Summary of Investment Options

Investment Options

Business

  • Requires initial capital.
  • Profit is earned over time through interest.

Nonfinancial Assets

  • Real Estate: Land appreciates; rental income.
  • Agriculture: Planting crops for later sale.
  • Livestock: Raising animals (e.g., hogs) for sale or slaughter.
  • Jewelry: Value increases over time.
  • Luxury Items: (e.g., expensive bags) Value increases due to supply and demand.

Financial Instruments

Fixed Income
  • Provides regular, fixed interest payments.
  • Examples include treasury bills, treasury bonds, and corporate bonds.
  • Treasury bills are short-term, while treasury bonds are long-term government-issued securities; considered debt security.
  • Corporate bonds are issued by private corporations; government securities are more secure.
  • Income (interest rate) should exceed the inflation rate.
Variable Income
  • Potential returns vary and are not guaranteed.
  • Examples include Unit Investment Trust Funds (UITF), mutual funds, and stocks.
  • Returns depend on market performance.
  • Stocks: Value increases over time, but there's some gains or losses.
  • PSE index: Value of all blue-chip stocks.

Investment Instruments

Government Issued
  • Treasury Bills: Short-term debt, sold at a discounted rate.
  • Treasury Bonds: Long-term debt, coupon rate, redeemed quarterly.
  • Retail Treasury Bonds (RTBs): Available to small investors with lower minimum placements.
Pooled Funds
  • UITF (Unit Investment Trust Fund): Mix of financial instruments, managed by fund managers, sold by banks; value changes daily.
  • Mutual Funds: Mix of financial instruments, sold by licensed investment companies; value per share changes.
Equity, Debt, and Derivative Securities
  • Debt Security: Issuer borrows money (e.g., corporate bonds).
  • Equity Security: Ownership in a company (stocks).
Stocks
  • Shares of ownership; can be publicly traded.
  • Earn through buying low and selling high (capital gains) or dividends.
  • Preferred stocks: Fixed income; guaranteed dividends.
  • Common stocks: Dividends depend on company declaration.
  • Voting rights are given to common stock owners.
Primary vs. Secondary Market
  • Primary Market: Initial Public Offering (IPO) - first time shares are offered.
  • Secondary Market: Trading of shares after IPO (e.g., Philippine Stock Exchange).
  • Blue Chip Stocks: Performing corporations that are generous in giving back to their investors in terms of dividends.
Basic Stock Market Terms
  • Bid: Highest price a buyer will pay.
  • Ask: Lowest price a seller will accept.
  • Trading occurs on weekdays (9:30 AM - 3:30 PM, excluding lunch break).

How to Invest in Stock Market

  • Create an online trading account with a PSE accredited broker (e.g., COL Financial, U Trade, BPI Trade).
  • Fund the account and start buying stocks.

Insurance Products

  • Variable Life Insurance (VUL): Investment-linked insurance; portion goes to protection and investment.
  • Life Insurance: Pension, accident, and death insurance.
  • Non-Life Insurance: Protection of properties; travel insurance.
  • Pre-Need Insurance: Paid for future use (e.g., education, memorial).