Why should we Invest?

Planning on getting married in a couple of years? Have plans to put up your own business? Travel Plans? Want to buy your dream house one day? Want to be able to retire comfortably and not just rely on your Social Security Cheque? Then you need to Invest, and do it NOW!

There are so many reasons why we need to invest, but let me give you my Top 5 Reasons why.

  1. Better Returns than a Savings Account.Calculate_Money

 A savings account will typically give you .25% interest per annum for your savings. By investing your money in instruments with higher returns such as Corporate Bonds, you can get as much as 5-8% per year which means that you money will grow at a much higher and faster rate than just putting it in a regular savings account.

source:  https://www.imoney.ph/savings-account

    2. Achieve your Financial Goals– Faster.

Goal

If you’re planning to get married in the next 5 years, or buy a house after working
for 10 years, or even go to your dream destination someday, then you need to invest. Like it or not, there is always a Financial Cost to the things we want to do in life, and it helps to be prepared financially. This is where investing your money can help you. The higher rate of returns will allow you to achieve your financial milestones faster. To give you an example; if you invested your money in the stock market 5 years ago by buying shares of Ayala Land Inc, (ALI) when it was still at PHP 15/share, and kept it there for 5 years, you would have effectively more than doubled the money that you invested in a shorter time period, compared to when you just put that money in a savings account.

Current stock price for Ayala Land Inc. (ALI) as of this writing is PHP 42.35/share.

3. Save for Retirement.

Less than 10% of Filipinos are financially prepared for retirement. (Source: Rappler). Most Filipinos expect the government to shoulder their retirement expenses by relying on the Social Security System (SSS), while the others will simply rely on their children or other relatives for financial aid. Let’s get a few things straight here. First of all, the monthly pension that you will receive from the SSS or GSIS will not be enough for your daily needs, specially when you require medical care or aid due to some illness. Second, it is YOUR responsibility alone, and not anyone else’s to prepare for your retirement. Your children should NOT be your retirement fund. After all, who doesn’t want to retire comfortably, enjoy time with your grandkids and just have the freedom to travel and do whatever you like after working for so many years, right?

Retired.jpg

A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.- Proverbs 13:12

Time is of the essence! The more time you have until you retire, the more time you have to grow your investment, and prepare for your comfortable retirement.

4. Beat Inflation.

inflation

Inflation is the rate at which the cost of goods and services increase every year,resulting to a loss of a currency’s buying power. Currently, the Philippine’s inflation rate is pegged at 3.5%. This means that your money is currently worth 3.5% less it’s actual value. How did that happen? Allow me to use a simple example. Back in the 90’s you can buy a burger meal from your Jollibee or McDonald’s for only PHP 25, but now it costs you around PHP 70-80. Back in the the 90’s, PHP 2000 can already fill a big shopping cart, but nowadays it’s only good for a few bags or maybe 1 or 2 small boxes worth of groceries. So what does this mean for you? This means that if you do not invest your money in instruments that yield a rate of return that is higher than the inflation rate, your money will lose its value over time, but by investing it in equities, or bonds and other high yield investments, you can effectively beat inflation, and double your money in a number of years.

5. Grow your Money Faster.

Ever heard of the Rule of 72? Compound Interest?

wealth

Rule of 72- By dividing 72 over the rate of interest that your money grows, you can determine the number of years it will take your money to grow. Say for example you have money in the bank, around PHP 1M. Based on the current interest rate which is .25%, it will take 288 years for your money to double in value. Now let’s say you invested that in a fund with an annual growth rate of 5%, your money will be worth PHP 2M in 14.4 years. How is this possible? Compound Interest! Through compound interest, your money is able to grow at a much faster rate. The higher the interest rate, the quicker it grows. The same can be said about debts. If you’re borrowing money at a high interest rate, you’re going to end up paying double the amount that you borrowed.

Simply put, if you choose to invest your money today, you will definitely be able to reap the benefits when the time comes. The earlier you start investing, the better.

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.- Albert Einstein.

There are a number of ways to invest your money in order to achieve your financial goals, but each investment also has its own level of risk that you need to consider. Always make sure that you know what you’re getting into before parting with your hard-earned money. If you’re in the UAE, and you want to know how to build a strong financial foundation, feel free to reach out and send us a message.

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