How about INVESTING?

A lot of us maybe one of those guys who live as we call it “from pay check to pay check” or are you one of the 15th day club e.i. happy only on payday?

A lot of us also are too afraid to play the game of investing. Some say its risky because you can become a rich in a second and also a poor man in just a wink of an eye. So many people have so little idea about investing, and I am one of those. So in my quest to learn investing I started reading books, surfing the internet, and asking questions regarding investing. I am not an expert on the topic but as the saying goes” only you can well manage your money”; if you don’t have enough knowledge about money probably investing is not for you. The thing is information about investing is free. We can all access the internet, read the business section  of the newspaper, and ask anyone who knows about it. It is just a matter of us making the move to really educate ourselves about it.

I got an excerpt from China Banks website regarding investments. Hope it will be the start.

Starting to Invest

Proper investment planning involves the process of accumulation and management of funds to improve one’s financial position and achieve goals set for oneself and for one’s family.

Strategies should be mapped out on how assets are to be allocated among various outlets such as cash, stocks, bonds, real estate, and other investments. In planning for investments, it is important to have a careful assessment of one’s personal situation before choosing on the various investment outlets available in the market. Each one is unique and the same applies to one’s investment profile. The suitability of investment outlets and strategies to a person would depend on several factors. Some of these are the following:

Amount of Capital
How much capital do you have available? Are these excess funds or funds intended for business or standby for other potential business opportunities?

Investment Goals
Investment goals should be specific and quantifiable. For example, you may want to save up for a comfortable retirement. How much is “comfortable” would depend from person to person. You may have to compute how much monthly income you would need during retirement, and how much funds can provide that amount of retirement income. Then you can make saving and investment strategies in order to achieve that retirement goal.

Investment Horizon
How much time do you have to reach your goals? An investor’s age and possible future use of the funds can help you determine your investment horizon. Short-term goals should be matched with short-term term, lower risk investments. It would be wiser to keep funds in instruments that protect principal and guarantee yield because you don’t have the benefit of time to recover whatever will be lost. With long term goals, you have the benefit of time to ride out the volatility in the market. There are investment outlets that may have the possibility of losing the principal on a short-term view, but have a higher yield potential on a longer term.

Risk Appetite
Finally, it is important to determine your risk tolerance before investing. A very conservative investor may not be comfortable putting his money on an investment that offers a high potential yield, yet with the possibility of capital loss. He may be affected with the volatility in the market, thus preventing him from making rational investment decisions.

On the other hand, an aggressive investor may not be very happy with the returns that a low-risk investment offers. It may be more fitting for him to invest in an instrument that may be a little riskier on the short run, yet has a higher potential for capital gains in order for him to achieve his goals faster. Each person’s risk profile differs, and should be matched along with his investment goals before choosing on any investment.


Some types of Investments

There are several forms of investment, but they can fall under any of 2 main categories:

Bonds
Bonds are certificates of indebtedness of an issuer (e.g., the national government or a private corporation) to an investor. Investing in a bond is an act of lending money to the issuer usually to finance the issuer’s business expansion or public expenditures.

In exchange for lending money, the investor (i.e., an individual or another private institution) gets interest payments at specific intervals and par value upon maturity of the bond.

There are several ways to classify bonds. One way is to base it on their currency, as follows:

Currency Type of Bonds
Peso-denominated
  • FXTNs (Fixed Rate Treasury Notes)
  • RTBs (Retail Treasury Bonds)
  • Zero coupon bonds (Napocor)
  • Corporate Bonds (Ayala)
Dollar-denominated

Euro-denominated

  • ROP (Republic of the Philippines)
  • BSP (Bangko Sentral ng Pilipinas)
  • Corporate bonds (e.g. Ayala Bond, SMIC, PLDT)
     
  • ROP (Republic of the Philippines)
Another is to classify bonds by their holding period or “life”, as follows:

Life of the Bond Holding Period
Short-term 1 year or less
Intermediate term 2 to 10 years
Long-Term 10 to 30 years
If you are investing in bonds for the first time, consider the life of the bond that best meets your investment horizon.

Treasury Bills
Treasury Bills or “T-Bills” are short-term borrowings of the National Government to finance public expenditures. T-Bills have the following features:

  • are issued by the National Government through the Bureau of Treasury
  • have an original term of 91, 182 & 364 days from issue date
  • earn interest income subject to 20% withholding tax

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