People invest their money for different reasons. Some do it for fun, while others start to invest with bigger goals in mind. Be it starting their emergency fund and retirement account, simply building their investment portfolio, or wanting to achieve financial freedom. If you’re a young professional looking forward to start investing, we listed here the Top 10 investments for you.
For starters, investing may not look as easy as it seems due to the risk different investment carries. But with proper guide and learning, you too, even though still a young professional, may be able to know and understand the ins and outs of different investments and become an efficient investor as well.
Read: Budgetting guide for the millennial investor
Saving Vs. Investing
Identifying the difference between saving vs. investing is a basic knowledge everyone must know. This is for you to appreciate the value that investing brings.
Saving is setting aside a portion of your money in a safe place for future use. You may keep it in a piggy bank, inside your drawer, or in an actual bank. The intention of saving is to make money available and accessible to you anytime you want it or need it. This is to provide for your essential expenses or short-term needs.
The idea of saving is keeping money as it is, and take it out whenever you wish. That’s why savings account are counted as low risks. However, in terms of personal finance safekeeping money yields little to no interest rates. This means the money you decide to save today, might not grow that much tomorrow or after a year or even 10 years from now.
In short, savings yield low risk and low returns. Saving is not bad, it’s just that there is a better way to safe keep your money. And it is called investing.
Investing is also putting away your money in a safe place. But this time, you are setting a goal of keeping it there for the long run and growing it. This is why its better to begin investing in mutual fund or stocks as soon as possible. Saving maintains the value of your money while investing grows it.
Unlike saving, investments in general can be categorized as low risk, medium risk, and high risk. And its returns go with it as well, giving you an opportunity to earn more than low rates but with medium to high returns. If you’re strong enough to take risks, you might identify with some of the investments on our list for young professionals.
Why start investing?
Now that you’ve identified the difference between savings vs. investing, we are here to amplify the reason why you, as a young professional should start investing.
In a wealthy mindset, one source of income is not enough. You should be able to think of the long term and be prepared for it in advance. Thus, investing is here to help you set financial plans for your future and attain them.
1. Grow your savings
Saving money effectively and building it as a habit is just the first step to attain wealth. Investing in the right assets will help your money attain interest rates that savings account never provide. With low-high returns choices, there is a guaranteed possibility of growing your saving through investing.
2. Fight inflation
The inflation rate is the increase of prices in common goods over a period of time. In the Philippines, the average inflation rate is 4.4% annually. This means common and essential goods that drives the market has increased 4.4% in their price compared to last year.
The thing about inflation rate vs. savings is that keeping your money in a little to no interest account means that your money’s value is decreasing as years pass by. In short, if you save 100,000 today, its value after 5 years is not the same. After 5 years, your money will not be able to purchase the things at the price that they are today.
Investments fight inflation by generating returns that are equal to higher than the inflation rate. Making your money’s value able to keep up with the increase in prices for the next few years.
3. Save for retirement
If you’re a young professional, you probably have 30-40 years left to save up for your retirement. However, with the inflation rate mentioned above, keeping your money in the long run with no interest rates may struggle to keep its value.
You can try to think of it this way. If you can save 1 Million pesos now, after 30 years, is it still worth 1Million pesos? That’s the question you should ask. Along with combating inflation, investing is a good way to keep your money in the long term, especially if it’s 10years or more.
4. Wealth Building
Most of the young professionals nowadays dream of being the person who breaks the generational curses in their families. Financially, you might be dreaming of getting your family out of debt and never going back there again and eventually start to build something for the future. While others just want to be able to create something for themselves and provide a comfortable lifestyle.
However, your one corporate job might not be able to provide for it. Paying bills, providing for your family, and saving money might not make wealth-building an easy feat. But with investing, you will be able to produce another set of income that could help you achieve your goal.
5. Financial freedom
All of the mentioned reasons above actually boil down to one thing – financial freedom. Where everyone dreams of not having to worry about making ends meet, paying that credit card debt, checking their paycheck if they made enough, living a comfy or luxurious life, and being able to give to those who need help. These are just some of the many things financial freedom can provide.
Investing in the right asset and right mindset might just be able to help you achieve financial freedom in the future.
Now that you’re all decided to start investing, here are the things you can choose from:
Top 5 investments for young professionals
There are different ways to grow your saving such as mutual funds, money market funds, real estate investment trust, and stock market. But below is our top 5 picks for young investors.
Insurance as an investment. Life insurance is mostly known by others as an expense that provides intangible benefits to the beneficiary of the payor or the insured. This meant that the one who is paying the insurance or covered by it will not directly benefit from the returns of the insurance.
For those who are unfamiliar with insurance, to give you a better understanding, life insurance is a contract between an insurance policyholder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person.
Nowadays, life insurance companies were able to develop and promote investment-linked insurances. This type of insurance is called Variable Universal Life or VUL. VUL is insurance with investment components and the payor or the insured can benefit from it while they are still living.
The payor or owner of the policy can take profits from their insurance policies if they start to earn. These investment-linked insurances are also invested in bonds or stocks. In the Philippines, insurance companies project earnings of 4, 8, or 10 percent annually. However, with certain regulations and charges deducted, investing in insurance is better when done long-term. Especially 20-40 years or more. If you want to find out more about insurance and its charges, you should talk to a financial advisor.
Stocks is an investment wherein existing and potential investors like you place their money on a certain company to take part in their growth. In return, along with the company’s profit, you will also receive an income. Taking part in investing in the stock market makes you an investor or a shareholder of that company.
Investing in stocks is done on broker platforms. In the Philippines, there are online and mobile platforms wherein the buying and selling of shares is held. These transactions are also available on several banks.
There are different ways to invest in stocks but one of the most famous ways is stock trading. Stock trading refers to the constant buying and selling of the company’s shares of stocks. If you choose to trade for the short term, you or others may refer to you as a trader.
Trading stocks can be done in short term and long term depending on strategies. Short-term traders buy and sell stocks within 1 minute to 1 day. This type of trading or stock investing is best advised for professionals or knowledgeable people who can allot time watching the market.
On the other hand, long-term stock investing is best for those people who want to stay low risk and keep their money for the long term. This type of stock trading is also best for beginners who are just starting in stock trading or investing. Moreover, the interest rates of stock investing are still higher than regular savings account despite it being low-risk.
3. Real estate (pre-selling or RFO House and Lots)
Real estate is one of the safest investments for beginners. There are different types of real estate properties you can choose from. Ranging from residential – house and lots, condominiums, apartments, and commercial – commercial spaces, office spaces, etc.
Investing in real estate is always a long-term one. Compared to the first two investments, you have to spend quite a big sum of money to acquire a real estate property. Nevertheless, real estate properties are sure to grow every year due to value appreciation.
Value appreciation is one of the best things about house and lots of real estate as an investment. This is when a price of a good or an asset increases over time. On average, real estate property prices rise about 3-5% per annum.
There are other ways to earn and boost your income through real estate. Such as buying and selling or flipping houses or putting them up on an Airbnb site. However, value appreciation and the security it provides are already enough of a reason why this is one of the top investments for young professionals.
4. Small business
As a young professional who is just starting to build a career and possibly always making ends meet, investing in high-risk or high capital instruments might be too much for you. With that, we’d like to recommend a small business as one of the top investments for young professionals.
Small businesses can start with a capital as low as P5,000 – P10,000 pesos only. If you’re a minimum wage earner, you can make it a goal to reach that kind of savings in a few months’ time and try to put up a small business.
With that amount of money, you can already open a sari-sari store of your own and just start it at the comfort of your home. If you have kapitbahays who pass by your house, you can target them as your customers. As easy as that, you are at your home, and you have your family to look after the store too. Just be careful with budgeting, you should also be able to make the money go around to keep the business alive.
Another option for a small business is a Bigasan or a rice mill. Again, you can start this at the comfort of your own home without having to pay rent for a stall or commercial space. Selling rice in retail or in wholesale has great potential in neighborhoods and near markets. This is because rice is one of the most essential food for Filipinos.
The good thing about small businesses as one of the top investments for young professionals is that the ability to promote your products online is already available. Starting small, customers might not immediately flock your store. Thus, needing some online promotions. A simple post on a buy and sell group near your city will already do great miracles.
There’s nothing better than investing in yourself. As a young professional who wants to start investing, yourself is one of your greatest assets, and investing in it might just be the best investment you’d ever make. Improving oneself and skillsets will bring you the best returns in life.
All of the aforementioned top investments for your professionals will not be profitable or will not work if you are not skilled, persistent, and knowledgeable enough. Skills take time to build but at least, it is something one can learn.
You can start by building skills that will bring you success or are aligned with your goals.
6. Bonus: Cryptocurrency
With our fast-paced adaption of internet services and goods, e-currencies are now also available online. Initially intended for paying online goods, cryptocurrencies are now traded like stocks. Although very complicated, cryptocurrency trading is actually one of the top investments for young professionals. The number of traders in the Philippines is continuously growing and different forms of cryptocurrencies are emerging.
Overall, whatever investment you try to choose, there is a risk. Just make sure to invest knowledge first before doing anything. Hope you enjoyed or list of top investments for young professionals!
Affordable House and Lot For Sale
Acquiring your own place is known as something that’s not easily achievable. This is because we know that getting your own home does not come cheap.
Fortunately, affordable house and lot developers such as Bria Homes is making this dream achievable. Your dream home is now within your reach. Along with a housing loan from a bank or thru PAG-ibig, you may choose from the different house and lots Bria Homes has in store for you. You may also read out guide on how to make the best out of house loans if you’re planning to get one!