By Leony R. Garcia
WE all work to earn money and then we need money to get to work. Without money, we do not have accommodation, food and clothes, which are considered basic necessities. Money provides access to everything we need and want because that’s how society is structured.
Normally, if one has money he or she has more control over his life and it makes him feel more secure. Because without money, it’s hard to do the things one wants, and even more difficult do the things he needs.
But, of course, money can’t buy everything, like happiness and love. Also, it can’t replace more important things, like family and even friends.
Money does not come just like that to any person by any amount of wishing, praying or wanting. Everyone has to work hard to earn money as the supply of money is limited in this world but the demand of money is unlimited. Therefore, knowing the benefits of having money and making it grow for can be very challenging.
The traditional way of earning money is to work and get paid with a certain amount called salary. Some entrepreneurial individuals get their money rolling and earning through buy-and-sell of products or services they offer. But to earn extra, people have to work hard juggling several jobs working days and nights.
Bottom line, there are only two ways to make money: by working and/or by having your assets work for you.
According to investopedia.com, if you keep your money in your back pocket, instead of investing it, your money doesn’t work for you and you will never have more money than what you save. By investing your money, you are getting your money to generate more money by earning interest on what you put away or by buying and selling assets that increase in value.
Whether you invest in stocks, bonds, mutual funds, options and futures, precious metals, real estate, your own small business or any combination thereof, the objective is the same: to make investments that will generate more cash for you in the future—perhaps to buy a house and lot, a condominium unit or a car, or for use in time of sickness or hospitalization, for travel and recreation or retirement, or simply for the kids’ education.
Filipino investment habits
A study of the investment habits of Filipinos show that majority are non-investors. This is according to Bangko Sentral (Central Bank of the Philippines), which released the results of the survey from the Consumer Finance Survey in April 2015.
Those surveyed would rather have cash than invest their money elsewhere. Most Filipinos are risk-averse, and, therefore, prefer to hold on to cash than put their money in investments that could not assure them of a guaranteed income.
Manulife, one of the oldest life insurance in the Philippines, validated this finding in its own research and said that around 60 percent of the total fund holdings of Filipinos are in cash. Of this 60 percent, only a third is spent on household expenses. The remaining two thirds lays idle to take care of emergencies.
However, more than half of Filipinos would be willing to invest their money on ventures that would give them guaranteed income, and the rest are willing to put in their money if the investment could offer a steady stream of earnings.
Most of those surveyed, revealed that they opt to invest their money in household appliances, real estate, and life insurance. Some have investments in motor vehicles, bank time deposit and jewelries. Only a minuscule percentage owns bonds, stocks and other financial instruments.
Most locals own their homes, with the rest either co-owned or rented. Acquisition is either through cash, inheritance or loans. It would be interesting to note that most Filipinos do not have bank deposits or savings accounts. The reason given is that there is not enough money to save. When money becomes scarce, individuals go to money lenders at usurious rates, even for buying property or equipment. Other sources for housing loan are the government agencies; PAGIBIG (Home Development Mutual Fund), National Housing Authority, and rural banks.
Investment options at P50,000 and below stocks
Bank deposit interest rates ranges from 1 percent to 4 percent per annum. Stock yields are higher than that. The amount of money that you will invest would depend on the minimum number of shares to be traded. This number is generally fixed and dependent upon the prevailing market price of the stock. The minimum number of stocks that you can buy is 100 shares. So, for stocks selling at say, P100 per share, an investor would need to put in is PHP10, 000, exclusive of trading charges. For stocks that fall within the low price range of PHP0.001 to PHP0.0024, the number of shares that you need to buy is 1,000,000 shares. The investor has to put in a minimum of PHP1,000.00 as initial investment. The Philippine Stock Exchange (PSE) can now be reached online.
Investments can start with mutual fund which is a pool of money from different investors that are invested in bonds, stocks and other financial instruments. These funds are managed by a fund manager, who is in charge of investing to earn money for his clients. Investing in mutual funds is advisable for investors, who do not have enough knowledge or time to monitor his investments. There are many fund companies to choose from and bank managers would be willing to assist if you are interested in this instrument. It is but ironic that the performance of mutual funds in the Philippines has always shown the PSEI as top gainer. What this purports to show is that it is hard to beat the performance of the local bourse, and it would have been better to invest in the PSE directly. Investments in mutual funds can start with as low as P5,000.
Investing in treasury bills is a good investment if you want to have higher returns compared to savings account or time deposits. According to treasury.gov.ph, Treasury Bills are government securities, which mature in less than a year. There are three tenors of Treasury Bills: (1) 91 day (2) 182-day (3) 364-day Bills. The number of days are based on the universal practice around the world of ensuring that the bills mature on a business day. In the Philippines you can buy treasury bills in the banks. It is being offered in almost every local banks here in the Philippines.
Retails treasury bond
You can start investing in retail treasury bond and let your money grow while you sleep. The Retail Treasury Bonds (RTBs) form part of the National Government’s program to make government securities available to retail and individual investors.
The RTBs aim to cater to retail investors, such as individuals and corporations, who are looking for a zero-risk, accessible and higher-yielding investment alternative for their savings. The minimum denomination is only P5,000 and in multiples of P5,000, thereafter. Check the latest public offering of treasury bonds by visiting treasury.gov.ph.
High – yielding investments
The Securities and Exchange Commission oftentimes issues warnings about investing in high-yielding instruments. These types of investments can turn out to be scams with promises of high rates of returns on questionable financial instruments, with an inordinate complexity and secrecy surrounding the investment.
If you are a risk-taker with a large amount of investible funds, and can handle volatile swings in the financial markets, then high yielding instruments may be worth considering. Some of the high yield investment instruments that you may consider are:
These financial instruments pay interest regularly and can be converted to stocks when stock price increases. Even if you do not convert, the price of the bonds will still follow price increases in the stock market.
Stock with dividend payouts
Investments in blue chip stocks that pay regular dividends are often considered as high yielding. It is a safe investment with an assurance of regular dividend payouts each time.
Investing in stock options can provide higher earnings than stocks. Options are used as leverage over the stocks. It is easy to buy stock options where the slightest movement can give you high returns.
Certificates of Deposits and investment in real-estate holdings
According to a survey made by Sun Life of Canada in 2013, Filipinos save inadequately and do not prepare for the future as seen from the mere 20 percent availing of life insurance. It also advised Filipinos to have the discipline to invest at least 30 percent to 40 percent of their earnings on gainful endeavors.
Moreover, money management should include emergencies to relieve you of the stress of incurring a debt when the unexpected happens. Only through proper cash management would you be assured that there is money in the future when you need it the most.