If you’re reading this blog for sometime now (thank you!) you can see that we share information and ideas on how we can achieve financial freedom. By sharing basic personal finance one blog at a time, I hope that somehow it inspired other beginners like me to continue learning with our finances.
That’s the main goal of this blog, to share personal finance literacy to everyone especially to my fellow kababayans.
Today, we will talk about investing 101 or the basics of investing. I understand that there’s a lot of personal finance blog and other resources out there, but I believe that each of us has a unique point of view and experiences in life that can inspire and help others with their financial journey as well.
In aiming to be financially literate, we should search and grab all resources available and as many as we can to help us be more financially educated. As I wrote on my first post on this blog, investing in ourselves is the best investment we could ever have that can give us more than 1000%.
Before we talk about investing, I strongly suggest that you read my previous articles listed below. These are must read steps we need to consider before investing our hard-earned money.
These are the basic and fundamentals of financial literacy. Here we go.
If you’re done reading those articles, that’s good to hear. I hope somehow it will help you make better decision about your finances.
The reason why I what new readers to get back on those articles is to make them aware that (I believe) achieving financial freedom is a step by step process. Those articles above are needed or pre-requisite before we go to the next step and start investing our money.
By following those simple steps, I am confident that we can all achieve our financial goals and be financially free someday.
Alright enough talk, let’s now share information about investing 101 or basic investing.
What is investing?
What is investing by the way? On my personal point of view, investing is the process of making our asset or money grow (since we are talking about personal finance here). But here’s a more meaningful definition of investing.
In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price (Source: Investopedia.com).
In a pinoy layman’s term, ang investing ay ang pagpapalago ng ating pera. Kasama na dito ang tama at maayos na pagpapa-ikot nito. Most of the Filipino want to grow their money but are lacking in financial education.
At dahil kulang sa kaalaman at edukasyong pinansyal, marami ang nalulugi o di kaya naman ay naloloko. Financial scams are everywhere. The more you’re eager to earn without educating yourself, the more you put yourself to the trap.
Be vigilant to know all the things you need to know before investing. Don’t be blind by the ‘quick rich scheme’ that promise high returns in a short amount of time. We should be aware that we need to invest in ourselves first before venturing to anything.
Wag nating hayaan na ang perang pinaghirapan natin ay mapunta lamang sa wala. You can read my previous article about tips to avoid financial scam in the Philippines.
Why we need to invest?
If you read my previous post about setting financial goals, you will realize that it is important to set financial target in order to have a clear view of what we want to achieve in our life. That should be our WHY, why we need to invest.
By having SMART financial goals in life, we have a clear roadmap where we are heading. That will serve as our motivation and inspiration why we want to grow our money.
Aside from achieving our smart financial goals, I list 2 main reasons why we need to invest. That is to beat inflation and to make money work for us. This is based from financial blogs, books and videos I read and watched.
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. In more basic explanation, when inflation arises, the value of our money decreases.
Inflation has many factors but the main concept is it eats the value of our money over time. Halimbawa, assuming na tataas ang inflation ng Pilipinas with in 5 years. Ang mabibili ng 100 pesos mo today is hindi na mabibili ng 100 pesos mo after 5 years.
So in order to cope up or beat the inflation, you need to find ways to increase or grow your 100 pesos, and that process is what we called investing.
To know give you further explanation, I’m sharing a link from one of my favorite personal finance filipino blog, pesos and sense that fully explain about inflation. This really explains the ABC of inflation and why we need to beat it. Click here to read the article.
The other reasons I have why we need to invest is to make our money work for us. Many people wonder: why invest? Well, the reasons for investments are very clear and simple. Investing or investment makes you to prepare for your future.
Nobody wants to work their entire life. Investing is one good option that you can secure your future. By properly investing our hard-earned money, we are increasing our chances to have a source of income even if we’re not working.
Let’s say when we retired or not able to work anymore, by investing early and putting our money on an investment vehicle, we increasing the possibility to be financially free. In that case, we are no longer working for money and our money is the one working for us.
Where we need to invest?
Where to invest our hard-earned money really depends on each of our financial goals. It is also depends on the risk appetite of each individual. How much risk can you take regarding that investment?
You and only you can answer that question. By identifying and understanding the risk involve, you can answer the question where you’re going to invest your hard-earned money.
Also as I mentioned above, you need to have SMART financial goals in order to identify what kind of investment will work for us. No investment is good for all.
We need to know our WHY before we search and look for investment instrument that can help us achieve our goals. The best advise I can give, as a newbie, is to invest in ourselves first.This is the best investment we could ever have that will really give us the best returns we could imagine.
If you’re ready to invest, here are some list of available investment in the Philippines.
- Own a business
- Savings account
- Time Deposit
- Real estate
- Mutual Funds
- Stock Market
- UITFs
- Bonds
- Treasury bills
- Commodities like gold, silver etc.
- Forex and many more.
The list above are just examples. There could be a lot of investment vehicle available. I will post detailed information about each of these investment instrument as we go along.
The important thing we need to take note is that we need to understand first what we are venturing to. We must do our due diligence in order to protect our money and ourselves.
When do we need to invest?
This is the question most being asked by many, when is the right time to invest? To answer that question, I believe that the answer is a big ‘NOW’.
But wait, what I mean by NOW is starting to invest in yourself as early as today. Before diving to the list of investment instrument above or any other investment, I strongly suggest to study and take time to understand those kind of investments.
Additionally, as I mentioned at the beginning, it is ideal and as advised by the experts, you should know how to budget, built your emergency fund, have insurance and again the right knowledge and education on what you’re venturing to.
Once you answered YES to those criteria, I do believe that you can now start investing. Sad to say many Filipinos are just directly going to investing without taking those necessary steps.
You and only you can provide the correct answer as to when you are ready to invest.
Okay, I hope the information above somehow give you idea about basic investing. If you’re a beginner like me, this is very valuable.
I know I didn’t cover all the details and I may missed something but I’m hoping that somehow it provides you basic understanding of what, why, where and when about basic investing. There’s more to come!
Before I end this post, I will repeat and reitirate again the importance of investing in ourselves first. There’s no other investment instrument that can give you the return as high as what you can get from investing in yourself.
This is the best investment we could ever have!
I’ve read some of your posts/blogs and I’m glad someone like you is sharing good thoughts and knowledge about these kind of topics. It really helped a lot because me and my partner is planning to invest at our early age (me at 22, my partner at 19). And good thing, my partner is a good keeper (literally and not ????) and your posts are a great help for us too. Thank you and keep on sharing and God bless you and your wife, as well as your whole fam!