For most people, the only way to build wealth is by working for the money and finding a high-paying job. While it’s true that having a stable source of income boosts your earnings, investing some of those earnings should not be overlooked. A lot of Filipinos believe that a substantial amount of funds is a prerequisite to investing, but that’s actually far from the truth. You can build your wealth through investments despite a small net worth, provided that you can stay on top of your funds and know the right options.
To be clear, investments in this case do not refer to the big-ticket purchases you make from time to time: a brand-new phone, a car, or a new home appliance. Investments are the assets or properties that might increase their value over time. As an investor, you will use your capital to buy these assets that could potentially generate profit for you in the long run.
Even if you’re an office worker or someone living paycheck to paycheck, you don’t have to feel hindered from the path towards greater financial freedom. With that in mind, here are some tips to help you make the investments that will be worth every peso in the long run.
Manage Your Debts
Before you start investing, you need to identify the financial obligations that might be holding you back. While it’s not necessarily detrimental to have debts before investing, you need to make sure that these debts are manageable enough. If you’re saddled with debt from multiple credit cards, for example, you could have trouble balancing your repayments along with your everyday expenses AND investment contributions. In that case, you may need to refinance your debt by taking out a loan from a trusted lender. To make things more convenient, you can secure a cash loan online that will allow you to easily file an application, disburse your loan, and make payments as needed.
Assess Your Goals and Objectives
One of the most important things to understand about investing is that it takes years for you to fully reap an investment’s benefits. Investments are not “get rich quick” schemes, so it would take consistency and patience on your part to make them worthwhile. To add to this, you cannot simply withdraw your money from investments at any time. If you want to invest money for short-term goals like an out-of-town vacation, you may be better off placing your money in a savings account. Investments are ideal for long-term goals such as retirement, home ownership, or acquiring additional properties.
Opt for Investments with Low to Moderate Risks
Investing has a reputation for being a “high risk, high reward” activity, but it all depends on the type of investment you’re getting into. While there are products intended for seasoned investors with aggressive appetites, there are also low-risk investments that offer stable returns and require a low amount to get started. These may be good options if you want to start building your wealth but don’t want to jeopardize the resources that you already have. These options include:
Time Deposit
Time deposits are essentially bank accounts where your savings will be locked within a certain period. Lock-in periods can last anywhere between a few months to a couple of years, but you will earn a fixed amount of interest over time. Time deposits are protected by the Philippine Deposit Insurance Corporation (PDIC), so you can rest assured that the money you put in them is not at risk.
Retail Treasury Bonds (RTBs)
Government-issued RTBs are low-risk investments that offer returns on a medium- to long-term basis. Essentially, RTBs provide access to government securities and abide by fixed quarterly interest rates. You can withdraw your money before the maturity date, but you may face losses due to untimely conversion and limited buyers.
Unit Investment Trust Fund (UITF)
A UITF is a pool of investments that fund managers allocate to various money market funds, bonds, and stocks. UITFs, which are offered by banks, are regulated by the Bangko Sentral ng Pilipinas (BSP). That said, the returns from UITFs are not always guaranteed, so you need to make sure that you’re parting with an amount of money you’re comfortable with.
Mutual Funds
Similar to UITFs, mutual funds are pooled investor money that is funneled into other investment vehicles. Unlike UITFs, however, they are managed by a mutual fund company and regulated by the Securities and Exchange Commission (SEC). The risk that comes with investing in mutual funds varies as well.
Build Your Savings
Setting aside a certain amount of money may help you build up enough funds to make multiple investments. To make saving up possible, you may want to make some lifestyle changes and identify unnecessary expenses you may want to cut back on. This can mean spending less on takeout, choosing to commute, saving a portion of your 13th month pay, or downsizing and looking for cheaper places to rent. Whichever way you choose to save up, the important thing is to set aside a realistic amount to support your investments.
One way you can make saving a part of your regular habits is by automating it. Most banks have an auto-debit feature that allows you to automatically set aside a small amount of your choice to a separate savings account. This will help you sustain your fund by eliminating the need to make monthly or bi-weekly reminders to yourself.
To make the most of your savings, you can opt for accounts that offer high interest rates. You can also open an account with banks that offer promos such as account opening bonuses and cashbacks which you can funnel into your savings account.
Your Budget Doesn’t Have to Be a Barrier
When all is said and done, investing is a great way to build your income and acquire more financial freedom than you do now. Once you’ve decided that it’s the right time to start investing, you may want to follow other best practices such as investing regularly and monitoring the news for developments (and hits) on your investment vehicles. Risk is a factor that should not be ruled out when investing, but it’s still worth knowing your investment options and the potential benefits you can gain when the time comes.
