Posts Tagged ‘securities’

Safest Way To Invest

The featured article below would help those confuse people who got the money to invest but don’t know or have any idea on where to put it or perhaps just reluctant in finding the safest way to invest.
Take the query below as well as the answer to Edwin’s question.

Q: What’s the best way to save these days? I am expecting a big amount of money to come from the sale of a lot we’ve had in the family for a long time. With the global economic crisis affecting our economy, I want to play it safe yet grow my money. – Edwin

A: It’s good that you are thinking of protecting your money (your capital) by investing the proceeds from the sale of your lot. Investing your money may make it grow over time.

Understand, though, that with investing comes risks and rewards. If you want your investment to grow and yield higher possible returns on your investment, be prepared to meet setbacks and losses if they happen. Investments that yield higher returns come with higher risks such as heavy losses, as what stock market investors have realized last year at the height of the global financial crisis. Investments that have low risks may more or less safeguard your capital but give you low rewards as well (low interest income or minimal capital gains).

Bank deposits and government securities may offer you relatively safe investment options.

Bank deposits take the form of savings accounts, interest-bearing checking accounts, and time deposits. You deposit your cash in the bank and you get interest back after a month or so. While this may seem to be safe and will preserve your investment, this may not actually be the case as inflation may eat into your investment.

The current rate for savings accounts, for instance, is about 0.75 percent per annum. The inflation rate is way higher than that, which means that the growth to be yielded by your investment in a savings account will be overtaken by the rise in prices of commodities.

Time deposits may give better rates, but still may not be enough to match the cost of inflation. You may need to keep your money on deposit for a longer term to achieve a higher rate of return.

As “The Citibank Guide to Building Personal Wealth” (a book published by Citibank) says, “Inflation is a major risk if you hold large sums of cash permanently, because it reduces the buying power of cash.” Put simply, inflation may erode the value of your investments over time.

We mentioned government securities above. These come in the form of treasury bills, treasury notes, and treasury bonds. Bills have the shorter term (less than a year), and bonds have the longest term. Government securities are generally low risk since the government guarantees to meet its obligations and pay the published interest rate.

But since you mentioned that you want to grow your money, it may be wise to look into other forms of investment as well to achieve your goals:

1. Stocks or equities may give you high possible returns over the long term, but these come with high risk, which you don’t seem to want to assume at this time.
2. Bonds may also give you good rates of return, but these also come with some form of risk, although lower than that of stocks.
3. Pooled funds come in the form of mutual funds or unit investment trust funds (UITFs) and depending on their nature may be invested in stocks alone, bonds alone, money market funds (government securities and commercial papers), or a combination of these.

To keep your money safe and make it grow at the same time, we advise that you do what wise investors have been doing all along: Diversify! Keep some funds in bank deposits, some in government securities, and some in pooled funds. Since you may have other financial goals and may have a timetable in needing your funds later on (example, for retirement), we advise that you consult a financial professional who will assess your risk profile and suggest the best possible allocation of your investments.

You may also invest your money in tangible assets such as real estate property. However, market values fluctuate over time, so be prepared for any eventuality. Investing in a business also comes with a high risk as not all businesses realize income. Jewelry and art are also forms of investment, but bear in mind that it may take a while for their value to increase. Converting them to cash may also take a longer time should you find the need to do so.

Whatever investments you go into, study all aspects thoroughly. Look into the pros and cons before deciding. We wish you the best.
Entry Credit: http://business.inquirer.net/

*Disclaimer: Those who happened to read the article above are solely responsible for their own investment decisions and should consult professional advice from financial experts or analysts.Thegetwealthy.com will not be liable for any loss or damage caused by a reader’s reliance on information obtained from our web site. Thegetwealthy.com receives no compensation of any kind from companies or industries or funds that are mentioned above.

Mutual Fund

We collated and researched online on the different definitions of Mutual Fund. Here:

What is a Mutual Fund?

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.^[1] The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually

- Wikipedia

***

A mutual fund collectively pools money from individual and corporate investors. These funds are managed by a professional fund manager who invests the money in stocks, bonds, money market instruments, and/or other securities. The mutual fund earns in two ways: from the capital gain (increase in value) of the security and dividend or interest income. These proceeds, net of whatever charges and expenses, are passed along to the shareholders. The value of a share of the mutual fund, called the Net Asset Value (NAV), is calculated daily based on the fund’s total value divided by the total number of outstanding shares.

There are mainly four types of mutual funds in the Philippines: stock (or equity), bond, balanced, and money market.

-Pinoymonetalk.com

***

Mutual funds are similar to UITFs or Unit Investment Trust Funds, to make investment much simpler, more accessible, and more cost effective for small investors.

The sale and trading of mutual funds, stocks, and bonds is regulated by the Securities and Exchange Commission (SEC), a government agency that protects investors from fraud and theft. However, the value of your investment in a mutual fund (or an individual stock or bond) is not guaranteed by the SEC or by any other government institution.You can lose money on a mutual fund investment — in an extreme case, even all your money. However, the safety track record of most mutual funds is quite good.

-Investingpinoy.com

Advantages in Investing in a Mutual Fund

Mutual funds provide a combination of benefits to investors which cannot be matched by other investment instruments. These advantages are as follows:

Professional Management

Full-time professional managers are the ones who manage the mutual funds. Their job is to analyze the various investment products available in the market and select those that would give the best possible returns to the fund and its shareholders.

Low Capital Requirement

A minimum investment of Php1,000 to Php5,000 is enough to start with. Most mutual funds in the Philippines require a minimum initial investment amount of only Php5,000.00 and minimum additional investments of Php1,000.00.

Diversification

There is a saying that goes, “Do not put all your eggs in one basket.” This adage is especially true in the world of investments which is full of uncertainties. There is no such thing as a “sure” thing. Diversification is the key to manage risk. When people invest in a mutual fund, they achieve instant diversification because the fund is usually invested in a wide array of securities.

Liquidity

Liquidity is the ability to readily convert investments into cash. While the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within a day. Mutual funds are, therefore, considered very liquid investments.

Safety

Mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules. They are prohibited from investing in particular investment products and engaging in certain transactions (this is discussed in greater detail in a latter section). All of the fund’s assets must be held by a custodian bank for a safekeeping.

Potential Higher Returns

Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For instance, with its millions under management, it can negotiate for lower stockbrokerage fees or command higher interest rates on fixed-income investments. In the end, however, it is still the investment adviser who really makes the big difference between making direct investments and investing in mutual funds because very few individual investors can match the experience and skill of full-time professional fund managers.

Convenience

In other countries, mutual funds can be purchased directly from a funds or through a broker, financial planner, bank or insurance agent, by mail, over the phone and increasingly over the internet. The popularity of mutual funds in the Philippines is fast catching up. It may be a matter of time for this level of convenience to be a reality in the country. Funds also offer a variety of other services, including monthly or quarterly account statements, tax information, and 24-hour phone and computer access to fund and account information.

-Pinoysmartsavers.com

Our Mutual Fund

Our current mutual fund is Philequity. Why? We made researches and it’s so far one of the best mutual fund to invest in the Philippines. It got lots of awards and recognitions in the financial field and as an investor of Philequity, I’m in deed very satisfied with it.

You may visit PSE for the list of mutual funds you might want. As an advice, know the company first, before putting your money in it.

-thegetwealthy.com

LINKS:

Wikipedia

Pinoymoneytalk.com

Investingpinoy.com

Pinoysmartsavers.com

GetWealthyIn

PhilEquity

Rule of 72

Do you want to know how Compound Interest works for your money? Do you want to know how to double your money for a period of time say in years? Do you know about the RULE of 72? Do you want money work for you instead you working hard for the money? Do you want to get wealthy? Knowing the secrets of the wealthy is in your hand! Please read below:

Trivia:

“Albert Einstein called compound interest as the 8th wonder of the world and mankind’s greatest invention, because it is the mightiest force ever unleashed for the amassing of wealth”

How is Rule of 72 computed?

- It is dividing the value of 72 by the interest rate per period to estimate the number of years it takes for your money to double.

Example: If you have Php 100. When will this become Php 200?

Answer: W e have to apply the Rule of 72 and in depends on the interest rate where you put your money at.

* Scenario 1: Bank- it will give your money 1% interest rate per annum. But consider taxes, it might give you less than 1%, say .66% perhaps. This is on regular savings. You may get 4% interest rate per annum if you put your money in time deposit in the bank. Computation: 72/1=72. It means, it will take 72 years for your Php 100 to become Php 200.

* Scenario 2: Bonds- these are certificate of indebtedness issued by the government or any company who wish to borrow money from you with the promise to pay you out after a certain period (say 3 years) with a guaranteed interest rate. This is SECURED and NON-RISKY investment of your money. Most of them will give you 4% to 6% interest only per annum. Way better than 1% right? Let’s take at 4%. Computation: 72/4=18. It means, it will take 18 years for your Php 100 to become Php 200.

* Scenario 3: Stocks/Equity- these are shares or certificate of ownership issued by companies or corporations if you acquire a portion of their outstanding shares offered to the public. This is a risky investment but it may give you more than 12% or let’s say 100% or 200% or more of your money! But taking the risk is ok if you know how to manage your investments. Let’s take 24% rate of return. Computation: 72/24=3. It means, it will take 3 years for your Php 100 to become Php 200.

* Scenario 4: Mutual funds- it allows many investors (individuals, banks, companies, etc.) to pool their money and Professional Money managers will invest it in a diversified portfolio of securities (bond and/or stocks). It is recommended for NEWBIES who wants to try the stock market. It is “quite” non-risky or may be risky. So, it’s important to know what mutual fund to invest in. It may give you like 8% or more. It depends on how your Professional Money managers invested your money to give you the highest return possible. Let’s take 8%. Computation: 72/8=9. It means, it will take 9 years for your Php 100 to become Php 200.

There you go, that’s the power of Rule of 72. It is easy to compute. Now, you know already where to put your money to double it! It’s just choosing the options above, if you have questions or suggestions, you may leave a reply below or go to our FORUMS or chat with ME.