“Where to invest my money now” is the question of the new decade. When you are just beginning your investment journey this is a very important question as it is vital that you get off to a good start. Too many people have one bad experience with investing and then turn their back on it for the rest of their lives. When you are learning where to invest your money the most common problem is that you have too many options.
It’s time to decide where to invest money in 2012 and beyond. The flow of money and the investment tide could be changing, so you’ll want to invest money with your eyes wide open going forward.
So how to you decide where to invest your money? After you consider your investment objective, time frame, and appetite for risk, you can start evaluating your options.
Here’s a great guide from MoneySense Ultimate Guide to Financial Planning:
Step 1. Compare rates of return.
Typically, we look at the returns. So what rates should you look for? For fixed-income securities like Treasury Bills (T-Bills), Retail Treasury Bonds (RTBs), and commercial papers, it’s not the interest rate but the effective yield. For equities, it’s not just the growth in the stock’s market value but the dividend rate as well. For investment fund like mutual funds and Unit Investment Trust Funds (UITFs), it’s the growth rate in the net asset value (NAV). Remember, however that how much you’ll actually earn as the return on your investment depends on at what price you bought and later sell the security.
Step 2. Consider the minimum investments.
This is another factor to consider when investing: the initial minimum investment required. There are a good number of investments that regular folks can afford. For instance, the minimum for Fixed Rate Treasury Notes (FXTNs) is steep but you can easily invest in government securities through RTBs. It takes a lot of money to have a diversified portfolio of stocks and bond but it’s very affordable to buy units in mutual funds and UITFs.
Step 3. Check for the holding period.
Once you place money, how soon can you take it out? Time deposits and investment funds have minimum holding periods, within which you can’t withdraw your funds. Otherwise, you won’t be paid the full interest (in the case of time deposits) or you’ll be slapped an early redemption fee (in the case of investment funds). For government securities and stocks, you can sell them anytime you want at the price you want as long as there is a ready buyer.
Step 4. Ask about fees and taxes.
The come in the form of commissions, management feed, sales loads, etc. Fees eat up your return. So with all things equal, go for the company that charges less. The government also taxes bank deposits, stock transactions, even government securities. Mutual funds are tax-free and so are investments that are long-term (at least five years). So, when comparing investments, compare the returns net of tax.
Step 5. Factor in risk.
Are you willing to risk everything, including the original amount of your investment? Or do you want to make sure you keep your principal intact? Certain instruments like time deposits guarantee your principal (up to P500,000). Others like some insurance and pre-need products guarantee the returns. For government securities, the security is in the ability of the government to fulfill its obligations. But for equities and investment funds, neither your principal nor your returns are guaranteed but in exchange, you get the potential for higher returns
Sample table
|
Investment |
Rate of Return |
Minimum Investment |
Holding Period |
Fees and Taxes |
Finding the best safe investments will be truly challenging in 2012 and deciding where to invest your money is a very big choice. Read available information you can get about investing your money, for educating yourself about investing, what to invest and where to invest your money will break down your fear of investing. To become a successful investor, you need to grow and develop and the best way to do this is to increase your knowledge.
