5 Best Investment Ideas Where you Can Put your Extra Money While you are Working
One question asked a million times, “I have extra cash but where should I invest my money?” Let us take you to an in-depth analysis of the pros and cons of various investment products.
Disclaimer: There is no perfect investment. The right mix of investment differs from one person to another.
Everyone has a unique financial condition to consider that might affect their future investment goals.
Thus, it completely varies on how a person took the study and understood well the right mix of investment as well as the company he is going to put in his or her money given his or her financial situation and objectives.
Read and decide which one is best for you.
1. Government Securities
Pros: These are relatively safe since the Philippine government guarantees them. (Examples are: Treasury bonds, Pag-ibig Housing Bonds and Treasury Bills). They provide steady and regular income every year. Most of the government securities can be liquidated by selling bonds to interested parties such as bank and the like.
Cons: Relatively low interest. Since the investment is guaranteed, the yield is minimal. Although this is higher than traditional savings and other accounts, interest earnings from government securities may still be lower as compared to other investments.
What to do: Consider government securities as part of your portfolio. You may want to invest directly in these instruments or join a Mutual Fund or Unit Investment Trust Fund.
2. Corporate Bonds
Pros: Corporate bonds yield fixed interest income for a specified number of years. The interest rate is usually higher than offered by the government securities or bank deposits.
Cons: Investing in this bonds come with risk. The higher the interest rate, means the higher the risk that the company will be insolvent. For example, if the company’s operation is loss, it may end up not settling its obligation to its bond investors. An insurance company like PDIC does not guarantee these bonds.
What to do: Invest only in corporate bonds if your financial goal is to preserve your capital and hold it for a long term. Choose only bonds with good rates.
3. Mutual Funds, Unit Investment Trust Funds (UITF) and Exchange Traded Funds (EFT)
Pros: Mutual funds, Unit Investment Trust Funds, and Exchange Traded Funds are collective investment schemes offered by banks and other financial institutions. You benefit from the expertise of the fund managers in exchange for your invested capital. You need not be concerned with the daily fluctuations of asset prices or the day to day operation. The investment managers will do that for you.
Cons: Mutual funds and UITF that are invested in stocks may generate capital losses, which means you can lose money. There are no guaranteed returns, and there is no insurance for investment loss.
What to do: Decide on an appropriate investment fund that suits your investment objective and risk appetite. Learn more about these investments here:
- Unit Investment Trust Funds (UITF)
- Mutual Funds
- Exchange Traded Funds (ETF)
Pros: Stocks represent your ownership shares in a company. When there is a bull run in the market, stocks perform well. You also earn a lot when you get good stocks during the initial public offering that ultimately raise the price after. In the long run, stocks may outperform bonds regarding yield.
Cons: Returns generated by stocks are not guaranteed. It is possible to lose your money when investing in stocks.
What to do: Invest only what you can afford to lose. Hold your stock investment for the long term to ride out market price fluctuations.
5. Real Estate
Pros: Investing in property or real estate is lucrative because the price of a property typically appreciates over time. You can also use it to provide recurring income if you have lessees to rent the property. Land, in particular, is also considered a store of value. That means its price does not usually depreciate over time.
Cons: Real estate is not very liquid because you may be dealing a hard time looking for a buyer. If the economy undergoes depression, basically the value of the property is also affected so you might sell it at a lower price. Maintenance costs of the property may also be high.
What to do: When buying real estate, the time it right to get a good price for your property. If you are not using it, try to rent it out. The location of the property matters most, so the best thing to do is to locate the property in the most accessible place where a customer will surely acquire it. If you are getting a condo unit, read here our Tips when Buying a Condo.