Do Not Put All Your Eggs In One Basket

By | December 6, 2015

do not put all your eggs in one basket

 

Do not put all your eggs in one basket.

 

You have heard that sentence countless number of times before

right?

 

In layman’s term, it simply means that you must not put your

hard earned money in just one place.

 

You may be paid your salary through your atm savings account

and it serves as the place where you store or save all your

money.

 

What will happen if the bank where you keep all your money

becomes bankrupt or runs out of cash?

 

You can nor withdraw your money and becomes frustrated right?

 

You might say, well, my money in the bank is just 400,000 pesos

and it is insured for at least 500,000 pesos so I will not

lose my money in case the bank goes bankrupt.

 

Well, you are right, savings account deposit in Philippine

banks are mandatorily insured for up to 500,000 pesos.

 

But what if your money deposited is 1 million and you can

recover only 500,000 pesos, you will lose 500,000 pesos

right?

 

It is better if you put that money somewhere else.

 

The sentence Do not put all your eggs in one basket still

holds true.

 

It simply means you must diversify.

 

You must spread where you put your money.

 

You may say that well, I do not need to do that because I

only have 10,000 pesos total money I keep in my house for

emergency.

 

You are right but what if thief stole your money from your

house? You have left with nothing.

 

You can still spread or diversify your money in so many ways

to protect it and maximize the increase in its value.

 

You may ask how?

 

I attended a small investor seminar and this is what the

speaker, which is a financial expert in small time investing

said that you can diversify even say with your 10,000 pesos.

 

Where to put your 10,000 pesos?

 

Put it in either UITF or Mutual Fund.

 

A Mutual Fund is an investment company that pools together money

from different investors and invests them in various securities

depending on the investment objective of the fund. The mutual

fund company issues shares to the public that represents their

holdings in the fund.

 

An example of a mutual fund where you can place your hard earned

money is Sunlife Philippines.

 

UITF or Unit Investment Trust Funds are ready-made investments

that allow the pooling of funds from different investors with

similar investment objectives.

 

These funds are managed by professional fund managers and are

invested in various financial instruments such as money market

securities, bonds and equities, which are normally available

to bigger investors only.

 

An example of a UITF is that offered by BDO.

Philippine Banks usually offer a .250% interest on your savings

account deposit and usually compounded once a year so your

10,000 pesos will become 10,025 in one year.

 

The 25 pesos your earn will still be subjected of a 20%

withholding tax.

 

Some Mutual Funds earn 10% or more per year so your 10,000

will become 11,000.

 

The best thing however is that mutual funds will not be

subjected to a 20% withholdings tax.

 

Isn’t that great?

 

You can initially invest 5,000 pesos in most mutual funds like

sunlife and UITF like BDO so start investing now.

 

The earlier the better.

 

Your money will be invested in various stocks in the stock

market so in essence your money is diversified.

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