Investments for Beginners: Find the Right Investment for You

Many of us Filipinos believe there’s only one way to make money—by working for it. Either
you’re paid to provide a service or you earn from running your own business.

However, there’s a second but less popular way to make money—making it work for you. This
entails investing your money so that it earns more money. When you invest, your money earns
interest over time, or you buy an asset and sell it later for a higher price when its value has
increased.

According to the Bangko Sentral ng Pilipinas (BSP) 2019 financial inclusion survey,[1] only 25%
of Filipinos have some sort of investment.

Although it’s true that money doesn’t grow on trees, it can definitely grow if you know how to
invest your money wisely. Start with knowing the basics of investments for beginners in the
Philippines through this guide.

What is the Meaning of Investment?

Many people use the term “investment” rather loosely for a number of things, despite not
completely understanding investments for beginners.

A newly bought BMW can be labeled as an investment. Buying MAC Cosmetics instead of a local
brand is often considered an investment in quality makeup. You might even be guilty of
“investing” in the latest mobile phone.

With these labels, there’s a fine line between investing and splurging. But by learning about the
real meaning of investment, you can figure out exactly when a purchase becomes an
investment.

An investment is an asset or item that is purchased with the hope that it will generate income
or will appreciate in the future.

Based on this investment meaning, there are two keywords to remember: time and
appreciation. The goal of any investment vehicle is to grow your money over time.

Let’s say you’re planning to invest in real estate. Simply buying a house to live in cannot be
called an investment because it doesn’t automatically generate money. But if you buy a house
to rent it out, then it becomes a viable investment because it provides you money for your
future needs.

There has to be a return on investment (ROI), which is a performance measure that assesses
how efficient an investment is. The higher the ROI, the more profitable your investment is.
Where Can I Invest My Money in the Philippines in 2022?

When investing in the Philippines, know that there are three types of investments you can
choose from.

1. Ownership Investments
This type of investment works by contributing to a company’s capital. The ownership depends
on the number of assets you put into the company. Ownership investments are computed at
the end of each year with an increase in your contribution which earned profit or interest.

Ownership investments basically let you put in money and earn as the company grows or profits
over time. They’re the most profitable, but they’re also considered to be the riskiest. Examples
of ownership investments are:

 Stocks – Investing in stocks makes you a part owner of a company, giving you the right to
a portion of the company’s value and income.
 Business - Entrepreneurship focuses on the creation of a product or service that you can
sell to others, giving you enormous potential returns.
 Real estate - Buying a piece of land or property is also considered an ownership
investment. You pay for it and expect it to increase in value. You can also use it to earn
money by renting it out or reselling it.
 Precious metals and collectibles - Gold, paintings, and signed limited edition
merchandise are all examples of ownership investments. Most collectors and investors
who invest in precious metals and rare collectibles expect the values of these items to
increase.

2. Lending Investments
Did you know that lending money is also a form of investment? You can lend a company money
with interest and expect returns, even if they’re modest returns. Lending investments are
considered less volatile and low risk because you can take your money back anytime. Here are
some examples of lending investments.

 Bonds - When you purchase a bond, you loan money to a corporation or an organization,
and you get paid with a fixed interest rate.
 Certificate of Deposits - Issued by banks as proof that you have agreed to leave a certain
amount of money with them, Certificates of Deposit are almost similar to savings
accounts. But unlike savings accounts where you can withdraw your money anytime, CDs
require you to leave your money with the bank for a certain period.
 Savings accounts - The most popular form of lending investment and perhaps the most
feasible investment for beginners due to its simplicity and accessibility is the savings
account. The idea is to put your money in a bank account for safekeeping which will earn
profits from monthly interests. However, compared to other types of investments, the
returns are usually lower.
3. Cash Equivalents
These are investment assets that are the total value of cash on hand that includes items that are
similar to cash.[2] Short-term investors would benefit from cash equivalents, which are the least
risky of all investment types. Here are more examples:

 Treasury Bills - T-Bills are issued by the government and you can usually invest with a
minimum of ₱50,000.
 Commercial Papers - These are issued by SEC-registered Philippine corporations to fund
short-term obligations like inventory purchases and payrolls.
 Certificates of Deposits - CDs are debt instruments that earn interests and are much
similar to time deposits.

7 Investments for Beginners in the Philippines

Wondering where to invest your money as a first-timer? You can choose from a wide range of
investment opportunities that fits your personality and budget. Select an investment based on
your goals (short, medium, or long-term) or based on your risk appetite (conservative or
aggressive).

Check out the recommended investments for beginners below.

📈 Pag-IBIG MP2 / SSS PESO Fund

Among Filipino adults who invest, the most common types of investments are those by the SSS
(88%) and Pag-IBIG Fund (52%), based on the BSP financial inclusion survey findings.

This is not surprising, as the two government agencies’ investment programs offer plenty of
benefits to their members. For one, it’s affordable to invest in the SSS PESO Fund and the
Modified Pag-IBIG II (MP2) programs. You can start for as low as ₱500 (for the MP2) or ₱1,000
(for the PESO Fund). Earnings from these investment schemes are tax-free and guaranteed by
the Philippine government, making them one of the cheapest investments for beginners.

📈 Stocks
How much money you need to invest in stocks: ₱5,000
Stocks are among the types of investments considered to be the riskiest yet most profitable. If
you want to invest in stocks, be sure to know when is the best time to buy. Even so, stocks are a
good investment for beginners who are comfortable parting with their money for at least five
years.

Investing in stocks makes you a part-owner of a company, giving you the right to a portion of the
company’s value and income.

📈 Bonds
How much money you need to invest in bonds: ₱8,000
Stock investing and running a business are both risky ventures. If you don’t like taking risks, you
can try investing in less volatile investments such as bonds.

Bonds are debt obligations issued by companies and treasuries. The good thing about bonds is
that they pay a set amount over a certain period, regardless of the company’s gains and losses.

While this means that you won’t be left empty-handed, you also won’t be able to take
advantage of a company’s growth. It’s a low-risk but low-profit investment.

📈 Mutual Funds
How much money you need to invest in mutual funds: ₱5,000
Mutual funds investing involves pooling funds from different investors and investing them in
various assets such as stocks and bonds. This is one of the ideal investments for beginners
because, unlike in stock investing, a professional fund manager makes investment decisions for
the investors.

📈 VUL Insurance
How much money you need to invest in VUL: ₱1,500 to ₱3,000
Variable universal life insurance (VUL) combines life insurance and investment into one product.
Investing in VUL is ideal for first-time investors because, like in mutual funds, professional fund
managers handle their money. It's also a good choice if you don't have a life insurance policy
yet. Indeed, VUL is one of the top investment opportunities in the Philippines.

📈 UITFs
How much money you need to invest in UITF: ₱5,000 to ₱10,000
Unit investment trust funds (UITFs) work the same way as mutual funds. They just differ in what
handles and regulates them.

Mutual funds in the Philippines are managed by insurance and brokerage companies, while
UITFs are handled by banks. Mutual funds companies in the country are regulated by the
Securities and Exchange Commission (SEC), while the BSP regulates banks that offer UITFs.

📈 GInvest
How much money you need to invest in GInvest: ₱50
As GCash’s investment marketplace, GInvest[3] allows you to put money into several partner
product providers, depending on your risk appetite. This product is partnered with ATRAM and
can be a good investment for beginners.

What are the investment funds under GInvest?

For moderately conservative investors - ATRAM Peso Money Market Fund and ATRAM Total
Return Peso Bond Fund
For aggressive investors - ATRAM Philippine Equity Smart Index Fund, ATRAM Global Consumer
Trends Feeder Fund, and ATRAM Global Technology Feeder Fund

Investing 101: 5 Tips for Investment Beginners in the Philippines

Got your heart set on investing? Here are some tips to remember before you begin your
investment journey.

1. Save up for Emergencies

Don't forget to set up your emergency fund, ideally before you start investing. It serves as your
cushion when any unforeseen expense comes up, and you won't have to touch your funds for
investment.

Investing money you might need in the short term can hurt your finances. When you invest,
you're leaving your money for several years. Taking your investment money too soon will keep
you from maximizing your ROI.

2. Set Your Investment Goals

You can plan to use your investment returns to buy a house or a car in the future, fund your
children’s education, build your retirement fund, or serve as an extra source of income.

Whatever your purpose is, your investment goals should be clear to you from the beginning to
help you make the right investment decisions.

3. Invest Regularly
Investing at regular intervals, like monthly or quarterly, is a good strategy for managing risks,
especially in long-term stock investing when prices of shares rise and fall. It also forces you to
set aside money for investment regularly.

4. Educate Yourself Continuously

When it comes to investing, knowledge is power. If you continue to learn new things about
investing, you can make more informed decisions and maximize your profits.

FAQs on Investments for Beginners

1. How much money do I need to start investing in the Philippines?
“Can I invest with little money?” Yes, you can start investing for as low as ₱1,000 to ₱5,000 in
vehicles like stocks, mutual funds, and government investment programs.

If you can’t afford to invest at least a thousand bucks per month, you may consider cheaper
investments for beginners, such as the GInvest that allows investing for only ₱50. But because
the investment amount is just minimal, don’t expect to earn high profits. Still, it’s a good way to
start the habit of investing, especially for beginners.

In the Philippines, a typical investment for beginners can start with little money, but it’s better
to have more funds for investment. The higher the amount you can invest, the better you can
diversify your investment portfolio to minimize risk.

This means you can put your eggs in different baskets. For example, you allocate a portion of
your investment funds to stocks, another to bonds, and another to Pag-IBIG MP2.

2. How much of my income should go to investments?

This depends on your investment goals and how much you can afford to invest. The rule of
thumb, however, is to invest 10% to 15% of your monthly income. So if you're earning ₱20,000,
you should be investing at least ₱2,000 every month.

In the end, what matters more than how much you invest is that you actually get started.

3. Are investments subject to tax?

Yes. The Bureau of Internal Revenue (BIR) imposes a Capital Gains Tax[4] for the executed sale,
disposition, or exchange of capital assets.

4. What is investment risk tolerance?

Investment risk tolerance is the amount of risk you’re willing to take in your investments. Since
investment for beginners poses risks and challenges, you should know your investment risk
tolerance before putting your money into an investment product.

It can help you prepare for the worst case scenarios that come with your investment and help
you manage your finances more efficiently, too.

Here are three types of investment risk tolerance.

Conservative
Conservative investors accept little to no volatility in their investments. Most conservative
investors are willing to take small profits as long as they’re assured that their capital will be
returned accordingly.

Moderate
Investors with a moderate risk tolerance can accept some losses. For this type of investors,
there’s a balance between risks and long-term returns.

Aggressive
Aggressive investors understand the complexities of the investment market. They’re willing to
purchase highly volatile assets that provide high yields.