addition, faster earnings growth is accompanied by higher valuations, which most investors consider a higher risk proposition.
Value investors want low-cost deals. They are bargain shoppers looking for stocks that they think are undervalued.
They believe that the security’s intrinsic value is not fully reflected in the prices of those stocks. Value investing is partly based on the idea that there exists a certain degree of irrationality in the market.
In theory, this irrationality provides opportunities to buy stocks at a discount and make money from them.
Finding deals does not necessarily mean combing through large volumes of financial data. There are numerous value mutual funds that allow investors to acquire stocks that are considered undervalued.
For example, value investors consider the Russell 1000 Value Index as a benchmark. Several mutual funds also mimic the index.
While investment strategies can be changed anytime, doing so can be costly, especially for value investors. With value investing, the long game has to be played.
Investors should not pull out their money after a couple of poor-performing years. Warren Buffet is often cited as a great value investor.
This investment strategy involves keeping buying and selling to a minimum in order to maximize returns. A popular passive investing strategy is index investing.
Investors who adopt this strategy buy a representative benchmark like the S&P 500 index. Then, they hold it for a long time.
In general, passive investing means buying and holding a portfolio for long-term investments. Trading in the market is minimal.
Compared to actively managed portfolios, passive investments cost less and are not as complex. In addition, passive investments often have better after-tax results over longer time horizons.
Momentum investors like to ride the wave. They go for stocks that are experiencing an uptrend and may decide to short-sell the securities which are losing. They believe that winners will continue to win and losers will continue to lose.
As technical analysts, momentum investors use a trading strategy that is strictly data-driven. Patterns in stock prices guide their decisions when purchasing stocks.
Momentum investors basically go against the efficient-market hypothesis, which states that new information coming into the market is reflected in stock prices right away.
This is because momentum investing aims to capitalize on overvalued and undervalued equities.
Dividends refers to the money companies pay to shareholders. When you own stocks that pay you dividends, you will get a share of the company’s profit. Therefore, you can enjoy a steady stream of income in addition to the growing market value of your portfolio.
However, not all companies pay a dividend. This is only common with publicly traded companies. To determine whether or not it’s a good strategy for a company to have dividends, they need to factor in different financial and economic elements.
Dividends are usually paid in the form of cash distributions monthly, quarterly, or yearly.
To be given a dividend payout of any stock, you must meet the requirements. This can include being a shareholder of record on or before the date required by the company’s board of directors.
Stocks can also be referred to as “ex-dividend.” If you buy this stock, you won’t be eligible to receive the current dividend payout, and you have to wait for the next one.
Income investing means selecting the best investments that will give you a regular source of income for a specific period. This is a common way to chase returns and beat inflation. It can come in the form of interest payments, dividends, and bond yields.
The goal of this strategy is to help you build a portfolio filled with assets that will give you the highest annual passive income.
One of the best things about income investing is that anyone can try it. Because most companies have a large and stable income, they could help give investors a strong foundation for their portfolios.
With income investing, it’s recommended to shift your focus on overall returns instead of being caught up with short-term movements.
If your goal is to get income from an investment, do not factor in how the value of the asset fluctuates. If you’re receiving dividends, that will give you a reason not to panic especially if you plan on holding it until it matures.
Whatever approach you follow with income investing, make sure to include a range of income sources in your portfolio that align with your timeline and risk tolerance.
This type of passive investment strategy involves compiling economic data into one metric, or comparing specific data to that metric.
Investors who use this strategy want to replicate the performance of an index by purchasing the component securities or putting their money into an Exchange Traded Fund, or index mutual fund.
There are tons of indexes you can use to track index funds, and there are also different sector indexes that focus on specific industries, or country indexes that highlight value-priced stocks, and fast-growing companies in a specific nation.
After you have chosen an index, find an index fund that tracks it. If you’ve chosen more than one index, try to see which index fund tracks the performance best, costs the lowest, and offers the least amount of limitations.
After this, you’re ready to buy shares in the index fund of your choice. To do this, simply open a brokerage account, or open an account with the company that offers the fund.
This investment strategy refers to purposefully going against the grain by selling when other investors are buying, and buying when other investors are selling. The principle of this strategy says that following the herd instinct that controls the market direction is not a great thing to do.
Those who follow this strategy believe that people who say the market value is going down only say that because they have no purchasing power left.
Considering this, the market still hasn’t peaked. When the price rises, these investors have already sold out their shares.
The principles of this investment strategy can be applied to stocks, specific industries, and entire markets.
Contrarians see an opportunity because they believe that the value of a stock is less than its intrinsic value. The pessimism of other investors pushes the price below what it should be, and contrarians buy it before the prices rebound.
If you want to be a contrarian investor, it is recommended to pay attention to distressed stocks and sell them once the price has recovered well.
As with other strategies, there are risks involved with contrarian investments because they can pave the way for high losses without proper research and timing.
Growth vs. Value Investing
Value investing involves choosing stocks that look as if they trade for less compared to their intrinsic value. Basically, these stocks are being underestimated by the market.
With growth investing, an investor chooses to invest capital in junior companies’ stocks which can potentially grow in earnings.
Wall Street categorizes stocks as either value or growth stocks. However, things are a bit more complicated in reality since there are stocks that have elements of both growth and value.
Nevertheless, value and growth stocks have important differences.
These are shares of a fundamentally solid publicly traded company that are priced lower compared to its peers.
Value stocks are relatively cheap if you consider their long-term growth potential as well as their earnings. Their growth characteristics are not flashy.
Rather, these companies have steady and predictable business models which generate modest revenue gains and earnings over time. Value stocks can sometimes be found in companies that are in decline.
They have a really low stock price, which often causes their future profit potential to be undervalued.
Growth companies start out as up-and-coming businesses, and their priority is to become leaders in the industry that they are in as quickly as possible.
Early on, they tend to focus on building their revenue up, often delaying profitability. After some time, they begin to work on maximizing profits more.
Growth stocks often come with relatively high valuations when they are measured by price-to-book value or price-to-earnings ratios, but they also have faster growth in income and revenue than their peers.
Which is Better?
Go for value stocks if you want your portfolio to have current income, want more stability in stock prices, are confident in your ability to avoid value traps, and if you want your investment to have a more immediate payoff.
Choose growth stocks if it is not an issue with you that your portfolio is not currently earning, if you are fine with big movements in stock prices, if you are confident in your ability to pick winners out in industries that are emerging, and if you have plenty of time before needing your money back.
In terms of long-term performance, growth stocks often relatively outperform value stocks when the economy is good, while value stocks usually hold up better during difficult economic times.
17 Best Investment Vehicles for Filipinos
Here are the 17 best investments in the Philippines that every hard-working Pinoy should consider.
|Investment||Minimum Capital||Average Returns||Risk Level|
|Social Trading||₱5,000||10-70% per year||Medium|
|Exchange Traded Fund (ETF)||₱5,000||6–11% per year||Medium|
|Pag-IBIG MP2||₱500||4.58%–8.11% per year||Low|
|Bonds||₱5,000||4.7–6.3% per year||Low|
|Insurance (VUL)||₱2,000/month||7.8–16.6% per year||Medium|
|Stocks||₱5,000||10.8% per year||High|
|Mutual Funds and UITF||₱1,000||2–5% per year||Medium|
|Real Estate (Foreclosed)||₱10,000–₱15,000||High||High|
|REIT||₱5,000||10% per year||Medium|
|Cryptocurrencies||₱100||3,384% (avg returns of the top 10 cryptos in 2021)||High|
|Blogging/Website Flipping||₱2,000 – ₱10,000||High||Medium|
|Forex Trading||₱5,000||1–10% per month||High|
|Angel Investing||₱50,000||27% in 3.5 years||High|
|Personal Equity and Retirement Account (PERA)||₱10,000/year||5%–15% per year||Low|
|New Skills||Time and effort||High||Low|
1. Social Trading
Minimum Investment: $100 (eToro)
What is Social Trading?
Social trading is a type of investing in which traders interact with each other through an online trading platform.
Think of it as the social media of the online trading world. Social trading works like a newsfeed where traders follow one another, share trading ideas and information, comment on each others’ posts, and view and analyze experts’ trades in real-time. It’s a good way to learn how to trade.
Ideal for beginners, social trading helps people make sound investment decisions with the help of professionals. This way, inexperienced traders learn faster even with little knowledge of the financial markets such as stocks, indices, forex, and cryptocurrencies.
What is Copy Trading and How is it Different from Social Trading?
Often used interchangeably with social trading, copy trading is a related term but is a different thing altogether. Although copy trading is a type of social trading, it involves directly and automatically copying the trades and strategies of experienced traders to replicate them in your own portfolio.
Any market movement of traders you’re following gets copied, such that when they open a new trade, you also open a new trade. If they make a profit or lose money, you’ll achieve the same results, too.
How to Start Investing Through Social Trading
Open a trading account with your chosen platform and follow the instructions on social trading.
If you’re particularly interested in copy trading, it typically involves choosing a trader whose trades you’d like to replicate, entering the amount you’d like to invest, and clicking the Copy button. This will automatically duplicate the trader’s position.
2. Real Estate
Minimum Investment: Starts at ₱15,000 (Foreclosed Properties)
For those who would like to own houses through installment, there are cheap mortgages that would only cost ₱2,000 to ₱3,0001 a month.
Another investment to of course consider is real estate. If you’re thinking about owning a property but you’re wary about how much you want to spend, you may consider buying foreclosed properties to get a cheaper deal. For as low as ₱30,0002 you can own a foreclosed land.
Tips on Buying Foreclosed Properties
According to Lamudi.com3, here are some tips for buying Foreclosed Properties:
- Know where to look. To find foreclosed properties, go to banks, lending institutions, SPAV companies or companies formed under the Special Purpose Vehicle Act of 2002 to help banks shed their nonperforming assets, and government financial institutions like the Social Security System (SSS), Home Development Mutual Fund (Pag-IBIG Fund), and National Housing Authority (NHA).
- Get your financing ready. When you already have a housing loan approved by the bank, sellers will take you more seriously. And so, you’ll get more negotiating leverage compared to other buyers.
- Attend property auctions. Attending these auctions will be a great way to discover properties not usually on online listings.
- Inspect the property. You shouldn’t ever buy anything without properly inspecting it. You must see for yourself if it’s worth your money.
- Know your fees and taxes. Other than the down payment and the property’s selling price, there are also fees and taxes charged to the buyer
Tips on Real Estate Investing
- Be goal-oriented. Ask yourself what you want to achieve in real estate investing. This way, you can have a vision of what you want to get from investing, and it will also keep you determined. If you think real estate can be the easy money you’ve been searching for, well, nothing in this world can really be called easy money. There will be challenges but having a vision and determination can keep you in track.
- Learn as much as you can about real estate. You need to familiarize yourself with the ins and outs of real estate transactions in the Philippines. Do research on the subject.
- Attend seminars. You’d have to learn a lot about real estate—one of the best ways to do that is to attend seminars and conventions on real estate. Not only can you learn from experts, but you can also check out potential properties.
- Join or start your real estate investors club. This is a great way to network and find out more from fellow investors.
Ways to Earn from Real Estate Investing
Buy “Pre-selling” properties
When you buy a pre-sale unit, it means you are purchasing a property in its pre-construction stage. A lot of investors make tons of money through this method because they buy it at a low introductory price, and then sell it at a higher price after its construction. This almost always guarantees high profits.
Fix and flip properties
This way to make money involves buying a property in need of repairs, and then fixing it and reselling it. When it comes to this method, some investors choose to do it on their own, while others hire contractors to fix the property’s problems.
Lease or rent properties
Depending on your property and its location, you can try long-term and short-term rentals. Long-term rental guarantees a more consistent income. Meanwhile, short-term rental is great if your property is located in a major city or a vacation spot.
When it comes to real estate, there is also another option called rent-to-own.
Depending on the agreement, this allows the renter to lease your property for a certain period and once that period is over, the renter has the option to buy the property from you.
Earn from REITs
Real Estate Investment Trusts (REITs) are a collection of properties or assets owned by a corporation such as commercial buildings, hospitals, and shopping malls. Investors who buy REITs then receive periodic dividends from the net earnings of the company.
Buy and hold properties
This is a common method where investors purchase properties and then hold on to the properties for years to sell them at a later time when their value has appreciated greatly.
Invest in a hotel unit
Although this is a relatively new way to earn money from real estate, its potential cannot be denied. Hotel investing refers to buying a hotel unit and letting a company operate, manage, and maintain it on your behalf. Just like owning a condominium, you will also have a title for your unit.
In the Philippines, this is made possible by companies like Hotel 101. This business and leisure hotel was developed by Hotel of Asia, Inc., a subsidiary of DoubleDragon Properties Corporation.
Hotel 101 will shoulder all the costs and hassles of upkeep and maintenance, as well as operating your unit as a hotel. Around 30% of Gross Room Revenue will be equally distributed to all investors every 16th day of the succeeding month regardless if your unit was occupied or not. Considering this, it’s a great source of passive income.
The perks do not end there. All Hotel 101 unit owners can enjoy 10 free nights stay in Hotel 101 – 5 nights in the branch where their unit is located, and another 5 nights at any branch nationwide.
Hotel 101 properties are located in prime business locations and tourist spots such as Fort and Davao, and the company is expected to expand in Libis, Palawan, Cebu, Boracay, and Bohol.
Minimum Investment: ₱2,000 to ₱5,000, depends on the minimum board lot and market price
What is ETF and how does it work?
ETF stands for Exchange Traded Fund. It’s a type of fund that owns assets like stocks, bonds, foreign currencies, gold bars, futures and others—similar to mutual funds (MFs).
Ownership is divided into shares too. But unlike MFs, these shares can be traded anytime in the market within the trading hours, making them easy to buy and sell.
ETFs are said to have lower operating costs compared to MFs since it’s more “passive” in its investing strategy. In most cases, ETFs merely “mimic” popular indexes (Index ETF) or industries and sectors (Sector ETF). Comparatively, fund managers handle MFs.
How to Invest in ETF in the Philippines
As of this writing, only one type of ETF is available in the Philippines: The First Metro Philippine Equity Exchange Traded Fund (FMETF) by First Metro Asset Management Inc.
Buying and selling ETF is a similar affair with stocks. To start investing, you need to open a trading account with an accredited stockbroker like COL Financial, First Metro Securities, BDO Nomura, Philstocks, and BPI Trade, among others.
There’s a long list of accredited stockbrokers in the Philippines so opening a trading account is fairly easy.Once you have an active account, you may begin buying and selling ETFs via your preferred broker’s trading platform.
Read Next: How to Invest in ETF in the Philippines
4. Modified Pag-IBIG 2 (MP2) Savings
Minimum Investment: ₱500
What is Pag-IBIG MP2?
The Modified Pag-IBIG 2 (MP2) is a savings program available to existing and former Pag-IBIG Fund members with at least an equivalent of 24 monthly savings. They may leverage higher dividend earnings versus that of the regular Pag-IBIG Savings program.
For as little as ₱500, you can take part in a program that lets your money earn as much as 8.11% in dividends (their highest ever recorded dividend rate).
Their 3-year average is a solid 7.65% per annum4, way better than what you could get from bank savings accounts or other investment vehicles. You can withdraw your earnings annually or get the lump sum dividend when the fund matures (5 years).
How to Invest in Pag-IBIG MP2?
Enrolling under the Pag-IBIG MP2 program couldn’t be easier. Simply get a copy and complete the MP2 Savings Application form and submit it with copies of a valid ID and passbook or ATM card of your nominated bank.
You can get the MP2 Savings Application form from your nearest Pag-IBIG Fund branch or download it from here.
Or you can visit this page and complete the required fields.
Learn More: How to Invest in Pag-IBIG MP2
Minimum Investment: ₱5,000 (First Metro and COL Financial)
People may stay away from stocks because of having no knowledge about it. Most even just prefer to let their money be stagnant and stay in a bank.
But knowledge can be acquired, so it shouldn’t stop you from investing in stocks considering it could make your money grow exponentially.
Investing in stocks allows you to buy shares of companies, you won’t be able to buy under normal circumstances, said Marvin Germo, author of Stock Smarts5.
“The stock market gives you the opportunity to buy in companies, like partnering with SM, GMA, Jollibee,” he said.
Tips on investing in Philippine Stock Market
- Learn everything you can. Being too confident in the stock market can also be too risky. Absorb from the books and experts first. Do your research, discover the terminologies and all the tricks, buy books, and attend seminars. If you can, get a mentor. Do everything you can to be knowledgeable on the stock market.
- Know your risk profile. Are you cautious or are you a risk taker? Your personality should reflect the stocks you buy. According to Marvin Germo, there are stocks that are volatile, with a great potential to go up but also a great potential to go down. Some are just steady but when the market goes down, the impact to the company won’t be as bad. Consider what type of stock would fit your level of comfortability.
- Buy low, sell high. Buy stocks only when the price is below the “Buy Below Price”. The Buy Below Price is a level at which capital appreciation potential is already attractive relative to the fair value estimate. Any price below this is considered optimal to buy.
- Don’t expect money to double soon. According to an investor interviewed by Rappler
Want to get started with stock trading and investing? Check out our Beginner’s Guide to Stock Trading and Investing.
6. Mutual funds & UITF
Minimum Investment: ₱1,000
What are Mutual Funds and UITF?
A Philippine Mutual Fund is an investment company registered with the Securities and Exchange Commission (SEC), which pools money from many investors creating a massive fund under a common objective.
This fund is then invested in specific types of securities to achieve the stated objective.
The Unit Investment Trust Fund (UITF), on the other hand, has similar functions of a mutual fund. The main difference is that the fund is managed by a bank instead of a mutual fund company.
This type of investment is ideal for young and new investors because you’re investing your money to experts who would know what to do to make your money grow.
There are four main types of mutual funds and UITFs offered:
- Money market funds – Short-term debt instruments (one year or less).
- Bond funds – Long-term debt instruments offered by governments or corporations.
- Balanced funds – A mix of shares of stock and bonds.
- Stock or equity funds – Primarily shares of stock.
Tips on Investing in Mutual Funds
- Go with competent fund managers. You’re basically entrusting your hard-earned money to a third-party company. So, you must ensure that the fund managers they have are competent enough to bring growth, not losses. A good way to know is to look at the consistency of the fund performance at least in the last five years.
- Add regularly. Although you can start at a low price of ₱5,000 and there is no required regular addition, it is advisable to add regularly and use it as kind of your piggy bank for your long term goals.
- Assess risks. All investments have their risks, so it’s important to do risk assessments. Online brokers who offer mutual funds usually have their risk assessment questionnaire which will help you decide which type of mutual fund is best for you.
- Set goals and objectives. Like with any other investment, you must know why you’re investing. Is this for your retirement, leisure, or capital for your future business endeavors? Be clear on where you want this to go to make the best decisions. Newbies may become disheartened when they see losses even if they still haven’t reached the end of their time frame. As with stocks, you must be patient enough to see your investments grow.
- How to Invest in Mutual Funds & UITF in the Philippines – a complete guide by Grit PH
- Best Mutual Funds in the Philippines – curated by SavingsPinay.
Minimum Investment: ₱5,000
What are Bonds and how do they work?
Bonds work similarly to loans, except in terms of who borrows the money.
Say a company needs ₱1 million to expand its operations. They have two options: they can either borrow from banks (loans) or they can issue bonds.
With loans, banks will provide the company with a lump sum that they’ll have to pay based on the interest rate and other terms that the banks have set. In most cases, the company will be asked to pay in monthly terms, with the interest embedded in each payment.
With bonds, it’s like doing a reverse loan.
Instead of the company approaching the lender (bank), they will print a bond (contract) that might state, “In five years, our company will pay the owner of this bond ₱50,000”.
Since they need ₱1 million, they decide to print 20 pieces of these ₱50,000 bonds and issue them to institutional investors and the public. Aside from receiving the promised ₱50,000 face value back after five years, bondholders will also receive “coupon payments”.
For example, let’s say that the ₱50,000 bond in our example features a 5% annual interest rate.
Each year, the company will have to pay the bond owner ₱2,500 for five years. In total, the bondholder would get ₱12,500 in earnings after the bond matures (₱2,500 x five years).
But it doesn’t stop there. Since bonds are classified as IOUs (debt instruments) and can be circulated publicly, they can be traded—like stocks.
It’s possible that a bond can be sold at a higher price than its face value if the net present value of the principal and interest payments have increased.
But if the bond owner decides to hold on to it until it matures, he or she gets back the original investment (making it a good way of preserving capital) plus earnings from interest (passive income).
Different Types of Bonds
Bonds are generally classified into two: by maturity or by the issuer.
- Maturity-based bonds – Classified according to the length of time it will mature
- Treasury Bills (T-bills) – Mature in less than one year (short term). The most common tenors (length of maturity) for T-bills are 91 days, 181 days, and 364 days.
- Treasury Bonds (T-bonds) – Matures in more than one year. The most common maturity lengths for T-bonds are 2-year, 5-year, 7-year, 10-year, 20-year, and 30-year bonds.
- Issuer-based bonds – Classified according to who issued it
- Treasury Securities – Issued by the Bureau of Treasury
- Government Bonds – Released by various government agencies like Home Development Mutual Fund (HDMF or Pag-IBIG), Government National Mortgage Association (GNMA), Federal National Mortgage Association, and others.
- Municipal Bonds – Distributed by the local government units (LGUs)
- Corporate Bonds – Supplied by public and private companies
How to Invest in Bonds in the Philippines
For corporate bonds, some banks advise the general public through their official website or mailing list. Information and requirements for investing in bonds are typically posted on their website.
Some will have you complete a quick online questionnaire to get your details and contact info. Afterward, a representative from the bank will call/email you to discuss the details and next steps.
For Government bonds like T-bonds, you can visit the Bureau of Treasury website for updates and listings for any upcoming public offerings.
You can also reach out to banks and check if they have any government bond offerings.
Like with corporate bonds, they’ll provide you with details and instructions along with the paperwork to complete should you wish to proceed with the investment.
- How to Invest in Bonds in the Philippines
- How to Invest in Fixed Income Securities in the Philippines
8. Insurance (VUL)
Minimum Investment: ₱2,000 to ₱3,000
Life insurance is something every young professional should consider.
What is VUL?
This type of insurance gets bundled with an investment component. You’re insured, but you can also have the option to invest your money. It’s ideal because you get the best of both worlds.
Aside from that, there are other benefits to VUL that differentiate it from other traditional insurance policies, such as flexible premiums.
Any excess amount you add to the premium will go to your accumulated funds. In case of a financial emergency, on the other hand, you can choose to only pay the charges without the plan lapsing.
Speaking of financial emergencies, one great feature of VUL is its liquidity. You can still access your funds in times of need. Unlike traditional policies, this is treated as a withdrawal and not a loan.
Meaning the amount withdrawn does not incur interests. Although it is encouraged that whatever amount was withdrawn should be immediately reinvested to keep on track with your financial goals.
Tips on getting VUL/life insurance
- The need: Ask yourself—will someone be negatively affected financially by my untimely death? Mind you, it’s not about being sad about someone’s passing. Rather, it’s about the financial liabilities that you may be leaving after you pass.
- The amount: How much you need depends on several variables, such as current liabilities and dependents. If you’re thinking about retirement, ask yourself what your projected retirement fund will be. Will it only cover the replacement of your actual income or will it include expenses for leisure? That’s something to think about when getting your plan.
- The plan: Call different insurance agent and ask for quotations or get them to send you proposals through e-mail. This way, you can pick and choose what would be the ideal plan for you. Most insurance agents now have tools that generate quick client policy proposal.
- The overheads: A lot of the agents you will encounter will push for additional insurance or add-ons because of targeted quotas which will mostly just benefit them and the insurance company. Stick to your basic life insurance. It is, however, advisable to get a critical illness add-on. You never know if or when you’ll get a serious health problem.
- The advisor: Get an independent financial planner. Agents tend to be biased about plans because of their quotas. It’s advisable to get an independent financial adviser who is paid to advise you and not to reach quotas based on plans and add-ons. It’s not necessary to do this, but if you have extra cash to spend on a financial planner, get one.
- The timing: Obtain your insurance now. The younger you are, the cheaper the plans are. There’s no time like today to get a plan.
- The stability: Of course, you must make sure that the insurance plan you’re getting is from a reliable and stable company. Call the insurance company or the insurance commission, and search the web. Look for reviews and research the company. Make sure they are legit.
9. Micro-Lending & Peer-to-Peer Lending
Minimum Investment: $25 (₱1,250)
Another investment option young professionals and investors can get into is microlending and peer-to-peer lending.
What is P2P Lending?
Peer-to-peer lending is the borrowing and lending of money through a platform without going through traditional means like the bank or other financial institutions.
What happens is, usually, an online company will bring together borrowers who need financing and lenders who would like to invest their money and earn through interest rates.
People are attracted to P2P because it cuts out the middleman (the bank) and provides better deals for both the borrower and the lender.
Because rates are a lot flexible compared to banks, borrowers can get relatively cheaper interest rates while the lender can still profit from a decent amount of interest rate.
Popular P2P Lending platforms in the Philippines:
Tips on investing in P2P lending
Here are some tips to consider according to Paula Pant, from Student Loan Hero10.
- Research before you invest. This should be a no-brainer, but it is something you must keep in mind. Research about the loan history of the company you’re going to choose to invest in. Look into things such as the percentage of borrowers who default (unable to pay back) and how they screen the borrowers. Also, ask about the average returns of investors in the past and how they handle late payments.
- Know your risk tolerance. “Think carefully about how much risk you are prepared to take, bearing in mind that you could lose the whole of your investment in a loan if it defaults,” wrote Graeme Marshall
10. Small Business
Minimum Investment: ₱5,000
Having a small business is another investment that you shouldn’t pass up. A lot of people might not be inclined to try this out because of the fear of failure. But why should that stop you?
Failure is just a part of life and taking risks is important, if you want to make your money grow.
But if you’re still apprehensive, you could always start small. With just ₱5,000, you can get into the food business. You can go with street foods, gotohan or mamihan.
If you’re the type of person who likes karaoke, with just a bit more money (around ₱25,000), you can do karaoke rentals. There are several options for those who want to start a small business for under ₱100,000.You can also check out our massive list of small business ideas.
Tips on starting a small business in the Philippines
- Find your passion. A lot of people wonder what they should sell. Finding your passion can be important because it will help you push through with your business even if the going gets tough. For instance, if you have the passion for fashion, selling clothes would be ideal for you.
- Do market research. The thing about most Filipinos is that, when they think about starting a business, all they think about are the basics, such as where to get capital and what product to sell. Those may be the main things, but market research is always important in any type of investment. You have to know your products, services, your competitors, your demographics, and trends in the industry.
- Secure funding. Your funding will cover two types: pre-operating fund to cover for equipment, stock, deposits, permits, etc., and working capital, which may cover salaries, rent, utilities, supplies, and other contingencies. It’s advisable to secure funding for at least six months of operation.
- Build a website. We live in the age of the internet and social media. So, having a website is essential these days. Your website is the digital address of your business. And it’s also basically your digital store. Having a website or at least a social media account can provide you with a digital presence and also social media marketing opportunities.
- Network with other people. The more there are of people who know about your business, the better the business will be. Online presence is crucial. Word of mouth is also great, but you get a wider audience through social media. Connect with people both online and offline. Attending seminars and business conventions is also a way to network.
- Consult experts. Getting a mentor or at least some form of advice through experts is always important. You will learn from the experiences of those who have made it. If you can’t find a mentor in person, find mentors in books or go online. Watch seminars on YouTube or search for business articles written by experts.
Minimum Investment: PHP 5,000
What is a REIT?
A real estate investment trust (REIT) is a company that owns or operates income-generating commercial properties such as office buildings, hotels, and shopping malls. REITs earn money through the rent collected from tenants that occupy their properties.
Investing in REITs allow small investors to make money in real estate without having to buy or manage any physical property. All you have to do to get started is to open a stock brokerage account and use the broker’s trading platform to buy and sell stocks issued by REITs.
Tips on REIT Investing
- Consider your investment goal, risk appetite, and time horizon. Just like investing in other assets such as bonds and stocks, you have to carefully take these factors into account when deciding whether you should invest in REITs or not.
- Do your research. Gather as much information as you can on the REIT company’s cash flow profile, revenue growth, occupancy rates, track record, and management team, among other details.
- Consider the property’s location. How high is the potential of a property’s value to increase over time? That depends a lot on its location. If there are any development plans, then chances are high that the property will have a higher value in the future.
- Analyze industry trends. This will help you determine the best type of REIT to invest in. For example, malls and hotels have been badly hit by the pandemic, as more people do online shopping at home and put off their travel plans. Investing in REITs that mostly own these types of real estate can be riskier than others because of lower demand.
- Decide how much of your portfolio must be invested in REITs. The goal, of course, is to diversify your investment portfolio. For beginners, experts recommend investing 5% to 20% of one’s portfolio in REITs.
Learn More: How to Invest in REITs in the Philippines
Minimum Investment: $20 – $1,000 (Depending on the Cryptocurrency)
What is Cryptocurrency?
If you’ve never heard of Bitcoins or cryptocurrency, don’t worry. It may be unchartered territory for many people but it’s basically a simple concept.
Cryptocurrencies are simply digital or virtual currencies that people on the internet use to trade. It uses cryptography for security to ensure the safety of the traders. Its most appealing feature is the security from the government that it offers. Because your currency is encrypted and blockchains are decentralized, governments can’t monitor it.
Bitcoin is the most well-known type, but there are other types of cryptocurrencies that are actually cheaper and might be more ideal for you.
Now you may try to avoid this because of the sketchy ways cryptocurrency can be used. But Bitcoins and other cryptocurrencies are legal depending on where you are and what you plan to do with it.
The Central Bank of the Philippines (BSP) and the Securities and Exchange Commission (SEC) are still in the process of issuing regulations on how digital assets will be governed11.
Tips on Cryptocurrencies Investing
- Have a strategy – Investing in crypto is also like investing in stocks. You need to decide your strategy before you do it. After all, crypto is not “easy money.” For instance, you can be an aggressive investor and go for emerging cryptocurrencies that have the potential to give you a high return on investment in the long run. Alternatively, you can be a conservative investor and stick to some of the most stable and established cryptocurrencies such as Bitcoin and Ethereum.
- Keep your risk tolerance in mind – Investing in crypto is potentially risky. While many people have become millionaires by investing in it, many individuals have also lost their hard-earned money in this industry. Remember that crypto is still relatively new and it is also largely unregulated.
- Avoid FOMO – “Fear of Missing Out” is normal for people who are just starting in the crypto world. However, you should make sure that you don’t get carried away by the hype and forget to study. Look at the charts, check the news, and study the trends. Just because your peers are investing in a certain cryptocurrency doesn’t mean it’s a good one.
- Diversify your portfolio and don’t go “all-in” – Just like other investments, don’t pull all your eggs in one basket. If you do, you’ll only be putting yourself at risk of losing your money.
- Prioritize established cryptocurrencies – The world of crypto is quite volatile, but some cryptocurrencies have stood the test of time. Make sure to prioritize these coins, or at least include them in your portfolio.
- Never forget your crypto keyphrase – If you want to save your crypto for a long time, a cold wallet is the best option. If you use this type of wallet to store your crypto offline, never lose your keyphrase. If this happens, you can say goodbye to your investment. If you prefer to store your crypto in a hot or online wallet for ease of access, make sure to manage it properly since it’s more prone to being hacked.
Check out our Beginner’s guide to Cryptocurrency Investing.
13. Buy a website (for passive income)
Minimum Investment: $200 – $1000 (depending on the bid)
Buying a website is something you should definitely consider. If you don’t want to go through the hassle of building a website and gather an audience for that site, then buying a readymade one that’s already profiting is definitely advisable.
It’s a great and easy way to acquire a passive income. You can check out Flippa.com to look for websites being auctioned.
Tips on Buying a Website
- Know the history. You must know about the site’s history before buying it. Know about its net worth, how old the site is, and if it is legit. Just because it’s saying it’ll earn you $10,000 a month doesn’t mean it really will. Usually, older sites are the most trustworthy ones.
- Be familiar with the platform. Is it WordPress, Joomla, or something else? This will make it easier for you to know the experts who can operate the platform.
- Understand the demographics. Find a site that targets the demographic you want to reach.
- Look at traffic quality. The more site visitors, the more money you’ll earn.
- Check the maintenance costs. How much will this site cost to maintain? How many staff do you need to run the site? These are things you must consider.
- Confirm the price. An average site would cost around $2,500—keep this in mind when you’re weighing whether a site is legitimate or not. There are sites that cost lower, but this can be considered a red flag.
14. Forex Trading
Minimum Investment: $100 (₱5,000)
Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world’s currencies trade.
The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. So, it would really be advisable to dip your toes into foreign exchange trading if you want to grow your investments.
Tips on Forex Trading
- Choose a broker wisely. Choose a broker that will allow you to do the analysis you require. You must know each broker’s policies and how he or she goes about making a market.
- Choose a methodology and be consistent in application. Remember that fundamentals drive the trend in the long term, whereas chart patterns may offer trading opportunities in the short term
Learn More: How to Invest in Forex in the Philippines
15. Angel Investing (Venture Capital & Private Equity)
Minimum Investment: ₱50,000
What is an Angel Investor?
Let’s break it down real simple: Say you want to launch your own food delivery business but don’t have the capital to begin with. After hearing about your plans, your uncle offers the necessary funding.
In exchange, he just wants the capital paid back plus 10% gain. Payable in three years. Happily, you accept his offer. “Thanks, tito! You’re an angel!”
Your tito is an angel indeed—an angel investor, to be exact. Often called informal investors, they are affluent folks who provide capital funding to start-ups in exchange for some gain or equity in the business.
What is Venture Capital?
Continuing with our scenario earlier, the money you received from your uncle is called venture capital. If you’re familiar with the tech industry, you hear about this a lot. Uber, Twitter, Airbnb, and a host of other big-name companies all received venture capital to kickstart their business.
In return, their success brought sky-high gains to their investors.
What is Private Equity?
It refers to monies or funds not included in a publicly listed exchange (e.g. the stock market). Funding injected by investors into a company in exchange of 100% ownership or control of the company is what makes private equity different from venture capital.
Read our Ultimate Guide: How to Invest in Venture Capital & Private Equity Funds in the Philippines
How to Become an Angel Investor and/or Venture Capitalist in the Philippines
Join a network of Angel Investors
This site stands as a middleman between entrepreneurs needing funding and investors. Once you’re registered as an investor, you can proceed to choosing among the list of business proposals that you deem most worthy (and profitable) of your investment.
Most people don’t know this, but you don’t need to be uber-rich to be an angel investor or venture capitalist. If we’ll use our scenario earlier, your food delivery business might only need ₱100,000 to get everything up and running. It really depends on how big the project is and how much capital it requires.
There are a ton of established businesses in the country that are looking to expand, which you can easily fund for as low as ₱50,000.
Tips on Angel Investing
1. Have a deep understanding of what it takes to run a business
As an investor, your main job is to provide funding. However, the success of your picks will highly depend on how well you understand the nature of their business.
Most successful angel investors and venture capitalists are stringent in their selection process, often going through several rounds of in-person meetings and reviews. This helps in making sure they are not betting their money on a high-risk venture.
2. Connect with Angel Investors and VCs in the country
It wouldn’t hurt to try asking for an hour of their time to get a primer on the whole thing. A simple gesture of taking them out for lunch to pick their brains may work surprisingly well in some situations.
Most of these people are kind enough to share their knowledge. And if they can’t meet you face-to-face, online correspondence is still highly valuable.
3. Invest in something you’re familiar with
When we invest in something, it’s usually on something we truly believe in, or very familiar with.
Why? Because it takes out a lot of the guesswork figuring out stuff from the beginning. Your existing knowledge about the product or service allows you to ask the right questions.
It also gives you better insight on the future and success of the venture.
4. Don’t go all in
In just a single investment, that is. As cliché as sounds, “spreading your eggs in several baskets” also applies in venture capital.
Not only will it allow you to lessen the risk, it also opens your pool of money to more promising investments (negates opportunity-loss).
5. Develop an investment game plan
As an angel investor or VC, it’s a good idea to come up with a solid plan that answers important questions like: What’s my expected ROI and when will I hit it? How much capital am I willing to invest during the course of the start-up? What type of involvement does this company require from me?
6. Try investing with a partner
Or better yet, several others. Investing is risky. In fact, most venture capitalists in the US fail.
If you’re just starting out, it might be a good idea to team up with others, so you won’t have to shoulder the whole start-up capital.
Sure, it will reduce your potential gains but at least you’ve significantly reduced the risk.
How do Angel Investors make money?
After putting in significant funding into a business, angel investors recoup their investments (and more) once the company starts seeing success. For example, an app or Software as a Service-type of company may begin growing its user base and starts getting paid for their offering.
This influx of revenue will naturally result to growth and increased chances of getting really massive (Uber, Airbnb to name a few).
While it’s mostly a hit-or-miss situation in the VC industry, the potential returns are enormous when you chance upon a real winner. It is said in the US, the average industry standard assumption for getting a winning portfolio is 10 investments.
Out of the 10, six will most probably be losers, 2-3 might break even or give slight gains, and (hopefully) your last one hits home run. The winning pick should be big enough (10 times your minimum investment) to make the whole thing profitable.
16. PERA: Personal Equity & Retirement Account
Minimum Investment: ₱5,000 to ₱10,000 per year
Established through Republic Act 9505, the Personal Equity and Retirement Account (PERA) is a voluntary retirement investment program.
It takes after the 401(k) and Individual Retirement Account (IRA) in the United States.
This long-term saving program aims to serve as an additional source of funds upon retirement apart from GSIS or SSS pensions or any form of retirement benefits from an employer.
What is PERA and how it works
PERA is a purely voluntary retirement savings program that allows the contributor to earn tax incentives from the amount he or she invested.
Those who choose to sign up for the program have to make certain contributions every year until they reach 55 years of age.
Upon retirement, they’ll reap everything they invested, not to mention all other proceeds earned from the contributors’ PERA account.
Some benefits of PERA include not being required to pay tax from all income earned from PERA when the contributor retires or die and 5% income tax credit until the contributor turns 55 years old, among others.
With the 5% income tax credit, you’ll get 5% off your annual taxable income allowing you to save more money in the long run.
Contributors can withdraw from PERA once they reach 55 years of age, given they have made contributions to PERA for a minimum of five years.
In case of death, the funds invested by contributors in their PERA account will be distributed to their respective heirs. Or if they have declared beneficiaries, the proceeds will go to them at this point.
How to Invest in PERA
If you are a Filipino citizen residing in the Philippines or abroad, is at least 18 years of age, have a tax identification number (TIN), and is making an income, you can invest in PERA by following the simple steps below:
- Find an administrator to manage your account. You can either choose between BDO or BPI. Remember, you can only have an administrator, so choose wisely!
- Assign a custodian to receive your funds. Make sure the person or entity is officially recognized by the Central Bank of the Philippines.
- Select the PERA investment product you wish to invest in. You may choose from stocks, UITF, government securities, mutual funds, insurance products, and other accredited products.
If, in the future, you wish to distribute funds but have not yet reached the required age, you can still do so—but not without penalties. Remember that there are only two qualified cases of distribution for PERA funds: death and retirement.
Distribution of funds that do not meet these requirements will result to having to compensate the government for the total tax incentives you got, including the 5% income tax credit, waived income tax for employer’s contribution, and waived taxes on the total investment income.
However, there are a few exceptions to this rule, such as:
- When a contributor needs to claim it after being considered “permanently totally disabled”.
- When a contributor needs it for payment of hospitalization for more than 30 days due to an illness or accident.
- When the proceeds will be transferred to an eligible PERA investment product or administrator not more than two working days from the date of withdrawal.
Supporting documents such as certifications might be needed for the first two exceptions so make sure you secure them from the proper authorities before presenting your case.
17. Invest in New Skills
Minimum Investment: Only your time and effort
Investing in new skills, and yourself, is something that people tend to forget. But it is very important whether you want to invest in business or not.
You don’t have to go to a formal school to learn new skills. If you have the money, you can take courses or even get a post-grad degree.
For those who don’t have the money for expensive degrees, here are other alternatives you can consider:
- Online Courses – Take online courses which are usually cheaper and may sometimes even be free. Look up starting your business, choosing the right investment, financial planning, blogging, SEO, marketing—just about anything under the sun. There are varied courses to choose from and you can take advantage of the services offered online. Skillshare is a great website to take classes from, and you can get coupons to get free classes for a couple of months.
- Seminars and Workshops – There are seminars and workshops you can attend, some for as low as ₱1,000. As was mentioned above, you can take seminars for investments in real estate and stock markets, to name a few. It will also be a great way to meet peers who are interested in the same endeavors.
- Books – Books are investments. If you want solid knowledge on any subject matter, then buying a book on it is always a wise decision. The trick to reading a book if you’re busy is to look at the table of contents and to just pick chapters that would seem more applicable for you. This way you can focus on what’s essential.
- YouTube – You can learn any skill for free from watching thousands of videos on any given subject, may it be Bitcoin, Forex, or stocks. You name it, the site has it. The wealth of information you can access is just within your smartphone.
How to Invest & Grow your Money in the Philippines (Step-by-Step Guide)
Investing your money is possible whatever your financial situation is. Here’s a step-by-step guide on how to do this.
Step 1: Identify financial goals, timeframe, and risk tolerance
When it comes to investing, you need to determine what your financial goals are, the deadline you want to set for yourself, and your comfort level with investment risks.
You can either choose one of these setups:
Short term goals
Your goal for your investment could be to finance your vacation for the next summer, build your emergency fund, or have money to buy gifts for Christmas.
Step 2: Figure out how you want to invest
After figuring out your goal and timeline, the next step is to decide the specifics of how you will invest your money.
You can do the DIY route, or you can have someone to invest your money for you. But before deciding on what to do, there are things you have to keep in mind.
First, you have to think about whether you want to do active or passive investing. Both styles have their advantages and disadvantages, especially if you want to focus on their long-term effects.
When choosing active investing, you need to thoroughly research investments and do your homework because you have to keep up with your investments at all times.
On the other hand, passive investing requires less effort because it entails having a hands-off approach.
Second, you need to think about how much money you plan on investing. If you don’t have much money, don’t get frustrated.
The amount of money you start with is not your end-all-be-all. Because you can always add more funds to invest in along the way.
The important thing to consider is you need to have an emergency fund in place before you risk your money on investments.
Finally, think about your risk tolerance. Each investment comes with its unique level of risk which is linked to its potential return.
Find a balance that works for you. For example, you can go with bonds that have low risk and low returns.
Step 3: Open an account
Once you have figured out what type of investment you want to have, the next step is to choose an account provider and open an account.
For example, opening an account with an online broker will enable you to personally manage your account through buying and selling investments like bonds, stocks, and many more.
This is an amazing choice for people who have a large selection of investments and want to be more hands-on.
On the other hand, you can also go with a portfolio management company that will do the work for you.
This company has advisors and uses state-of-the-art technology to build and manage your portfolio in a way that aligns with your risk tolerance and goal. You just need to pay a small management fee.
Step 4: Finalize your investment
After you open your account, you will have a better picture of your risk tolerance. Go back to the 17 best investment vehicles section and try to see which methods align with your goals.
For example, if you’re still a beginner who wants to learn how to trade or replicate the style of a trader you look up to, you can try Social Trading.
Meanwhile, if you are a young professional who wants to future-proof your life, you can invest in Life Insurance with investment features (ie: VUL).
If you want long-term or short-term returns and can make high-risk investments, try Cryptocurrency, specifically, altcoins.
The options when it comes to investing are endless. You just need to find the perfect method that works for your unique situation.
Step 5: Grow your portfolio
Your investing journey doesn’t end after buying your first investment. It’s integral to take time to learn about other investments so you can diversify your portfolio. This stage involves key steps, such as:
Determining the best asset allocation for you.
Depending on your investment goals, try to see where you can put more money into. For example, if you want to reach financial independence and you can take on more risk, you can put money on alternative investments. If you have more capital, you can invest in real estate.
Continuously assessing and rebalancing your portfolio.
As the market fluctuates, your portfolio’s value will also go up and down. Don’t panic. This is extremely normal. That’s why it’s important for you to continually reassess and rebalance your portfolio so you can make sure that you’re on track to achieve your financial goals.
Be consistent with your investment.
Investing is not a one-time activity. It’s a continuous process. You must be a consistent investor if you want to achieve your goals and build a bigger nest egg.
Switch investments depending on your priorities.
As time passes, your priorities may change, so it’s important to adjust your portfolio as needed. For example, a woman in her 20s who has a high disposable income can focus more on high-risk investments since she has a long time to recover from any loss/failure.
On the other hand, a man in his 50s who is saving for retirement will need to put more money on medium and low-risk assets to protect his capital and ensure that his retirement fund will be enough to sustain him for the rest of his life.
Get expert advice.
Sometimes, it’s hard to determine which investment to choose, especially when you don’t know much about the financial markets and the risk involved.
If you’re not sure, get expert advice from wealth managers and financial planners. These professionals can guide you in selecting the appropriate investments based on your goals and risk tolerance.
Investing Tips: How to Invest your Money Wisely
Every person’s financial situation is unique, and the best investment tip ultimately depends on your preferences, and your current and future circumstances.
To help you get an understanding of how to invest your money to gain maximum returns, we’ve compiled this guide to help you.
1. Set goals
Your investment goals should cover three major themes of your finances and how to manage them. First, they should be aligned with your life plan.
Next, it should make you more accountable to review your progress to ensure you are on track with what you want to achieve. Finally, it should serve as your motivation.
When it comes to goals, be specific. Start by writing each of your investments and how you can measure their progress. You should also break down your goals into short and long-term segments to match your life stages when you’re in your 20s, 30s, 40s, up until retirement.
Also Read: Personal Finance 101
If you’re still a beginner in investing, your excitement may be coupled with confusion. While this tip is quite self-explanatory, there are many research stages you should do to make investing easier.
Before investing, dedicate time to research strategies to build your own. During the investment stage, make sure to keep up with the news about the market.
Eventually, you’ll learn that social and political issues can affect the value of any asset or commodity. Considering this, reading the news will help you prepare for upward and downward trends.
More than that, make sure you are only investing in something you understand. Do not fall into the trap of investing in a stock just because all your peers are talking about it. When you blindly follow others, you can lose a lot of money.
After the investment, continue to do research. Whether you’ve sold your shares or it’s still in the market, keep up with how it is performing. This way, you can see the best time to enter it once more.
Research when it comes to investments is not something that should be taken lightly since it will help you set yourself up for the best returns.
3. Portfolio optimization
This refers to building your portfolio to give you the maximum possible return, while also maintaining the risk you can carry.
The goal of portfolio optimization is to have a balanced portfolio where you can spread your capital across different varieties of assets. Only then can you balance your risk and reward outcome.
An optimized portfolio is an efficient one. Here, you should apply diversification tips and understand the systemic risk involved in each one.
4. Don’t try to make it into a game
American economist Paul Samuelson explains this tip best when he said:
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Nowadays, people want instant gratification all the time. However, you need to understand that investing is a long process, but the wait will be worth it when you experience impactful results.
5. Risk tolerance
Risk tolerance refers to your willingness and ability to stomach the decline of your investments.
When determining your risk tolerance, factor in how comfortable you will feel to maintain your current position when the value of the market declines exponentially.
Knowing your risk tolerance is very important when it comes to investing so you won’t feel burdened by stress all the time.
The best time to assess your risk tolerance is to see how you will perform when the market declines. During this time, can you still hang on to your stocks, or will you panic and sell?
6. Invest regularly
Trying to time the market can be immensely taxing since no one can see the future. One great tip to save yourself from effort and stress is to invest regularly and add money whenever you can.
When you do this tip, you can capture the lows and highs of the market.
As expected, no one has the same risk tolerance. If you’re nervous about trying out this tip, what you can do is invest regularly in the defensive sector to enjoy less volatility. This includes:
- Consumer staples
Regardless of the state of the economy, there will still be demand for these products and the companies that are part of this industry will still thrive.
If you want to take the extra mile, try the next tip.
7. Automate investments
To make yourself more accountable, automate investments. Set aside a certain money for each money to be invested each month.
You can set up automatic investment plans in brokerage firms. When you follow this tip, you can invest more consistently and avoid stalling.
8. Don’t forget to have an emergency fund
The pandemic has made millions of people realize the importance of emergency funds to have a cushion when something unforeseen falls into their lap.
An emergency fund will allow you to live comfortably even if you lose your job, or face any emergency.
Before you start investing, having an emergency fund is essential. This will save you from being forced to sell your investments and stay true to your long-term goals.
This tip encourages you to use your interest, dividends, and other income distribution from investments to buy additional units, instead of receiving them in cash. This will help you increase the value of the investment in the long run. When you reinvest your periodic income back into your portfolio, you can reap maximum returns in the future.
10. Diversify, diversify, diversify
With the multitude of options provided in this article, it will be foolish to choose only one and invest all of your money in it. As what has been said earlier, putting all your eggs in one basket will be a bad idea.
Pick two or more investment options. This way, if one fails, you can still rely on the other. More importantly, if all will become successful, you’ll generate more income.
11. Don’t worry, just grow your money
Worrying too much and panicking won’t help you or your investment grow. Sometimes relaxing and taking some rest to reorganize your mind and your priorities are important, too.
Do not panic–sell!12
If you think too much about failure, you’re already failing. Just sit back, relax, and let matters take its course.
12. No regrets, it’s just cash
If one investment fails don’t dwell on it too much. Especially if it’s in stocks, forex, or cryptocurrency. Expect that there will be losses. But keep a positive mindset.
And it’s very vital to only invest the money you’re willing to lose.
13. No day, but today
There’s no better time to start an investment but now. If you decide to start investing at a younger age, you can become a millionaire not in your 60s but in your 40s or even 30s. So, don’t just sit there, invest now!
Investing in the Philippines FAQs
Still got questions about investing in the Philippines? We’ll answer them below.
How to Choose the Best Investments in the Philippines
Filipinos are known to be risk-averse when it comes to investing. You’re probably one of those who are wondering what kinds of investments give the best return.
The best investment yields high returns with minimal risk.
But are there really low-risk, high-return investments in the Philippines?
This may sound impossible, but you can find them if you know where to look.
The key is to check low-risk investments such as money market funds and bond funds (through mutual funds or UITFs) with the highest returns.
Money market funds and bond funds are both invested in low-risk, fixed-income securities. Time deposits and government T-bills comprise money market funds, while corporate and government bonds comprise bond funds.
To view and follow the best-performing investments in the Philippines, visit the following sources:
- Investing.com’s Philippines Stocks tracker for daily stocks performance
- Philippine Investment Funds Association (PIFA) website for mutual funds
- Unit Investment Trust Fund Philippines website for UITFs
How Much Money is Needed to Start Investing in the Philippines?
The short answer: Not much.
If you’re just starting out as an investor, you don’t need five or six-digit figures from the get-go. Anyone, even college students and fresh graduates, can start investing with as little as ₱25 to ₱5,000.
The actual initial investment depends on where you’re putting money in, and the bank or investment company that will handle your funds.
Here are the required initial funds for the common investment options in the Philippines:
|Investment Vehicle||Minimum Initial Investment||Minimum Additional Placement|
|Mutual funds||₱100 to ₱5,000||₱100 to ₱1,000|
|Stocks||₱5,000 to ₱1 million||₱1,000|
|Time deposit||₱1,000 to ₱100,000||N/A|
|Unit Investment Trust Fund (UITF)||₱25 to ₱10 million||₱50 to ₱1 million|
How to Start Investing with Little Money
The advantage of growing your money through investments is that you can start small.
There’s no excuse from getting started even if you’re a breadwinner with a lot of bills to pay, as you can increase the amount you invest later on when you’re more financially capable.
But it’s important to note that you should never begin an investment journey without a solid strategy.
Take these initial steps to invest even with a small amount of money.
1. Determine how much you can afford to invest.
This step is crucial if you plan to invest regularly in the long term.
You don’t want to invest a certain amount initially and then stop it altogether after a few months because you could no longer afford the monthly, quarterly or yearly investments.
Before you start off, set a realistic and reasonable amount to invest, considering your income, expenses and savings.
2. Save up for your emergency fund.
A common mistake many first-time investors make is jumping right into investing without having an emergency fund.
When a financial emergency happens (like the hospitalization of a family member or the need for home repairs after a typhoon) without emergency funds stashed away, you’ll have no choice but to withdraw your funds or sell stocks prematurely.
Ideally, you need to build an emergency fund equal to six to 12 months’ worth of living expenses, before starting to invest.
Make the process easier by putting away a small amount every week or payday.
You can invest the rest of your savings in medium-term or long-term instruments, depending on your financial goals.
3. Put your money in low initial investment vehicles.
Look for investment opportunities that allow you to begin investing with a minimal amount.
The best investment vehicles for this purpose are mutual funds and UITFs. When you put your money in these instruments, you can invest in a diversified portfolio of bonds and stocks with just a single transaction. Here are your options in the Philippines with initial investments ranging from ₱25 to ₱1,000.
|Fund Name||Minimum Initial Investment||Minimum Additional Placement|
|Sun Life Prosperity Money Market Fund||₱100||₱100|
|Philam Managed Income Fund||₱1,000||₱500|
|Philam Bond Fund||₱1,000||₱500|
|Sun Life Prosperity Bond Fund||₱1,000||₱1,000|
|Sun Life Prosperity GS Fund||₱1,000||₱1,000|
|ATRAM Philippine Balanced Fund||₱1,000||₱600|
|Sun Life Prosperity Balanced Fund||₱1,000||₱1,000|
|ATRAM Alpha Opportunity Fund||₱1,000||₱ 600|
|ATRAM Philippine Equity Opportunity Fund||₱1,000||₱600|
|Sun Life Prosperity Equity Fund||₱1,000||₱1,000|
|PAMI Equity Index Fund||₱1,000||₱500|
|Sun Life Prosperity Philippine Stock Index Fund||₱1,000||₱1,000|
|Fund Name||Minimum Initial Investment||Minimum Additional Placement|
|Unlad Kawani Money Market Fund||₱25||₱25|
|ATRAM Peso Money Market Fund||₱50||₱50|
|ATRAM Total Return Peso Bond Fund||₱50||₱50|
|ATRAM Philippine Equity Smart Index Fund||₱1,000||₱1,000|
|ATRAM Global Dividend Feeder Fund||₱1,000||₱1,000|
|ATRAM Asia Equity Opportunity Feeder Fund||₱1,000||₱1,000|
|ATRAM Global Technology Feeder Fund||₱1,000||₱1,000|
|BDO PERA Short Term Fund||₱1,000||₱1,000|
|BDO Merit Fund||₱1,000||₱1,000|
|BDO PERA Bond Index Fund||₱1,000||₱1,000|
|BDO Institutional Equity Fund||₱1,000||₱1,000|
|BDO PERA Equity Index Fund||₱1,000||₱1,000|
How to Determine your Investment Risk Appetite
Your risk appetite as an investor refers to the amount of risk you can take in pursuit of your investment goals. After all, “no pain, no gain,” right?
An individual’s investment appetite can vary wildly depending on different factors so there’s no clear standard for what a good risk appetite looks like. If you want to determine your risk appetite, take a look at the factors below.
Your investment goal will largely influence your risk appetite. Think of why and when you want to use your investment money for. A person who is investing to pay for a house down payment will have a different risk tolerance from someone who is investing to pay for a week-long holiday.
If you are an aggressive investor who is okay with taking on more risk for more potential reward, then you can afford to invest in higher-risk assets. Meanwhile, a conservative investor with a low-risk appetite will favor investments that lessens the risk of losing money.
Different people have different time horizons. Investors that have a longer time horizon can afford to take more risks.
Current income and savings
Your current income and savings are other major factors in determining your risk appetite.
Those who earn more money and have huge savings can have a greater risk appetite since they have a better financial cushion to catch their fall. On the flip side, if you don’t have enough disposable income, you can’t afford to lose much money on investments.
Keep in mind that there is no right or wrong risk appetite. The answer largely depends on your unique situation.
What’s the best investment for beginners?
Beginner investors in the Philippines can benefit from very low barriers to entry.
Some of the best investments beginners should take advantage of include Pag-IBIG MP2 and SSS, which are two of the most common investments in the country.
You can start for as low as Php1,000 for the SSS PESO Fund, and Php500 for Pag-IBIG MP2. These investments are also guaranteed by the Philippine government, and most of all, they are tax-free.
Other investments for beginners include stocks and mutual funds, UITFs, and VULs.
Always keep in mind that before you start investing, you should first have your emergency fund. This is ideally 6 times your monthly salary. You may store this in a high-yield savings account that pays you interest based on your cash balance.
What are the top 5 investments for building a portfolio?
There is no such thing as a perfect investment portfolio for everyone.
When you’re building your investment portfolio, there are key things you should account for such as your time horizon, investment strategy, goals, and risk appetite.
That said, five of the most popular investments today include emerging market stocks, blue-chip stocks, fixed-income securities, real estate, and certificates of deposit.
What are the best alternative investments?
If you’re ready to diversify your portfolio, investing in alternative assets is an amazing idea. These investments cover assets that are not stocks, bonds, or cash. The best alternative investments today include:
- Real estate crowdfunding platforms
- P2P lending
- Private equity and venture capital
- Arts, collectibles, and antiques
Want to learn more about these alternative investments? Check out our in-depth guide here.
How are investments taxed in the Philippines?
In life, there are two things you can’t avoid: death and taxes. Here’s how investments are taxed in the Philippines.
|Passive income||Tax rates|
|Interest from currency deposits, trust funds, and deposit substitutes||20%|
|Cash and/or property dividends received by an individual from a domestic corporation/joint stock company/insurance or mutual fund companies/ Regional Operating Headquarter of multinational companies||10%|
|Capital gains from sale, exchange, or other disposition of real property located in the Philippines, classified as capital asset||6%|
|Net Capital gains from sale of shares of stock not traded in the stock exchange||15%|
|Interest income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the BSP.|
Upon pre-termination before the 5th year, there should be imposed on the entire income from the proceeds of the long-term deposit based on the remaining maturity thereof:
4 years to less than 5 years
3 years to less than 4 years
Less than 3 years
Disclaimer: All information listed in this article is for information purposes only. Although utmost effort was made to ensure accuracy of information on this website, readers must not solely rely on it in making any investment or financial decision since it does not take into consideration the risk tolerance, financial situation, investment goals, and experience of readers. It is best to consult a professional financial planner or your bank before investing to make a more informed choice and limit your risk exposure.