To say that my February is a busy month is an understatement. Work, especially the untargeted ones demanded my sweat and blood! Oh, anyway, it’s almost over! And, I’m still alive! (P.S. As of this writing two of my colleagues in their 40s and 50s are confined in hospitals due to hypertension. We figure it’s the deadly combination of stress and unhealthy lifestyle.)
Since I think this is going to be my last blog post for this month, I’m writing about what most of my readers want – MONEY! Hehe. I really find it weird that my money posts are the most-read posts on my blog. Disclaimer, one more time, I AM NOT A FINANCIAL GURU. But, one day I shall make it as a Registered Financial Planner. One day. For now, I have myself as a guinea pig when it comes to my financial planning skills.
If you are following my money posts under #MoneyBliss, you would know that I do save and I do invest. Last year, I learned about PROPER DIVERSIFICATION. Wait, is there an improper diversification? The answer is yes, there apparently is. At first, I thought that my investments can be considered diversified when I have a savings account, time deposits, mutual funds, and stocks. Well, I later learned that that is not what diversification means. There is so much more of it.
In layman’s terms, diversification means not putting all your eggs in one basket so that when one basket falls, not all eggs would get broken. Easy, right? But, you need to know that inside the big baskets are small baskets where you divide the eggs. Here are my tips on PROPER DIVERSIFICATION of funds, especially investments.
Familiarize yourself with time deposits, mutual funds, UITFs, bonds, and equities or the stock market. You should know first when and how much you can invest in these basic options. You can have an idea here.
Reminder: Time deposits are insured just like your savings/checking accounts, only they have holding periods. UITFs and mutual funds are regulated but capital preservation is not certain especially for medium to high-risk funds. If you are not a skilled stock trader, the best way to grow your money here is through cost-averaging for no less than five years. By that, you have to invest/buy stocks regularly and wait for at least five years.
Mind the smaller baskets inside the big baskets. When you choose to invest in Mutual Funds and UITFs, it will be confusing, time-consuming and even intimidating at first especially when you answer the investment risk profiler questionnaire. But, it’s necessary. It is important that you read it thoroughly and try to understand it the best you could. After all, what’s the rule of thumb in investing? Do NOT INVEST IN WHAT YOU DO NOT UNDERSTAND. So, read and read and read. From there, you’ll learn that there are different funds under MFs and UITFs you can choose from depending on your risk appetite, preferences and goals. To diversify my big basket of MFs and UITFs, I made sure I have some in low-risk types such as money markets, some in the medium-risk group such as balanced funds and some in the high-risk category such as equity/index funds. Now, for my stock market portfolio which is considered equity funds therefore high-risk and for long-term, I am trying to diversify my investments by buying stocks from different sectors such as financial, industrial, service and real estate. It’s only the mining industry which I do not intend to invest on for some personal reasons.
Prioritize. When you have a diversified portfolio, it becomes difficult to divide your monthly savings. So, don’t. It’s better if you plan on how to invest your money in a diversified manner. Say, monthly savings from salary goes to time deposits and MF’s or UITFs alternately. Bonuses which come twice a year can go to long-term investments such as “business fund” or the stock market.
Keep a watchful eye. Take time at least once a month to review how your investments are performing. Withdraw from one fund or institution if you must and transfer them into more profitable or better institutions. Always read the advisories sent on emails. Lastly, at least once a year compare bank charges or brokers’ commissions.
Consider other forms of investments, not only money. Investments do not only mean money in the bank or the stock market. Investments come in many other forms such as house and lot and condominium. But, please take note that not all real estate are investments. More on this, next time. Skills, knowledge, experience, relationships/network and time are also investments. We, parents, invest in our kids too. Not because they are our retirement plan but because we would not want to provide for them all their life. They must earn for their own (and their family) living someday.
Let me tell you a secret, at the back of my head, I always worry about the apocalypse. I pray it won’t happen (at least) when my children are still young. My heart might not handle seeing them hungry. But, warnings can no longer be ignored. To prepare, I “invest” on jewelries. Well, aside from faith building, of course. I have this belief that when that fateful day comes and cash becomes useless, I could always barter my jewelries for food, enough to keep us or at least my children, alive until it’s over. Do you think I’m funny? Hehe.
There is no holy grail when it comes to investing. Different strokes for different folks. But, everyone must exercise caution and due diligence to protect and multiply whatever is given to us so we can bless others too.