6 Ideas on How to Invest

This post will tackle how to become rich as a saver/ investor.

I believe that there are three steps to becoming rich. The first one is to acquire consciously a desire to live a frugal lifestyle and thus become a saver. After you become a saver, you now have to look for ways on how to grow your wealth. Remember the parable of the talents? God doesn't give us financial blessings for us to hide the money underneath our mattresses. He wants us to invest our money and grow our wealth. After growing your wealth, the next phase is maintaining your wealth.

In this blog post, I will discuss several ways on how you can invest and grow your money.

Business

If you know anyone who has a great business idea and which you believe in; then you have a great opportunity to become an angel investor. Just remember though that this type of investing is very risky (as most start-up businesses fail during their first year) so be prepared to lose all your money if you decide to put money into a business idea. This mode of investment, however, can also give you very high returns (higher than stock markets can offer) if you happen to have bet your money on a very good business idea. Make sure to talk about revenue sharing and ownership with your “business partner”. Make it very clear with your partner whether you want to take an active role in managing the business or just be a passive owner and simply collect revenues.

Time Deposits

Time Deposits are probably the only investment opportunity that Filipinos are aware of or trust. As for me, this was also the first investment product that I got acquainted with. There’s nothing wrong with time deposits except that they are too safe and thus give really low returns. Of course, there’s nothing wrong with safe and low returns if you’re a millionaire and retired. But if you are a young call center agent, then there is a whole world of things wrong with putting money in a low yielding time deposit time account. Another thing I don’t like with time deposits is that they are still subject to 20% tax even at their rock bottom interest rates.

High Yield Time Deposits

High Yield Time Deposits are different from regular time deposits. They normally have a five-year holding period, are tax-free, and, of course, give out higher interest rates.

UITF and Mutual Funds

UITFs and Mutual Funds are probably the most important things invested next to the rice cooker. Yes, I am a big fan of UITFs and Mutual Funds. So why do I like these investment products? Simple, they allow you to get into the stock market and bond market easily. How do they work? Simple, the bank or investment company pools money from investors and invests the money for them. If the pooling of money is simply too hard for you to understand, here is another way of looking at it: you give money to a bank or investment company, and they invest your money for you. I have to tell you that I have tried explaining UITFs and Mutual Funds to a lot of my office mates already without much success, so I hope you understood my explanation.

The major difference between UITFs and Mutual Funds is that UITFs are managed by banks and have no sales load, and Mutual Funds are managed by investment companies and have sales load.

Stock Investing

Stock Investing is one of those investment options that people take the least advantage of. People simply feel that stock investing is too elitist and that it is only for the rich. Some people even think that you have to have millions just to invest in the stock market. This mindset, however, is a big misconception. Part of the reason I guess which leaves people in the dark about stock investing is the lack of proper marketing by the banks offering it. Citisec, for example, does not advertise its online stock investing facility. If they advertise this service by something like: Invest in the Stock Market for as low as 25000 pesos, wouldn’t that get your attention if you are planning to do so already? But no, this service is not being advertised and I only know about it because I frequent Money Making Forums.

So please, if you are interested in investing in the stock market, don’t feel like you have to have so much money to be able to so. Just remember though to put only disposable income and money which you are not intending to use over a ten year period.

Bancassurance

A bancassurance is a partnership between a bank and an insurance company. It works like an annuity (something that Suze Orman hates very much). It is an investment that pays the investor an x amount of money over a certain period at regular intervals. This investment product is coupled with a term or life insurance. One example of bancassurance is Manulife China Bank’s Money Max. Take note that these investment products get very low returns. It is very safe, though, or at least it appears to be so on paper.

What to Invest On

One team manager in a call center confided in me recently that she regretted how she spent the past eight years of her life. She had been working with a call center company for eight straight years, but she felt like she has nothing to show for it or in Tagalog (wala siyang naipundar). This aspiration is a very common one among Filipinos; you will also find this among OFWs. Having something to show for your hard work here means something along the lines of having built a house, buying a car, or maybe having set up a business. Instead of investing her money wisely, though, this team manager invested her money in dream vacations and clothes.

I always think that it is very wise to invest in something that does not get stolen or destroyed. This is why I recommend investing in securities. Yes, stocks and bonds may go down in value but it will always be there and will always recover in value. A house has to be maintained, it can be destroyed in a disaster, and there is no way to recover it anymore. The same goes for a car. A car is even worse because it goes down in value; a house at least appreciates in value.

If you have any questions about this post, please feel free to ask away.