Showing posts with label Investment Tips. Show all posts
Showing posts with label Investment Tips. Show all posts

The Rule of 72: Years to Double Your Money

One way of determining if a certain investment is a scam or not, if it will give you high returns but with low risk or no risk at all. Therefore, it is a scam. There is no such thing as guaranteed returns of 5-10% monthly or even worse double your money in one to two months! 

But how long will it take to double your money? Answer: by using the rule of 72. Take the number 72 and divide it by the annual rate of interest that your money is earning to know the number of years it will take your money to double. 

To give you an illustration, assuming you have a savings account with BPI worth Php50,000 at 1% interest rate per year, it will take 72 years for your money to become Php100,000. What if you are already 30 years old? You will be 102 years old then for your money to grow double. Do you think you can still wait for that long and can enjoy your hard-earned money?

source: yahoo! images


Find higher interest rates (better-than-inflation) investment vehicles like Mutual Funds and Stocks. Because if you choose to put your money in Mutual Funds or Stocks that will give you an average compounding interest rate of 12% per year, it will only take 6 years to double your money. These investment vehicles can give you higher interest rates but not guaranteed and definitely not a scam.

More on how to avoid scam, watch this Pesos and Sense's video.

How Diversified Are Your Investments?

I'd like to share with you this video about diversification. Mr. Armand Bengco, Executive Director of Colayco Foundation explains why do you need to spread the risk by investing in various investment vehicles such as Insurance, Mutual Funds, Stocks and the like. 

How long will it take you to accumulate 1 Million pesos?

Remember my post about 1Million in 23 years? Click here to read the full article. If you want to have 1 million pesos in 23 years, you should start investing Php1k a month now in an investment vehicle (i.e mutual funds, stocks) that grows 10% on an average every year. 

But what if you can save Php2k or even Php5k a month? Do you have any idea how long will it take you to build up a million pesos?

Take a look at this table.

(Annual Rate of Return)
(Monthly Savings)
          Php 1,000

TIME (No. of Years)

Time, Money and Interest: How does it work?

If you increase your savings to Php2k a month and put it in an investment vehicle that grows 10% compounded annually, it will take you 17 years to have a million pesos. Php3k monthly will produce 1 million after 14 years. But if you religiously save as much as Php5k a month and put it in Equity Funds (Mutual Funds) or stocks that on an average grows 10% yearly, it will only take 10 years to generate your one million.


As you increase your monthly savings, and as you increase the rate (better-than-inflation) of return, then it takes you a shorter period to accumulate the 1 million pesos.  

Pesos and Sense Episode 5 (Video) about Investing Early

Everyone should make time to watch this episode of Pesos and Sense. This is my favorite topic so far since I can relate myself with how important investing early can do for us plus the magic of compound interest. From the moment I have discovered about this, I eagerly looked for ways how my savings can grow. And I am grateful to God for this 'gift' that is really worth sharing with you.

Ideally, this is something that we all should know from the moment we start working for our first job because as Aya shared about his investment philosophy, 'it's never too early to start investing'.

Aya Laraya asked different people if they already started investing and some of their answers are: 'Sympre kasi isa sya sa wealth-building mo--ang power of compounding. The earlier you begin, the bigger future value you will get and Kung ang parents mo ay well-informed tungkol sa mga Investments, it’s better start na nila para sa anak na nila pero if not naman, as soon as malaman mo tungkol sa Investment, you should start.'

The Story of Ping and Pong. At age 60, who would you think will have higher amount of Investment? Ping who invested Php2,000 a month for 10 years but started earlier or Pong who invested higher amount of Php4,000 a month for 10 years but he invested late?

Citiseconline's Chief Technical Analyst, Mr. Juanis Barredo shared about Understanding Corrections and Consolidations.

Lastly, question and answer part by Aya.

You may be wondering what Investment vehicles will make your money grow that will definitely beat inflation. This can be UITFs, Mutual Funds or Stock Market. 

At the end of the day, it is all about you--your choice.

Pesos and Sense Episode about 'Investing Early and the Basics of Compound Interest'

        Last Saturday, 1st day of October, Pesos and Sense taught us the importance of investing early and the basics of compound interest.

 The host of the show, Aya Laraya asked different people if they already started investing and here are some of their answers:
  • Sympre kasi isa sya sa wealth-building mo--ang power of compounding. The earlier you begin, the bigger future value you will get
  • Kung bata ka pa, open your savings account. Teach your kids to spend wisely. Save!
  • I started 3-4years ago sa Stock Market. I’m 24 now
  • Kung ang parents mo ay well-informed tungkol sa mga Investments, it’s better start na nila para sa anak na nila pero if not naman, as soon as malaman mo tungkol sa Investment, you should start
  • Actually, as early as you get your first job so ideally it’s time for you to start investing for an Insurance plan already
  • Pag mas bata ka pa mas mura ang Insurance premium mo per year
  • If you have money to spare even if you’re still a student or maybe your first paycheck. Mag-allot ka ng few percent then unti-unti mo sya i-build
  • Turuan mo ang mga bata habang maaga pa to save and not to spend beyond their means

            And after that, Aya shared his key investment philosophy, “It’s never too early to start investing.”

          He gave an example that combines the concept of investing in stocks and starting to invest early. In 1990, at age 21, you convinced yourself to start investing regularly in BPI stocks for Php5,000 monthly without getting affected in Power crisis, Edsa 1 and 2, Global and Asian crisis. May mapapala ka ba after 20years? Based on the results given by Citiseconline, considering the total amount you invested (Php5,000 x 240months = Php1.2M) it will be worth more than 10M at the end of year 2010. You might be wondering where in the world can your money will grow to as much as nine times more of the amount you invested. Simply because the value of BPI stocks increases every year and when the time you hit 41, you already have money for your retirement. That’s the power of smart investing. 

The Story of Ping and Pong
                 Aya shared a story of two friends named Ping and Pong. At age 22, when they already started working for their first job, Ping likes to save a portion of his salary every month until he found an investment vehicle that would give him 10% compound interest every year. But Pong would rather spends his money buying gadgets, gimiks, etc. So Ping decided to start investing P2,000 every month that will amount to Php24K savings every year for his retirement fund. On the other hand, Pong continues to do what he likes doing until he was promoted as the Vice-President of his company at age 40. So Pong decided to start investing Php4,000 every month or Php48K every year in the same investment vehicle as Ping did, which gives him 10% compound interest too. The total amount Pong invested was twice the amount of Ping's investment. Both of them invested for 10years only due to personal reasons. Ping chose to be a public school teacher and Pong wanted to become a rock star.

The total savings amount of Ping and Pong is Php240K and Php480K respectively.
           At age 60, who would you think will have higher amount of Investment? Ping who invested Php240K but started earlier or Pong who invested higher amount of PHp480K but he invested late? Lets take a look at the photo below which illustrates the growth of their savings.

       Because Ping started investing earlier his money have more time to grow as compared with Pong's money. Though Ping only invested for ten years but his retirement  money will not stop growing. Although Pong invested large amount of money but he didn't have much time as compared with Ping who started earlier than him. Time is money. The earlier you start investing, the higher your money can grow. Even if you have little money now, start investing as early as you can because of the power of compound interest.

             Compound interest is the interest on the interest of your money. The earlier you start, the longer you can invest and the more money you can make. 

How to Invest Wisely: Diversify your Money

Tip No. 4: Don’t put all your eggs in one basket. Diversify

Diversify your money.

             It is important to diversify or spread your money in different investments like time deposit, bonds, mutual funds, stocks, real estate or even establish your own business. Don’t just place all your money in one company, invest in different companies. Like for instance, instead of buying shares in one company only, buy shares also of other different companies. You might be wondering, ‘why do you need to diversify?’ By spreading your money in different investments, you also spread the risk. In case you incurred a loss in one of your chosen investment vehicles, you still have your other investments. Always remember the higher the risk, the higher potential returns.

         You might be asking how you can diversify your money. It requires a lot of time, learning and research to do. Don’t worry. There are lots of companies or representatives who are willing to help you and I can be one of them. You may invest in Mutual Funds or Investment-linked savings plan that gives you instant diversification. Because your money will be invested in a wide array of securities and equities that will be managed by the top-notch professional fund managers. 

           To know more about the advantages of investing in Mutual Funds, you may read the article ‘Top Reasons why Invest in Mutual Funds’.

How to Invest Wisely: Explore your Options

Tip No. 3: Match the investment vehicle with your time horizon

Explore your options. Which ones will be best for you?
          If you already have funds set aside for every goal, consider investments based on the time you want to achieve them. Like, for very short-term goals (say a year or two), you may invest in a vehicle that is not risky or highly speculative. There is no point putting your money in risky investments because you may not be able to liquidate investments when the time comes you will need it.

          Take a look at the table below (which I already showed to you in Tip No. 2: No Risk, No Gain) that shows different investment vehicles that will make your goals come true. If you want to understand more about Managed (or Mutual) Funds, you may read the article “What is a Mutual Fund?

Investment Vehicles
Time Horizon
Potential Yield
Time Deposit
Medium-term to Long-term
Managed Funds
Short-term to Medium-term to Long-term
Medium-term to Long-term
Real Estate
Own Business

         Vehicles such as time deposit, managed funds like government securities and money market funds are ideal for short-term goals. For medium-term to long-term goals, you could establish a portfolio depending on the time frame and your tolerance (or appetite) for risk. You may opt to invest in bonds if you are a conservative type of investor or balanced funds that have medium risk and medium returns. You may invest in funds that are initially heavy on ‘high risk, high returns’ investments like stocks (or equity) funds.

    Over time, you can transfer your funds to other funds especially as the date approaches when you will need your money. You may transfer your funds to more conservative vehicles to preserve your investment.

         Different investment vehicles are intended for your different goals and time horizon. Which ones will be best for you?

How to Invest Wisely: No Risk, No Gain

Tip No. 2: No Risk, No Gain
Some of you may be tempted to ‘play it safe’ and put all your money in conservative investments. You want to keep your hard-earned money in a ‘safe’ place like a bank savings account. 

Yes, it is safe but it doesn't grow. But think about this – the threat of inflation on the purchasing power of your money is real! 

To understand inflation in simple terms, I will use my comfort food – Jollibee spaghetti (with extra sauce and cheese please, yum!) as an example. I remember three years ago, it only costs Php38 but now it reaches to the amount of Php44. Every time I need my comfort food, I always asked the manager why the price keeps on increasing and I asked myself there is no such a basic commodities' price that will lower its price, it's always going up and up. 

You may say that this is okay with you but the harsh reality will tell you that prices will continue to increase but income will always stay the same. You can't blame your company but there is something you can do about it.

But some of you who are earning well now might say you will have a comfortable life ahead. Think twice. If you are 30 years old now and spending Php30,000 to sustain your current lifestyle, the moment you reach 60 – with the same basket of goods and basic commodities (meaning you still have the lifestyle you want) the amount Php30,000 will now become Php76,000 after 30 years. 

If you will only put your money and savings in bank accounts and time deposit, it won't beat inflation. Your money will decrease its value. So if you are content with simply saving money instead of investing it, don’t be surprised if you don’t achieve your goals. You should be wise in managing your finances, aside from the habit of savings you should also learn how to invest. 

As the saying goes, "if you want to learn how to swim, you should be in the water". I am not encouraging you to invest all your money since we all have to follow the basic steps of financial success

Don't invest yet if you don't have funds for emergency needs. You also might consider the simplest way of saving money wherein you can try the 10-20-70 rule. That the 20% of your income can be invested and will be set aside for your long-term goals. 

Take a look at the table below to give you the idea of the types of investment vehicles available with the corresponding time horizon, liquidity, risk and potential yield.

The table simply shows  that you can invest part of your money in the different investment vehicles depending on your time horizon with its respective liquidity. And you may notice the investment that has a higher risk produces higher potential yields.

Ask help from your friends whom you can trust. Don't do it alone, there is always somebody who is willing to help you. You can leave a message below or simply send me an email ( if there is something I can help you. I'm hoping that you will make a plan now and take necessary actions as early as possible.

More investing tips will be discussed in the next post.

photo: source

How to Invest Wisely: Educate Yourself

Once you have settled all your debt and set aside fund for emergency needs, now is the time to carefully plan your investments. Plan your goals and dreams to make them happen. You may feel that in some point of your planning, you can’t afford to set aside funds for all your goals at the same time. 

But don’t panic. 

All you have to do first is to prioritize your goals. Categorize your goals into short-term (less than 5 years), medium-term (5 to 10 years) and long-term (10 years and more). The worst thing that can happen is that you may have to work on your goals one by one. But what important is you have a plan and direction.

Here are the tips on how you can invest your hard-earned money wisely:

Tip No. 1: Don’t invest in something you don’t understand

 This doesn’t mean that you should put all your money in a time deposit because that is the only type of investment you know. You have to go out of your way to see what investment products are available in the market. 

Educate yourself. You don’t need to enroll and take up Finance courses to gather information. As of the moment, you can get as many ideas as you want through the web, blogs, read related books, attend seminars, ask your friends and have conversations with them and look for financial mentors. 

Don't afraid to ask questions. Seek for financial wisdom. Try to understand the investment product being sold. To help you do this, evaluate each investment alternative according to the following criteria:

  1. Potential Return – How much can you reasonably expect to earn by investing in this product? What is the historical return on investment or yield on this instrument?
  2. Safety – What are the risks involved? Can you lose all or part of your investment?
  3. Liquidity and Marketability – Can you readily convert your investment into cash? Are there any penalties for pre-termination or early withdrawal/redemption? Is there a ready buyer or a market for your investment?
  4. Minimum Investment Amount – How much money are we talking about? Php5,000? Php100,000?

But if you have already chosen a specific company to be your partner towards the achievement of your goals, you may ask them some necessary questions like:

a. How is the company doing when it comes to stability, investment gains and asset portfolio, reputation in the industry and the service provided to the clients?
b. What are the risks involved and potential returns of the investment if I will choose to invest my money in your company?
c. Can I easily get my money if I need it? Are there other investment options aside from the one you’re presenting to me?
d. Do you also invest in the product you are telling me?

You should make time to learn more knowledge and understand your investment well. 

After all, it is about your hard-earned money. 

How To Be A Billionaire

I have been a huge fan of Bo Sanchez ever since I chose to learn more about Financial Wisdom. I read almost every book that he published and articles that he shared in his website. I even become a regular attendee of The Feast in Pasig along with my siblings and friends. That's how much I admire and believe him. 

With the articles that he wrote related on how money works, "How to be a Billionaire" is one of my favorites. I read it many times over and over again. 

And I'd like to share it with you. Here's the exact words of his article: 

              One day, a man got lost walking in the desert.
          The next day, he was still lost.
After two days under the scorching sun, he was very thirsty. 
          All of a sudden, he saw a little wooden shed.
          He ran to it, thinking of only one thing—Water!
      When he arrived there, he saw an old, rusty water pump sticking from the ground. He gripped the handle and began pumping like a mad man.  But nothing came out.
         Disappointed, he stepped back how to make it work.
         Looking around, he saw a jug covered with dust.
      When he grabbed it, he saw a piece of paper stuck on it. The message read, “Open this jug and you’ll find water. Don’t drink it. Pour it instead on the pump. And you’ll have all the water you want.”

        He popped the cork. 
True enough, the jug was filled with water. Lovely, thirst-quenching, water.
        Now imagine you’re that thirsty man. 
For two whole days, you haven’t drunk water. Your mouth is so dry, your tongue is sticking to the roof of your mouth. You’re literally dying of thirst. And you’re now holding a jug full of water. But the message says that you should throw it away!
       For a moment, your heart is torn. 
What if the message was a joke? A cruel prank? What if you poured the water on that rusty pump and nothing happened?
       But the man in our story chose to take the risk.
He closed his eyes, took a deep breath, and poured the water.
He held the handle and pumped like crazy.
A few seconds later, torrents of water gushed out. Indeed, he had more water than he could ever need!
He drank to his heart content. He also found water containers to bring with him in his journey and filled them up to the brim.
But before leaving the place, he filled the jug with water.
And underneath the sign attached to it, he scribbled, “I tried it. Believe me, it works.”

You Have A Choice:
Drink Now Or Drink Forever

This is a great picture of why people are poor.
The money that you hold now, no matter how small, is like that jug of water. And you always have a choice: You can drink now or you can drink forever. You can have money now or have money forever. 
How? By investing.
A lot of people don’t invest. 
They spend whatever they have.
I’ve met people who earn P10T a month or 50T a month or P500T a month—and they spend everything.  (Yes, I’ve met a lot of high-income poor people!) That’s why their money pump remains dry. And they’ll remain poor forever. It really doesn’t matter how much people earn. What matters is how much they invest.
Investment is a crazy decision.
It’s as crazy as pouring that last jug of water into the pump.
Friend, you have money now.
It may be small but you have it.
       And you’re standing in front of a money pump.
       Actually, three money pumps:
·        Business: Traditional, Franchise, Networking, etc.
·        Property: Rental Property, Buy and Sell, etc.
·        Paper: Bonds, Mutual Funds, Stock Market, etc.
But today, I’d like to focus on the “Paper” money pump. 
Not everyone can start a business right away.
Not everyone can buy a property right away.
But almost everyone can invest in Paper Assets.
Friend, you have a choice.
       Will you simply consume your little money?
       Or will you pour it into the money pump—so that it produces more money for you?
I call this sowing in time of famine.

Don’t Wait For Better Times
Before You Invest

       In the Bible, Isaac sowed in time of famine. 
Crazy, right?
Shouldn’t you keep whatever seeds you have to eat?
But because he did that, the Bible says, that year he harvested a hundred times as much as he had sown, because the Lord blessed him. He continued to prosper and became a very rich man.
If you want to be rich, you need to sow in time of famine too.
When you have very little money, that’s the time to invest.
       Here’s a promise: The seeds that you sow in time of famine will give you your greatest harvest too.
       Do you want to prosper?
Here’s a Bible passage that will tell you how.

Invest When Your Money Is Small

Proverbs 21:20 says, The wise man saves for the future but the foolish man spends whatever he gets.
Are you wise?
Let me tell you the story of Jack and Jill. 
Jack and Jill went up the hill to get a pail of water.
Jack fell down and broke his crown and Jill came tumbling after. And the people who saw the horrific accident, they sang and clapped their hands, “Lalalalalala…” (Our nursery rhymes are very strange.)
If all this time, you’ve always been wondering what happened to Jack and Jill after their fall, now you’ll now.
Jack had brain surgery and he recovered.
But he had no health insurance—and his high medical expenses made Jack’s family very poor. This experience changed his life. The emotional pain created an inner resolve in him.
Jack told himself, “When I grow up, I’ll never be poor!”
At age 15, he started a small business.
Everyday, he sold peanut butter and jelly sandwiches to his classmates. Every month, he earned P2500, which he invested in the Stock Market. His uncle advised him to buy the stocks of strong, solid, great companies. For the next 5 years, he was faithful with his investments. 
When he reached 20 years old, he volunteered in Anawim, a ministry for the poorest of the poor. He received only a small allowance and didn’t have any savings.  From then on, he couldn’t add to his investments anymore.  

Jill Saved At Age 27

Jill had a different life story.
The fall from the hill didn’t affect her too much.
No traumas. Except for a few scratches, she was okay.
She lived a happy-go-lucky life and didn’t save at all.
She worked as a mountain climbing instructor. So her fall from the hill affected her after all, at least subconsciously. She made it her lifelong goal to prevent people from falling.
But she lived like everyone else—spending her salary on “stuff”. Nothing was left at the end of the month.
But when she was 27 years old, Jack called up Jill and invited her again to “Go to a prayer gathering called the Feast.” There, she heard a handsome preacher say that it’s okay to be rich if your heart is in the right place.
That experience changed her life. 
At 27 years old, she began to save P2500 a month. And like Jack, she also invested it in the Stock Market—the same strong, solid, great companies that Jack invested in.
She was so faithful to her investments, she didn’t stop until she reached 65 years old.

Happy Retirement

One day, when they were both 65 years old, Jack and Jill had lunch together after the Feast. 
While waiting for their dessert, Jack said, “My service in Anawim is so happy and fulfilling.  But I guess at my age, I think I’m ready to retire.”
Jill said, “Me too. At 65, it’s getting a bit difficult to climb mountains.”
That was when Jack touched her hand said, “Jill, remember that day we went up the hill to fetch a pail of water?”
“Yes,” Jill said. “You fell down and broke your crown and I came tumbling after. How can I forget?”
“Do you know why I fell?”
“Instead of looking at where I was going, I kept looking at you.  I had a big crush on you.”
Jill blushed. “You did? Jack, I had a big crush on you too!”
For a few minutes, both of them couldn’t stop laughing.

Jack Pops The Question

That was when Jack looked at Jill and said, “I’m 65 years old.  I don’t have much time left.” He knelt on the floor, held her hand, and asked, “Jill, will you marry me?”
Tears filled her eyes, and she said, “Yes!”
After a few hours of celebrating their old new love, they sat down to discuss their finances.
“How much money did you invest?” Jill asked.
Jack said, “That was a long time ago. For 5 years, from age 15 to 20, I invested a total of P150,000.”
“That small?” Jill looked at him with pity. She said, “For 38 years, from age 27 to 65, I invested a total of P1.17M.”
“Wow,” gushed Jack. “I’m marrying a rich woman.”
“I’ll take care of you,” she squeezed his hand. “But I wonder how much money we have?”
“Let’s take a look.”
Both of them called up their Stock Broker.
Both were totally shocked…

For Those Who Like To Look At Tables

       Here’s what happened…
Jack                           Jill               
15   30,000              0
16   30,000              0
17   30,000              0
18   30,000              0
19   30,000              0
20   30,000              0
21   0                          0
22   0                          0
23   0                          0
24   0                          0
25   0                          0
26   0                          0
27   0                          30,000
28   0                          30,000
29   0                          30,000
30   0                          30,000
31   0                          30,000
32   0                          30,000
33   0                          30,000
34   0                          30,000
35   0                          30,000
36   0                          30,000
38   0                          30,000
39   0                          30,000
40   0                          30,000
41   0                          30,000
42   0                          30,000
43   0                          30,000
44   0                          30,000
45   0                          30,000
46   0                          30,000
47   0                          30,000
48   0                          30,000
49   0                          30,000
50   0                          30,000
51   0                          30,000
52   0                          30,000
53   0                          30,000
54   0                          30,000
56   0                          30,000
57   0                          30,000
58   0                          30,000
59   0                          30,000
60   0                          30,000
61   0                          30,000
62   0                          30,000
63   0                          30,000
64   0                          30,000
65   0                          30,000
Total Amount Investment:
Jill: P1.17Million
Jack: P150T
Total Retirement Money if it Grew at 20% A Year
Jill: P220M
Jack: P1 Billion

Jill Is A Multi-Millionaire;
Jack Is A Billionaire

       If Jack grew his money at 20% a year by investing in great, solid companies through the Stock Market, he’s now a billionaire.
       He did that by investing P150T some 45+ years ago.
Jill, because she invested late by 12 years, even if she invested a much bigger amount, P1.17M, has P220M “only”.
Are you 50 or below? You can retire with a few millions.
Are you 40 or below? You can retire with tens of millions.
Are you 30 or below? You can retire with hundreds of millions.
Are you 15 or below?  You can retire with a billion.
Sow in time of famine.
       Don’t wait for better times before you invest.
       Don’t wait when you have excess money.
       Invest now while your money is small.
       Because your greatest ally is time.

photo: source