 |
| Time deposit vs bonds vs mutual funds vs stocks: which do you choose? |
Long-term financial planning is crucial when you are looking
forward to enjoying a stable life in the future. I believe now is the right
time to do that. The younger you start saving and investing, the greater wealth
you’ll accumulate when you rich 40, 50, or 60. If you plan to build your own
investment fund, rather than completely rely on your government-sponsored
pension plans, then, you’re on the right track. Remember, it’s never really
easy to be a retiree. Other than enjoying the sun-drenched holidays on some
white-sand, tropical shores, the rest of an average retiree’s life is so full
of financial worries, stemming from frequent visits to the doctors and trips to
the pharmacy that could easy wipe out your hard-earned savings. You don’t want
to suffer that way. At least, if you’re going to be ill, you want to be ill
with tens of millions of assets and cash right under your name.
Financial planning this early makes you want to consider the
various instruments available. There are time deposits, bonds, mutual funds and
stocks that you can choose from. If you are not business savvy and yet you are not
happy with the meager interest rates that an ordinary savings account offers,
then, these options are ideal for you, although, your choices will also have to
depend on your risk tolerance and your financial goals.
Time deposit
For very conservative investors who are afraid of putting
their capital at risk, then time deposits are the most ideal investment
instrument for them. However, the returns can be very meager and even
negligible. Time deposits sit at the far end of the investment spectrum.
However, compared to regular savings accounts (less than one percent a year),
time deposits offer higher yields in exchange for getting your funds locked
anywhere from 30 days to one year. Almost all banks offer time deposit services
for balances as low as P10,000.
The money placed in time deposit account is guaranteed by
the Philippine Deposit Insurance Corporation, whereas money placed in bonds,
mutual funds and stocks may be lost.
Bonds
If you are looking for a fixed return on your investment,
then bonds are most ideal for you. Bonds are ideal for clients who want their
principal investments protected from loss. Bonds include short-term Treasury
bills and long-term bonds sold by national governments and private entities to
raise funds.
While bonds are not as common as stocks, investing in bonds,
though, is not that complicated. Simply contact your banker and he can help
you. While the return on investments may be lower compared to stocks, bonds
provide a certain type of security for the principal amount.
Stocks
Stocks are so far riskiest and most aggressive but also the
most financially-rewarding type of investments. If you have the time and
expertise to manage your portfolios, then, stock marketing investing is the best for you. If you want to play safe and ensure
of getting a decent return on your investments, then, go for blue chip stocks.
Blue chip stocks are considered as the best performing stocks in the market and
their growth is gradual over time.
There are numerous stock brokerage firms in the Philippines,
which accept startup investments of as low as P5,000. In fact, you can open an
account online. Citisec Online (COL) Financials is one of the best performing
online brokerage firms in the country. Constant communication is important to
succeed in stock market investing. If you are a newbie, it also helps to attend
seminars, trainings and short-term courses so you’ll get enough information to
help you become an even better (if not an expert) stock market investor.
Mutual funds
If you don’t have the time to manage your stocks and other
investments, opening a mutual fund account is the best for you. Some of the
biggest banks in the country offer asset management services, which include
mutual funds. Compared to other types of investments, where success or failure
largely depends on the investors’ management skills, mutual funds allow you to relax
and let the team of expert fund managers take care of your fortune.
With mutual funds, investors’ money are pooled together so
that the fund manager can leverage them for higher returns. You have your
option on what risk profile to choose from, which includes equity, balance,
low-risk and money market. You can open a mutual account for as low as P10,000.
Now the return on your investment depends on the skills of
your fund manager and you can expect to earn for as low as 5 percent or up to
20-25 percent per annum.
Choosing the right type of investment is key to financial
success. However, you need to seriously assess your financial goals and risk
tolerance. Do you want to be a millionaire in 10 years, then be more aggressive
and invest in stocks or bonds. Do you want mere capital preservation? Then time
deposits and bonds are ideal for you. Whatever choice you have now will
determine the status of your finances in the future. So, invest wisely.
1 Comments