Tight-Budgeted Investments (Minimum Monthly Investment of Php 10k and below)
Because the process involves letting out money, a common misconception is that you need to have a lot of it stored away before starting.
But contrary to popular belief, anyone can actually start investing even with a small amount. There are several kinds of investments that require quite a low minimum investment rate which you can easily avail of. Here are the common investments that you can make on a budget.
1. BTID (Minimum Monthly Investment: Php 2,000 – Php 3,000)
Buy Term and Invest the Difference is essentially an investment strategy that involves buying term life insurance and investing the difference in other investment vehicles, hence the name. This philosophy gives you the opportunity to spread out your investments elsewhere.
In order to understand how BTID works, here are some things you need to understand about life insurance.
There are two main types, namely term life insurance, and whole life insurance.
Whole or permanent insurance is much more costly because of the additional advantages it maintains over term investments. These plans usually last up to when you are 88 to 100 years old. It also offers a savings component or “cash value” which you can borrow from. However, this is what makes them relatively more expensive than term life insurance, usually five to ten times the cost.
Term life insurance or “pure life insurance” is the cheapest form of life insurance. This is because it covers the death of only one beneficiary within a span of 5, 10, 20, or 30 years.
The perks? Besides being insured for worst-case scenarios in that period of time, you are in total control of your investment plan. So you could potentially make a lot more investing in other vehicles rather than centralizing your budget in a whole life insurance plan.
It is the DIY nature of this strategy that makes this practice a wise and better decision if you want to have more control over how much you make in investments. Plus, investment returns are much higher when you invest in term insurance.
2. VUL (Minimum Monthly Investment: Php 2,000 – Php 3,000)
If BTID isn’t the plan that you want to embark on because of the work involved in it and the shorter coverage of term life insurance, then perhaps Variable Universal Life Insurance (VUL) may work better in your favor.
Purchasing whole life insurance comes with benefits that buying term won’t have. As mentioned above, everything is taken care of when you purchase this plan. You wouldn’t have to construct a savings plan because this already acts as one, plus it guarantees coverage for a much longer period.
Sure, it costs more and you may not get as big of a return as BTID, but that doesn’t mean that your money isn’t growing. With most VUL plans to guarantee a 7.8 – 16.6 percent of average returns yearly, it’s still pretty stable and gives decent returns.
The biggest advantage of this strategy is its convenience. This is most ideal for people who don’t want an overly complicated investment plan and just want enough to get by comfortably.
3. ETF (Minimum Monthly Investment: Php 2,000 – Php 5,000 depending on the minimum board lot and market price)
If you’re up and geared towards serious investing, then ETF is one of the best options that can help you learn more about how the world of investment works.
ETF or Exchange-Traded Fund is an open-ended investment fund that holds assets like stocks, bonds, commodities, and many others. They hold similar characteristics to mutual funds. The difference is that ETFs are traded within the day rather than being purchased with the end-of-day value. This ultimately combines the ability to diversify that mutual bonds possess with the flexibility of the stock market.
Unlike some mutual funds, ETFs are always transparent, giving daily updates. The First Metro Philippine Equity is the place to go to start this investment fund in the Philippines.
4. Bonds (Minimum Investment: Php 5,000)
With an idea of what bonds are from the information given earlier in this article, here is a proper introduction to how it works in the Philippines.
There are two types of bonds you can invest in the Philippines, namely corporate bonds and government bonds. The difference between the two is who you’re lending the money to. When you invest in corporate bonds, you’re lending money to a corporation. Likewise with government bonds.
There is no guarantee of which of the two are better to go for since they differ in risk profile as well. Corporate bonds often have higher yields, but this is because of the higher risks it carries most of the time.
Most banks can help you get started with investing in corporate bonds. Several banks also carry Government bonds that you can ask about. The information on how to get started is public knowledge and will most likely be posted on their website. You can contact them online to get a better perspective of how it works.
5. Stocks (Minimum Investment: Php 5,000)
Stocks have been increasingly doing well over the years, which means you wouldn’t want to miss out on the opportunity it could hold in 2020 and beyond.
Understanding the Philippine Stock Market won’t take overnight. With it constantly changing, you need to be updated at all times. This type of investment needs constant monitoring and work put into it, which means if you do choose to venture into it, you’re going to need to read up on it.
Popular corporations like Jollibee, San Miguel Corporation, and Aboitiz Power Corp are just some of the industries that rely on stockholders. But don’t go ahead and place your bet on the companies that you can name at the top of your head. It is important that you research well on the industries and how well they’re doing in the market.
You should also consider the price and risk factors going in. The perfect opportunity in stocks is when you buy stocks for a low price and are able to sell for a much higher cost. Buy stocks that are set below their Buy Below Price or BBP. On average, you can expect about 10.8 percent on average returns.