Are you still tied to investing to bank accounts?
I want to make things clear first, banks are good place to save up.
But at these times savings is not enough. Inflation keeps on eating up the interest banks give. You got to find other places to put your hard earned cash while you have no concrete business to put it into. Time deposits are okay but comparing the interest you get there are better investments where you can put it. But be also careful, I know there are some get quick returns schemes out there that you might have heard from a friend, from a flier, or even somebody who just emailed you telling you that you can earn a lot if you put your money in their company. So be on your guard and don't be scammed.
There are bank products that can actually give better returns but such are no longer protected by the PDIC due to the nature of such product.
These products are:
1. Unit Investment Trust Fund
2. Commercial Papers
4. Mutual Funds
5. Personal Equity Retirement Account or PERA
Let's discuss them in brief so that you can have an overview of your other choices if you are not comfortable investing outside your bank.
Unit Investment Trust Fund
Unit Investment Trust Fund or UITF is new thing for us Pinoys. UITF are collective or pooled money from various investors manage by banks to achieve specific investment goal. If you check out a bank's website these are usually under the "Funds" section of their product page. It is different from Mutual Funds in a sense that it is issued by the bank and you are not a stockholder of the Mutual Fund company but instead you get "units" of the pooled fund.
Commercial Papers are unsecured short term borrowings issued by corporations and retailed by banks. Such corporate borrowings are different from bonds which are long term in nature and primarily issued by government and big companies. Companies with high credit rating are usually the issuer of commercial paper.
Investopedia.com defines it s:
An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.
Bonds are debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.
Personal Equity Retirement Account or PERA
Republic Act 9505 which is also known as the PERA Law (Personal Equity and Retirement Account Act of 2008) is a contributory retirement account which an individual can avail. It is an additional retirement vehicle made available to the Filipino besides Social Security and other pension funded funds.