Recently, I was reading a viral post on Facebook about investors loosing money through an insurance plus investment company. The post headline screams "legal" scam in a bank. While I feel sad for the victims, it's even sadder to read the details. It appears as if either the investment company didn't explain how the process works or the investors didn't understand it. Although I'm not an expert, and my knowledge about investing in the Philippines is probably minimal, I thought of writing this short intro about investments because of that social media post I've read.
Image by Tumisu from Pixabay
In Defense or NOT of the Insurance Company
I will not drop names but first of all, the company in question isn't a bank. It's a life insurance provider with an investment option. I checked their website and found several products. I can only assume that the said victims were offered their best product in terms of earning potential but possibly didn't understand the risks involved.
I am not sure if all the investment options offered on that company's site have always been available since they started but every single product matches an investor's risk profile. The ones with highest growth potential, as with all other similar investment types, comes with that "high risk, high reward" tag. There are other products they offer for those who are not willing to loose that much money, even if the earning is minimal.
Investment Options
Some of the options listed here include the following:
- Variable Universal Life Insurance (VUL)
- Unit Investment Trust Fund (UITF)
- Mutual Funds
- Time Deposit
- Peer to Peer (P2P) Lending
- Crowdfunding
- Ride Service
- Franchise
- Real Estate
Variable Universal Life Insurance
What the company above offers is a Variable Universal Life Insurance or VUL. It's literally a life insurance but is also tied to cash savings which are invested in various instruments to increase the base fund. There are numerous established brands which offer this type of investment. There are also VULs with a healthcare coverage.
Some companies offering VUL include Philam Life, Manulife, Pru Life UK, Sun Life, and AXA Philippines.
Unit Investment Trust Fund and Mutual Funds
If you don't have time to learn, let alone be actively participating in trading, then both Unit Investment Trust Fund and Mutual Funds are ideal. They are both managed by professional fund managers by pooling capital collected and investing it for all the participants. The only difference is that UITFs are offered by banks while the other is through mutual fund companies. With the latter, you actually earn shares or stocks of the companies where the funds are invested.
UITF is measured by Net Asset Value per Unit (NAVPU) while mutual funds are calculated as Net Asset Value per Share (NAVPS). They (NAV) are both calculated simply subtracting the liabilities from the assets divided by the total number of outstanding shares (Investopedia.com).
Some banks which offer UITF, based on the list at UITF.com.ph are the following:
Most banks will require an initial investment of ₱10,000 to open an account. There are some which will let you start with just ₱1k monthly.
For mutual funds, you may refer to information available via PIFA.com.ph:
The site, particularly the NAVPS Performance page, lists all Fund Members, categorized according to type --- Stocks, Balanced Funds, Bonds, Money Market and Feeder Funds with their performance in terms of year-to-date, and so on.
Try to play and compare the data, if you're good with numbers or can at least use spreadsheets for comparison.
Time Deposit
Instead of the usual savings or current account, your money will earn higher interest rates per annum through time deposit, provided it reaches the maturity date. Funds can still be withdrawn earlier but with associated pre-termination fees.
Peer to Peer Lending
Peer to Peer Lending (P2P) is quite similar to lending money to your peers, although technically, borrowers are probably people you don't actually know. The risk of not getting paid back is still there but possibly not as worse as when lending money to those you personally know. 😬 Plus, you earn interest. Like other investment mediums, you can also diversify your portfolio by funding several loans. It also reduces the risk in case a lendee defaults since your capital is spread out to different borrowers.
Some platforms which offer P2P Lending in the Philippines include:
- FundKo
- MoneyMatch Philippines
- Vidalia Lending Group
- Acudeen
- Uploan
- Lend.ph
- Blend Philippines
How much you earn, starting capital, requirements when joining and so on will vary so it's best to read the FAQs from those sites before signing up.
Crowdfunding
This is somewhat related to Angel Investing but instead of one major investor, funds are collected by pooling money from numerous members in order to finance a project, in the same way that funds are pooled in UITFs or mutual funds.
Some of the platform which use this model include FarmOn, The Spark Project and UPbuilds. FarmOn promotes farming (as the name suggests), The Spark Project supports creative endeavors and UPbuilds caters to a commercial and agricultural related projects.
Related Post about Farmon:
Farmon Philippines Review
Related Post about Farmon:
Farmon Philippines Review
Ride Sharing Service
If public transportation is effective and more dignified than how it is today, then there would be fewer private vehicles on the road. But since this is not the case, ride sharing services became an opportunity for investment.
While profits are no longer as high as they were when the ride-sharing service Grab was first introduced (so says drivers and operators), it is still a good way to earn extra cash. It can even be a primary source of income if you have several cars deployed daily or drive the vehicle yourself so you won't have to share profit with a driver.
GrabCar is the most popular franchise among Transport Network Vehicle Services (TNVS) but there are similar services to consider, both as a potential operator and a commuter.
As of this post, some of those which are active include the following:
- Go Lag --- Metro Manila, Cavite, Rizal, Laguna, and Bulacan
- Micab --- Metro Manila, Cebu, Bacolod, Iloilo, and Baguio
- OWTO --- Metro Manila as well as selected areas in Cavite, Rizal, and Bulacan
- U-hop --- Metro Manila and other major cities nationwide
You can even put a new motorcycle to use by joining a similar platform, Angkas.
Franchise Business
Franchises require higher initial capital compared with the previous types since franchise fees alone are mostly over ₱200k, at least for established brands. This does not include other expenses involved like leasing, construction related to the location, business related permits and more. While it is definitely worth considering if you do have a stash of cash which can afford this, don't just jump in. Compare different franchises before settling for one and find a suitable location where it will potentially sell.
Real Estate
Amongst real estate properties, lots are constantly increasing in terms of value, specially those which are located near highways or in urban residential areas. I know of two house and lots purchased by families we are related with back in the 90's which cost about ₱700 to ₱800k that time yet now costs millions when put up for sale. Some don't even sell the properties but just offer it for long-term lease.
Condominiums on the other hand, contrary to popular belief, are like vehicles which degrade in value as time passes by. They will possibly be good only for the first 5-10 years unless the property itself is well taken cared of and the location attracts industrial or commercial workers. There's one condo building I've heard directly about, located in an area bordering between Makati and Pasay City which sold units for at least one million back in the 90s but the building is now in danger of demolition.
Related Post:
10 Tips for a Successful Rental Business in the Philippines
Related Post:
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But again, if you do have funding for this type of investment, choose properties where there is potential earning. Condos, duplex, townhouses and such can be rented out, specially if they are located within or close to commercial business districts or schools. It can be offered as is, or transformed into a bed space type of arrangement to accommodate more renters. You may even redecorate the place for staycation purposes and offer it through social media sites and platforms like Airbnb.
Image by Gino Crescoli from Pixabay
Risk Profile
In most cases, banks and investment companies will assess your risk profile before recommending a product which suits your preference. You will need to answer a series of questions with corresponding points depending on your response. The total score will be tallied to assess your investment risk appetite. What the profiles are called may vary but what they mean is substantially the same.
Here are the profiles and what will possibly be recommended based on the result.
Conservative
Literally those who are not willing to take risks and are satisfied with low returns. A savings account or maybe even a time deposit is most likely what's ideal for this profile.
Moderately Conservative
If you landed this bracket, you are at least one step above the traditional. You are someone who may accept stable, with minor fluctuations in investment returns. Most of the products listed for this type of investor are mutual funds or UITFs, specifically short term funds, money market funds and bond funds in the fixed income asset category.
Balanced
In some classifications, a balanced type of investor is also included. It's typically just what's in between the two profiles above (Moderately Conservative) and below (Moderately Aggressive).
Moderately Aggressive
You are someone who wants to see higher investment returns even if it's accompanied by equally higher or even negative fluctuations. Some investment types under this are varying stocks and bonds.
If you are investing through a fund manager (i.e. bank or investment company) your portfolio will most likely be automatically calculated and the funds are allocated based on your risk profile.
Here's an example from the website Digital Fodder:
The graph shows that the higher your risk appetite is, as an investor, the higher funding will be allocated to stocks.
Aggressive
This is where the quote, "high risk, high reward" is most applicable for because this type of investor is willing to loose money in exchange for the highest possible return in investment. Most of the capital here are invested in equities (stocks).
Recommended Local Resources
For additional and more detailed information on investing or finance in general or any of the subtopics mentioned above, some sites to research through include FitzVillafuerte.com, MoneySense.com.ph, iMoney.ph, ChinkeeTan.com, MoneyMax.ph, Coins.ph, and Grit.ph. There are more sites which definitely deserve to be listed and you'll probably find one just by quickly searching for a related finance topic.
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