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.