Investments

Investments
By: Elmer Francisco

Here is where it gets exciting. People say that investments are only for the rich. I must say that this is one of the reasons why the rich gets richer. But, it does not necessarily make the poor poorer. On the contrary, it can definitely make the poor rich. Whether you’re rich or poor or somewhere in between, investments are for you!

It is no secret that compounded interest could be your worst nightmare or your best friend. It’s a matter of perspective.

Do you own a credit card? If yes, whether you like it or not, you are exposed to compounded interest. Credit cards usually charge 3.5% per month as a finance charge. If you couldn’t pay your credit card bill before your cut-off date, they will impose a finance charge. For example, if you have a P10,000.00 credit card debt and you were not able to pay it in full before your cut-off date, you will be charged P350.00 for that month. Now, even if you would not use your credit card for the next month and you still could not pay your credit card bill in full before your next cut-off date, you will be charged again with a 3.5% finance charge but this time not based on your initial P10,000.00 debt but from your initial P10,000.00 debt plus the previous finance charge amounting to P350.00; therefore, your new finance charge would be P362.25 that would be added to your already P10,350.00 debt that would amount to a total of P10,712.25. This would go on and on until you pay it in full. In short, your previous interest payable would already incur interests as well. That is compounded interest at its worst. Don’t get me wrong. Debts are not necessarily bad. We will discuss more about credit cards in my article about good debts and bad debts.

For this article, we will discuss how to use compounded interest to your advantage. In investments, your money will earn interests and the interests that you will earn will earn interests as well. It’s just like our computation for credit cards but only the other way around. You would be the one gaining those interests. Isn’t it fun?

Now, where do you begin? The number 1 rule in investments is never invest money that you are not willing to lose. Yes, investments are very risky but with proper knowledge and experience, you will learn to manage the risk and turn the odds to your favor. It is not like gambling, though. Gambling is a game of chance and it’s entirely NOT in your hands. In investments, risk is manageable if you know what you are doing; therefore, it’s in your hands.

It is also important to know some information about inflation because it is the minimum percentage that you will have to beat in order to break even. Inflation is the sustained increase in the general price level of goods and services over a period of time. Meaning, when you have a Php10,000.00 monthly income and you could buy 10 sacks of rice, with inflation, you might be able to buy only 9 sacks of rice next year with the same amount of income and fewer in the coming years because the price level of goods and services are continuously increasing.  In short, with whatever investment options you would be engaging with, you must at least beat the inflation rate just to break even. Click HERE to see the current inflation rate in The Philippines.

When should you start investing? Actually, you can start NOW! But, I strongly suggest that you ask the experts first before you start investing in order to avoid expensive mistakes. You can send me a message via Whatsapp or Viber at +63 (917) 3011199.

Before you start investing, it is very important to know where you stand in terms of TIME, MONEY and KNOWLEDGE.

Time

For short term investments, you will need more time to monitor them. Meanwhile, for medium to long term investments, you will need only a little time to monitor your investments.

Money


This will really depend on the types of investments you are interested in. For instance, in  ForEx, Mutual Funds, UITFs or Stocks, you can start investing for as low as Php5,000.00. However, for Real Estate you would need a much bigger amount to buy properties for investment.


Knowledge


It is very important to have at least basic knowledge and information about the different investment types before you jump into them.

Click HERE to see the different investment types and some basic information about them.

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