Investing one’s hard-earned money requires thought, foresight, a long-term perspective and a certain appetite for risk. But given that all these qualities are in place, when, exactly, is the best time to dive into the investment pool? “It’s always a good time to invest,” said Fernando Jose Sison III, chairman of the Investment Company Association of the Philippines.
Before shopping for stocks and bonds, however, Ben P. Panares, chief operating officer of Sun Life Asset Management Company, Inc., suggests setting aside enough money to cover half a year’s worth of committed expenses, in case of a sudden job loss or a personal emergency. Only after fulfilling this exquisite can one embark on hi lifetime investment path.
Mr. Panares advises committing at least 10% of one’s monthly income to long-term investment vehicles. And the older one starts to invest, the bigger his monthly allotment should be. “Let’s say you want P10 Million at the age of 65. Assuming there is a 9% return on your money, if you start saving at 30, you’ll need about P5,000 a month. If you start at 40 you’ll need around P13, 500 and at 50 its P43,500,” he said.
As a first venture, Mr. Sison recommends putting at least P50,000 in a fixed income fund for at least a year. “And as you gain more experience, you can move into the riskier investment options such as equities,” he said.
Next comes diversification dividing one’s funds between different investment instruments to minimize risk while maximizing potential returns. “The logic of diversifying is that different financial vehicles have different reactions to events in the financial world,” said Mr. Sison.
The current financial crisis for example, saw riskier investments such as equities take a nosedive while special deposit account (SDAs) attracted the bulk of fleeing investors looking to park their money in safer instruments. Putting one’s eggs in different baskets guarantees that should one vehicle experience a lag, one’s losses can be offset by earning in other investment avenues.
Lastly, Mr. Sison advises against investing one’s spending money in a risky instrument. “ When a big purchase is imminent, don’t invest it. We won’t know what its value will be in short horizon. It may even lose value by the time you want to purchase what you want,” he said. “ Instead, put it in a time deposit or in a near- liquid investment.”
This article was originally published in the Special Features of Business World on August 14th.
i am interested in saving money thru secured bonds. pls educate me on this
Hi Odette!
Welcome to It’s Time! First, I congratulate you for your interest in having an investing mind-set. It is the first step towards financial freedom.
To put it simply, bonds are “utang”. That is why they are called debt securities. If you invest in bonds, you become the bond holder or the creditor to the company (corporate bonds) or government (Treasury bills or Treasury Notes).
There is a corresponding interest rate for a bond and you will receive it as interest income. The interest depends on several factors such as: tenure (length of investment), the issuer (higher risk means higher interest rate).
You can buy bonds from your local bank. Right now, there are several offerings in the pipeline by reputable corporations. The minimum ranges from P50,000.00 to P100,000.00
You can also invest in pooled investments like bond funds or fixed income funds. In this case, there are fund managers that will select which bonds are worth investing allowing you access to a diversified portfolios of corporate bonds and government securities. The minimum investment is also much lower, usually around P10,000.00.
I hope these information helped.