Where to invest my money?

“Where is the best place to put my money?”

We have addressed this question several times before (just scroll down to see Related Posts), but people seem to continuously crave for that ultra-super-mega-cool way to invest their money.

Actually the perfect investment instrument does not exist, because there is no right mix of investments that can suit all people. Everyone faces unique circumstances and has varying investment goals. One has to determine the right portfolio that will work for them given one’s financial situation and financial objectives.

Here’s our comparative pros and cons analysis of various traditional investment products. Learn and decide which one’s best for you.

1. Bank deposits

Pros: They are safe since the Philippine Deposit Insurance Corporation (PDIC) insures deposits up to P250,000 (now increased to P500,000). They provide steady interest income. They are also easily accessible, meaning you can easily withdraw your money given several bank branches and a lot of ATMs everywhere. A savings and current account can help manage one’s day-to-day expenses.

Cons: Interest on savings and current checking accounts are low.

What to do: Consider investing in a time deposit for higher interest. The secret to earning in a time deposit is to hold it for a long term to avail of interest rates higher than inflation. You can also have investment in foreign currency to take advantage of fluctuating exchange rates.

Want to learn more? Join the PMT Forum Discussion on Banking / Insurance / Credit Cards

2. Government securities

Pros: Government securities, such as Retail Treasury Bonds, Pag-ibig Housing Bonds and the like are relatively safe since they are guaranteed by the Philippine government. They also provide steady income. Most of the government securities can be liquidated by selling to other investors or selling back to banks that offered the securities.

Cons: Minimal interest. Although higher than traditional savings and current accounts, interest earnings may still be lower as compared to other investments.

What to do: Hold some government securities as part of your portfolio. You may want to invest directly in these instruments or join a mutual fund or unit investment trust fund investing in government securities.

Want to learn more? Join the PMT Forum Discussion on Corporate Bonds and Government Securities

3. Corporate Bonds

Pros: As fixed income instruments, they give fixed interest income for a specified number of years. The rate is usually higher than that offered by government securities or bank deposits.

Cons: Bonds come with a risk. They are not guaranteed by an insurance company like PDIC. The higher the interest offered, the higher the risk that the company will default on payments. If the company folds up, it may end up not paying its bondholders.

What to do: Put some money in bonds especially if your financial goal is to preserve capital. Hold it for the long term. Choose only bonds with good rating. You may want to join a mutual fund or unit investment trust fund directly investing in bonds to save you the trouble of identifying the best performing bonds in the market.

Want to learn more? Join the PMT Forum Discussion on Corporate Bonds and Government Securities

4. Stocks

Pros: When there is a bull run in the market, stocks perform well. You also gain a lot when you get good stocks during the initial public offering. In the long run, stocks may outperform bonds in terms of yield.

Cons:  Returns are not guaranteed and it is possible to lose your capital.

What to do: Invest only what you can afford to lose. Hold your stock investment for the long term to ride out market price fluctuations. You may also invest in stocks via a mutual fund or a unit investment trust fund to get rid of the hassle of monitoring stock prices daily.

Want to learn more? Join the PMT Forum Discussion on Stocks and Stock Trading

5. Real Estate

Pros: You may earn a lot as the price of property appreciates over time. You can also use it to give you recurring income through rental payments. Land, in particular, is also considered a store of value. It does not usually depreciate over time.

Cons: Real estate is not very liquid and you may be tied to it should you need funds. Sometimes the market is down and you may not get a good value for the property if you are forced to sell it. Maintenance costs may also be high.

What to do: When buying real estate, time it right to get a good price for your property. If you are not using it, you may also rent it out. Location, location, location of the property is key. If you are getting a condo unit, read here our tips to consider when buying a condo.

Want to learn more? Join the PMT Forum Discussion on Property and Real Estate

There are several more avenues to invest in. Read more of them in the PMT Forum or in our other Investing Guide articles.

- Excerpts from the Philippine Daily Inquirer’s ”Take Charge of your Money” series

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