Less than 1% of Filipinos invest in the stock market. This happens for a variety of reasons, but the most common is “Wala akong sapat na pera.” With rent, electricity, water, groceries, and other necessities taking up a huge chunk of a person’s income, not to mention all the “fun money” they spend with friends, there’s not much left after everything’s paid and done. Why would Filipinos bother investing?
What people fail to realize is that by not investing, they might not be able to afford in the future what they can afford today. This is thanks to inflation. With the country having a 5–year average inflation rate of 3.5%, costs are rising, but the buying power of the peso decreases. From McSaver meals to education costs, see how inflation affects expenses:
|Inflation rate*||Today (Php)||in 10 years (Php)|
|giving birth (private hospital)||5.1%||100,000||164,000|
*Inflation rate is reported by the National Statistics Office of the Philippines. Future values are estimations.
Investing is far and away the best way to fight inflation. If you invest Php 10,000 today and leave it for 10 years, it will grow to Php 21,500 with an 8% annual return on investments. Even better news is that you don’t need hundreds of thousands of pesos – you can start investing with just Php 5,000. Filipinos can use a number of inexpensive investment vehicles, so you can start making your money grow today.
Mutual Funds, Unit Investment Trust Funds, stock investing, and forex trading are four investment instruments that have a low participation fee. See the table below for the basics on these:
|What are they?||pool of investments where you buy shares of the investment company, making you a shareholder||pool of investments where you buy units of an investment fund||shares of an individual company making you a shareholder||currency trading where you leverage one currency over the other|
|Where can you buy the investments?||brokerage firms, insurance providers||banks||brokerage firms||trading platforms through online trading companies|
|Min. participation fee||Php 5,000||Php 10,000||Php 5,000||flexible|
These four investment vehicles will make your money work for you. With the low participation fee, just setting aside Php 500 a month will enable you to start investing in 10 months. Before going in head first, make sure to pick the investment type that best suits you. Mutual Funds and UITFs are best for beginners because a professional or expert manages your basket of investments. He makes sure your money grows by carefully selecting which corporations to buy shares from.
See below how much you can make your money grow in a year by investing in mutual funds and UITFs:
|Fund||Fund Type||Initial Investment (Php)||After 1 year (Jun 30, 2014 to Jun 30, 2015)||ROI|
|Philequity Peso Bond Fund, Inc.||Mutual Fund||10,000||10,300||3%|
|Philam Strategic Growth Fund||Mutual Fund||10,000||10,545||5.45%|
|Security Bank High Dividend Equity Fund||UITF||10,000||11,243||12%|
You won’t be able to get these interest rates with the usual savings accounts. And the longer you stay invested, the more potential for your money to grow.
Stocks and forex trading, on the other hand, are not suggested for beginners. Picking which stocks to buy requires understanding why you’re buying a particular stock. Why buy Jollibee stock over Ayala Land, or vice versa? (We’ll tell you more about stock investing in the next few weeks – stay tuned to this space.) With Forex Trading or currency trading, you need to know the economies of countries whose currencies you are trading to know which currency will increase in value against another. With the current Greek debt crisis, buying Euros might not be the best idea.
With these four investment vehicles, even if the participation amount is low, you need to pick the best one for you. We can help you do that over the next few weeks with our following articles about investing for different budgets, knowledge levels, and risk types.
Even with just a few thousand pesos, you can become an investor today. Stay tuned for next week’s article where MoneyMax.ph tells you some of the best beginner-friendly investments you can choose from, so your Php 5,000 can start growing.