How to Invest for Beginners in the Philippines

Let's admit it, "INVESTING" is such a foreign word for Pinoys. A lot of Filipinos are afraid of the word "investment" thinking its a scam, networking or tactic to lure people and lose their money. But investing doesn't have to be complicated. It's just a necessary move that every Pinoy ought to learn and take. If you have zero idea How to Invest in the Philippines or already an Investor but would want to gain more knowledge then this post is for you. 

Now this page doesn't focus on Stock Investing alone. This is a much broader informative post wherein I included the rest of the investment vehicles you need to know about. I have no prior and hands-on knowledge investing in stock market so I want to generalize everything instead. Reading this article will help you learn the following:

1. The Difference between Saving Money and Investing Your Money
2. The Different Investment Vehicle Available Today
3. Myths About Investing that Keeps You from Growing
4. Step By Step Procedure on Investing for the First Time

Investing at 19-years old

It was year 2013 when I (impulsively) did my biggest financial decision so far. I invested in a Mutual Fund under First Metro Asset Management, Inc. I resigned from SEO-Content Writer job and used my last salary as an initial fund and money to do all the step-by-step procedures. READ: How I Opened my FAMI Mutual Account ( STEP by STEP GUIDE w/ PICTURES)

I felt so accomplished upon receiving my Statement of Account. I now own "some shares" on big companies in the country from fast food giant, property developers and banks etc. I was definitely on cloud nine since I was only 19 years old yet I was able to try the world of investing. 

But it takes a lot of financial discipline to remain on top of your investing game. I have my ups and downs financially. It was such an impulsive move since I didn't foresee that the next job I'll be having would pay me less. I failed to invest for two consecutive months. 

Fortunately everything worked out for the better. I got a major salary increase not just once, twice but thrice. At 22, my FAMI-SALEF investment is going strong. READ: FAMI-SALEF 2016 Update. I check my investors profile regularly and the NAVPS is just getting better and better. I seriously have no regrets at all that I tried investing at 19-years old. It is one of the the biggest decision I've made that I know my future self will thank me for.

You too can start investing now. I hope at the end of this article you will be encouraged to be better in your finances. Save Now, Invest Now and walk you way to financial success.

The Difference between Saving Money and Investing Your Money

It is important to understand the difference between saving and investing your money. This can give you a better perspective in your financial life. 

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Saving Money is low risk and very liquid. Meaning the purpose is to keep an amount for you to use on a short time frame. For example you save money for a new gadget, a birthday dinner and/or a holiday vacation.

Investing Money is high risk and not liquid at all. Meaning the purpose is to put an amount for you to use in a long time frame. You invest your money to build wealth and get something in return. 

To put simply, you save money in case you will be needing it in the near future. If you're not going to need the money and you want to let it grow then you should invest it. The key is to save and invest. You can't be rich by just saving money on the bank because they offer too little of interest rate for your money to grow. You also can't be secured if you just keep on investing your money without proper savings.

The Different Investment Vehicle Available Today

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There are many different types of investment vehicles you can choose from. It all depends upon what type of investor you are and how much money you have as an initial investment. 

Below are excerpts from my blog post Are You Ready to Ride? Here are the Investment Vehicles You Ought to Know.

Traditional Investment Vehicles

1. Savings Deposit

This is the safest and most common type of investing vehicle. All you need to do is to park your money on your desired bank. This will cost you minimal opening fee, no risk at all but will also earn you little interest or growth. If you want to know more on how to safely park your money via savings account then click HERE.

2. Time Deposit

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My father once advised me to open a time deposit especially if I already have enough savings. This yields better than a savings account but you can't use your money for a given time frame in order to get the benefit of the interest this means that if you decide to withdraw earlier than the maturity period you'll lose some money rather than gain.

3. Treasury Bills

This is an uncommon type of investment vehicles but may result to a higher return than savings account. You lend your money to the government so the risk is lower but then you need a higher amount to open an account.

4. Retail Treasury Bonds

This investment is like treasury bills wherein you are lending your money in the government. Retail Treasury Bond was created to accommodate small investors that can only spare a good 5000pesos in their initial investment. The result of continually investing in an RTB has way higher return than Time Deposit.

5. Stocks

This type of investment comes with the highest risk among every other investment vehicles but the return will amaze you just as long as you know how to invest intelligently. Owning a share of stock in a company means you taking an ownership stake in the company too. COL Easy Investment Plan is one of the main option when it comes to directly investing in stocks.

6. Mutual Fund 

This investment vehicles allows small investors to put money on stocks indirectly. This means you will have to entrust your money on a financial institution and will be invested in a diversified portfolio depending on your investment characteristic. To know more about managed funds then make sure to visit my blog post, Understanding Managed Funds as an Investment Vehicle in the Philippines.

RELATED LINKS:

1. SavingsPinay Series: Yumaman sa Mutual Fund!
2. SAVINGSPINAY SERIES | Day 1 : Mutual Fund: Ano, Sino, Saan, Kailan, Bakit at Paano?
3. SAVINGSPINAY SERIES | Day 2: Gabay sa Tamang Pagpili ng Mutual Fund
4. SAVINGSPINAY SERIES | Day 3: 5 Bagay na Dapat Mong Malaman Tungkol Sa Mutual Fund
5. SAVINGSPINAY SERIES | Day 4: Kaya Mong Yumaman sa Mutual Fund

SOME MUTUAL FUNDS I HAVE FEATURED ON THE BLOG:

1. Soldivo Mutual Funds First Impression
2. ART Em King Mutual Fund First Impression

7. Unit Investment Trust Fund

Unlike a private financial institution in Mutual Fund, UITF or Unit Investment Trust Fund goes to the banks. BDO is known for their UITF account with as little as Traditional Investment Vehicles.

SOME MUTUAL FUNDS I HAVE FEATURED ON THE BLOG:

1. BDO UITF First Impression
2. PNB UITF First Impression
3. Security Bank's UITF First Impression
4. BPI Investment Fund First Impression

Non-Traditional Investment Vehicles

There are also alternative investments you can try which more often than not require a more complicated investment strategies. These non-traditional investment vehicles are generally risky and will not guarantee favorable return. 

Real Assets such as real estate, oil, precious metals like gold, silver and bronze as well as agricultural land fall in this category. They are those that appreciate in value over time. Also counted in this are luxury and collectible goods like jewelries, wines, paintings etc. 

Myths About Investing that Keeps You from Growing

In my post Believing These 4 Myths About Investing Keeps You From Growing I debunked the top investment myths and ears that make people of all ages, gender and income put investing on the side. Here they are:

Myth #1. Investing needs a lot of money

Yes, but NOT at all times. There are investment vehicles that require as low as 5,000pesos to begin. The government have been very supportive for people to learn the value of investment and a lot nowadays require only minimal amount to start.

Myth #2. Investing is too risky

The risk factor in investing is inevitable but its all worth it. No investment can guarantee returns overnight, the longer your money stays invested the better the return. This is also the reason why you need to start investing as young as possible. 

Myth #3. You must be an "economic major" or "math genius" to be an investor

Very wrong. I, for example, is very bad in numbers but I do love investing. The concepts in investing are very basic and you can easily follow through to calculate your gains and/or loses. 

Myth #4. Investing is all about "being rich"

Yes being rich is the ultimate goal if you are investing but the process will give you so much more learning. You'll learn to budget just to have enough savings to invest. You'll also learn how to be financially independent at a young age and find different sources of income since investing itself is so addicting. You'll also learn to set goals and aim high to achieve them. I guess it's good to say that the "wealth" is just the cherry on top.

Step By Step Procedure on Investing for the First Time

Step 1. Get on Track with Your Finances

Before you try to invest for the first time you should first sort things out financially. You should know your current income and whether it could supply to your needs in addition to the investment you'll be making. Yes initial investment is not that high but the actual money you'll be putting as a top up matters. READ: Why You Must Know Your Financial Net Worth Now

Step 2. Assess What Kind of Investor You Are

Next step is to know what type of investor you are. This will guide accordingly on the right kind of investment to make that will maximize your potential income. 

There are Three Types of Investors 

1. Conservatives or those who have low risk tolerance. They lean more on a portfolio that offers steady growth with low risk. They are easily swayed by negative news on surrounding the market and will need further explanation before making a financial decision.

2. Dynamics are people who have the highest risk appetite as an investor. They want capital growth through long-term investing. They do not get easily scared if they loss money for they remain positive that as long as they continue to invest things will change. 

3. Balanced are investors who are a mixture of the two. Their risk tolerance is on a medium level. They love capital appreciation through investing in a long period of time but will still get fearsome in case things don't go along their way. 

Now there are three deciding factors that could determine what kind of investor you are namely age, years you want to invest and risk you are okey to take. In a normal situation, the younger you are the more time you have to grow your money and the more risk you are able to take. 

As you grow older you have more needs and responsibilities in life that can lead to shorter waiting period for your investment to grow and lower risk you can take. 

Step 3. Choose Your Investment Vehicle

Once you have determined what kind of investor you are then it will be easier for you to choose your first investment vehicle. Conservative investors often go for time deposits, special savings accounts and government securities because they are a very sure type of investments. 

Balanced investors love Mutual Fund and Unit Investment Trust Fund on Equities and Bonds. They may also choose investing on direct stock market but on very selected and established companies that already have proven track record. 

Dynamic investors on the other hand are willing to trade on stock market or try non-traditional investment vehicle as a way of diversification. 

Step 4. Learn Your Investment Strategy or Style

Once you have chosen your investment you are ready to start investing. You will learn a lot along your investor journey from the right strategy to apply. I, for example have been a big fan of the peso-cost averaging method on my first mutual fund investments. 

Step 5. Assess and Review

Make sure that you always check how your investments are going. Review whether your portfolio still satisfies you as an investor. Withdraw your money in case something unwanted is happening or if you feel like the market is literally closing down on your set of portfolios. 

Step 6. Diversify

The final step is to diversify your investments. Diversification is a financial technique that reduce the risk factor of investing by allocating your investments under other investment vehicles, other industries, and/or under other varied categories. In my Top 10 Most Important Lessons to Learn in Personal Finance Day 4 I mentioned the importance of diversifying your investments.

You can diversify among different financial vehicles, assets such as bonds and stocks and market values. Do not just put your money on a time deposit account but aim high to have your other money on mutual funds, stock market or even a real-estate property.

Final Notes from SavingsPinay

The key thing is you need to know whether your diversification helps you in attaining your financial goals. You'll know when is too much naman because we are talking about your hard-earned money. Investing in the Philippines is very easy to be honest. You just need the strong will to begin and the financial discipline to maintain a positive finances. It is actually addicting to save and invest and it's something I realized after I made my first investment three years ago. Currently I am busy getting my finances in order before 2016 ends. I just want to prep everything before the New Year begins. My goal is to not commit the same mistakes over and over again which I have shared in my confession post before.

Are You Ready to Invest?

Shoot me a message in izzaglinofull@gmail.com

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