Investing Early for Sound Financial Future
June 15, 2010 by BizMind
Filed under Best Ways to Invest Money
Investing Early for Sound Financial Future – It’s never too late to take care of our financial future. Saving money in the bank and investing money save for years even in this time of financial crisis is a good practice. In investment, there are two basic types, i.e. lending investment and ownership investment.
Putting money in the bank is lending investment. Money in a savings account or in a time deposit is actually a loan to the bank. In exchange for using the depositor’s money, the bank pays him interest. This is the fixed income that the depositor gets while his money is kept in the bank. Here, the bank guarantees the payment of interest (depositor’s income) and the principal amount in the deposit. Because of this guaranty, the interest rate is relatively low as the risk of losses to the depositor is also relatively low.
Ownership investment, on the other hand, is actually the acquisition of assets (shares of stock, property, etc.) with the expectation to periodically earn income generated by the asset, and eventually to accumulate gains due to the increase in the value asset over time. In ownership investment gains of losses are actualized only when the asset is sold. Generally, ownership investments are more suitable to meet long term goals.
Economic law for investor’s guidance:
a) the higher the return, the higher the risk;
b) the longer the time, (investment period), the lower the risk; and
c) the longer the time, the higher the return
When one invest, he must have clear financial expectations based on specific economic goals. No matter how much small, a little interest is much better than just keeping money permanently in the piggy bank at home.
If you have accumulated money over P6,000 in your savings account, you can start to invest in Mutual Fund (MF) with a minimum investment of P5,000. There are few funds that accept this small minimum as an initial investment. The minimum for Unit Investment Trust Funds (UITF) of bank is P10,000. Thereafter, you can add P1,000 each time into your account.
