A clear financial goal is the starting point of financial literacy. It determines the types of activities that are undertaken. Part of these activities would be those related to investing. While there are many investment options that are available in the country, there remains to be a lot of room for more Filipinos to invest.
There is no such thing as a perfect investment. There is no such thing as a complete investment. Each investment has its own benefits and considerations. Some types of investment options will be discussed.
Investing in business is one investment option. The entrepreneurial spirit is alive and kicking in the country. According to the Philippine Statistics Authority, micro, small and medium enterprises comprise about 99.5 percent of business establishments in the Philippines.
There are three common ways to invest in a business. The first way is to develop a unique selling proposition and build a business from the ground. The second way is to purchase an existing profitable business. The third way is to get a franchise.
Owning a business has benefits. Businesses give owners independence and flexibility in charting their own future. Businesses give owners the ability to convert their passion to profit. The right businesses can deliver sustained profit streams. Businesses offer immense support to the Philippine economy. As more entrepreneurs open businesses, more Filipinos get employed. As more businesses are established, tax revenues can increase and these can help fund many government projects aimed at making lives better.
However, there are certain considerations. Initial capital or financing must be adequate. Having the right people for the business is critical. Building a business from scratch requires good market research since differentiation must be evident. Buying an existing profitable business requires continuity of legacy in terms of product, price, promo and place. Brand reputation and support of the franchise are essential for survival. As no business is an island, the general performance of the economy makes or breaks a business.
Investing in real estate is one investment option. Real estate has good utilitarian value since it can be used by an individual and the family. Real estate has investment value because of possible price appreciation and rental income. Development plans of both the national government and local government potentially make real estate more vibrant. There are considerations. Good real estate investments depend on the location. The reputation of the developer is a major factor. Financing must be calculated well.
Investing in the stock market is one investment option. Only a small fraction of Filipinos invests in the stock market. There are two popular ways to invest in the stock market. The first way is direct investing in stocks. One will need to have a stock broker. The second way is to invest through mutual funds and unit investment trust funds. These funds have professional fund managers who make the investment decisions. The main consideration with stocks and funds would be higher risks due to market volatility.
Investing in government instruments would be additional options. Pag-IBIG has a regular savings program It also has the voluntary MP2 savings program which earns higher returns than regular savings. The Social Security System has the PESO Fund. Retail Treasury Bonds are starting to become popular options as well. The main benefit of these options would be their characteristic of being government-backed. However, the returns associated with their lower risk levels may not satisfy the appetite of risk-loving investors.
We save to beat temptation but we need to invest to beat inflation. Investing is a necessary activity that helps achieve financial freedom. In choosing the investment to take, one must be cognizant about the goal, time horizon and risk tolerance. The economy is further supported as more Filipinos invest.
Genesis Kelly “Gemmy” S. Lontoc is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 101st RFP program this May 2023. To inquire, e-mail info@rfp.ph or text at 0917-6248110.
