Are you still tied to investing to bank accounts?

Tweet

source: http://www.ephemeraology.com

Are you still tied to investing to bank accounts?

I want to make things clear first, banks are good place to save up.

source: http://investmentsko.com

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.

Why do you have to invest?

Tweet

source: http://www.9negroup.com

They say this is the best time to invest in the stock market. Why is it the best time? It is because you are able to buy shares of a good company at bargain.


But you are confused.


The news is that the world market is collapsing with the Greek Debt crisis and the gloomy economic outlook in United States why do I say that this is a good time to invest?

source: http://www.hotslive.com

But before we discuss deeper into this I guess the best start for this is for us to define what really an investment is. 


Investment in simple term means a set aside money put in something that gives you back money. 


Simple but a lot of people still don't get the idea about this. A lot of people put money in a savings account and call it already investment. Yes the bank gives you back money by way of interest. I will call this sound investment if we are in the 70's or 80's where interest on savings are in the range of 5-10% but now I would like only to put money in a savings account for emergency fund purpose because banks nowadays pay 0.5-1% only even time deposit are within that small range.


That is why we have some alternative vehicles or funds where we can put money to give us back money. Remember the definition investment is a set aside money that will give you back money. That is why if you read my post about how I divide my earnings into 6 funds one of them is Investment Fund. We have to set aside money for this purpose.


Now let’s focus on investments. I will discuss some investment vehicles and how does these investments give back money.


Many say put it in small business like a computer shop, a taco shack, or a small food cart. Yes this is a good step to becoming into an entrepreneur but if you are inexperience and your funds are limited you might not be able to start it. So while accumulating enough money for the startup engage yourself in learning how such small business operate. Look at established small businesses around you and learn how they started, how they struggled and how they became and continually be successful amidst the economic slowdown. Business gives us back profit. What we can do with the profit is either to re-invest it to the small business, set it aside for another venture, or save it in a savings account for emergencies.


Some banks now offer what we call Unit Investment Trust Fund or UITF. The amount needed to invest in a UITF ranges from 10,000 to 100,000 pesos and has various holding period. UITF are investment funds, not a deposit that is why it is not covered by PDIC insurance, return depends on the performance of the stock these funds are invested. This is a way which you indirectly invest in stocks. You get what these funds earn.


Stocks are still one of the best investments. We earn either through dividends or price appreciation. But the problem is people wanted to profit right away. In times like these the best way to invest is to buy stocks of great companies at the lowest possible price and hold them until their price rise to about 30-100% of their price today. It may take long let say 6 months to 5 years waiting period and people always pull out their investments when their stocks are down and so they suffer the loss.


I am not saying invest now right away. Always make it a golden rule to know where you are putting your money. Ask but ask the right person. Ask people who did it and made money and still make money or still not pulling their investments at this very time of global economic crisis. It only means they know something that others don't know that is why they are still holding onto their investments even if price of their stocks went down up to 20-50%.


Also always remember to invest at your own risk. Investing is not a gamble; it is more of a discipline to be learned. That is the big difference between the true rich and the show off rich people. Find a truly rich person and learn from them. Bo Sanchez calls them "mentors', Kiyosaki call them "Rich Dad", and other people call them their "Idol". Go out and seek these people. Listen to them and learn. Apply what you learn from them in small scale and little by little make it to the big deal. If at first you failed it is good that you only use a small amount of your hard earned money and the bonus is you learned something out of that misfortune.


Life is a learning process and mistakes are part of it. So if you made a mistake don't worry as long as you learn something out of it.


So are you investing at this time of crisis? Well it's your call, it's up to you.

source: http://exploringthemind.com

Ways to be debt free: How come your still not financially free?

Tweet

 source: http://www.thebigdreamer.com

It has been awhile since I updated this series. An incident lately prompted me to write. 

Though people have finally paid off their debts and started saving up still it seems that they are still stuck in the same situation from where they were before: living from paycheck to paycheck, always only able to save up very small amount for their retirement fund and emergency fund, and as if no matter what they do they can't keep up with the rising prices.

Well I have this friend who is now living through a government agency because of a financial windfall that came to his family. Little by little he is picking up himself. But one day he ask me if I can loan him money. So I was startled. Then he told me that he has a friend who is selling a vehicle at a bargain price and he thinks it is a good price and it would greatly help him since he will be able to go to work better with a vehicle rather than using public transport. I said I don't loan at all. And told him how about your goals of becoming financially free if you loan gain how will you pay for it since your current pay for now only covers your rent and your daily meal. 

And then he realizes my point. He was awaken and he thank me that I guided him.(This is just a fictional story)

Most of the time people forget what have they been working on: that is to get themselves out from the rat race.

In my story if he buys the bargain vehicle yes he will have a comfortable  ride going to work but in the process he added another debt which his current finances can't afford and there is a high likelihood that due to his comfortable and reliable ride he might start oversleeping and be late at work because at the back of his mind he has vehicle to use no more catching up the bus.

Most people who after paying all their debts go again into debt because they can't let go of their old lifestyle: The lifestyle of having what my rich neighbor has even though I cant afford it.

If you noticed there are only few Overseas Filipino Workers or OFW that has truly succeeded after doing their stint in abroad. The problem is when they are abroad they send money to their families and their spouses buy a flatscreen, get cable, remodel the house, buy luxury which they never had before and saying that "because we can afford it now lets get them". Where did all your hard work go? Where did your salary go?

 source: http://negosyongmaypuso.blogspot.com/

All went to consumer goods. Consumer goods are things you buy to be consumed and never generate back additional income.

source: http://dbseconomics.blogspot.com

Some OFW are wise. They send money to their spouse and tell them either to save in a bank with a good interest return, put it in UITF, or even better buy a Van, a Rental property, or do Five-Six, to earn extra money. The van is use either as a school service for students of the rich schools or even a delivery van for small operations for province to Manila and back routes. Rental property like apartments gives back rental income. And the well known 5-6 gives back income as an interest.

Most fail to achieve financial freedom after finally paying their last debt because they get back to their old lifestyle. One has to be focused on the goal. Wouldn't you like to retire young and without thinking of your expenses?

Action my friend, you make the call. You need to change our lifestyle. You need not follow the standards of your neighbor; make your own definition of success.

Want to follow Investing in Philippines by Email?Click here