Before, our parents keeps on telling us to save money. “Son, you better save money and put it in the bank.” I heard that line too and sank in my mind as I grew older plus having an ATM card before looked so cool! (haha, see how colorful the inside of our wallet will be!)
The banks before actually had a very high interest rate, interest rate that could reach up to 12% a year! Imagine depositing 1 million Pesos, in a year you will have automatically 120,000 Pesos as interest. No wonder our parents would tell us to save in the bank.
As the years go by, interest rates in the bank has gone smaller, from 8% a year to what it is now, .50%!
.50%! How would money grow so much on that? Not to mention that taxes would still be applied for the earning that you will get from .50%! What about time deposits? Sure, deposit around 10 thousand and each year it will earn 1%. When we reach 99 years old, this 10 thousand will still be far away from 1 million!
These were the solutions before, things have changed a lot! For example:
Before we had the Walkman (yes the portable cassette player), now we have the ipod, hi tech mp3 players.
Before we had Betamax, VHS, Laser Disc, now we have DVD and Blu Ray Disc which amazingly holds 25 GB of memory.
Before we had those big cellphones where you can’t even put in your pocket, now we have the IPhone, Sony Xperia, Samsung Galaxy, HTC, Cherry mobile, Myphone (whew, what else?).
And remember these? The Family Computer, Sega Genesis, Nintendo 64, these were the pioneer in console gaming, now we have Wii U, Xbox One, PS4. Amazing how technology changed!
Everything around us changed, the way we lived before is no longer the same now, technology now was not the same as before. Only change is constant in this world.
My point is, if everything changed or changes, our financial strategy should change too.
We need to look for a venue or an instrument that would give us more that 1% a year for our savings.
The answer: Mutual Funds. Going directly in stocks are good but I personally recommend mutual funds.
The mutual funds may earn 12% or more a year depending on how the market runs. Remember, these are investments so losses and gains happen, there is no guarantee of a total earning.
The higher the risk, the higher the earnings as well. The mutual funds provide higher interest rates. Back in 2009, Philequity, one of the strong Mutual Fund company in the Philippines ended with a 65.05% return. In 2010, the same company ended with a 54.18% return.
Sounds good? Yes! But again, these do not guarantee positive returns all the time, it may go down too just like in 2008, the Global Financial Crisis, Philequity ended the year with -40.71%.
Many people stick with the old way of saving because not many are financially educated, meaning not many knows how to invest. With proper knowledge on how to invest, when the market goes down, there is nothing to fear, we should actually be rejoicing! Why? This will be discussed further in my other articles. :)
Let’s move forward, invest in the mutual funds!
Happy investing!
Cheers!
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