Last Updated on July 23, 2024 by Izza of SavingsPinayPH

There are too many investment vehicles available today, such as mutual funds, stocks, bonds, online farming, real estate, and more, which can be overwhelming, especially for first-time investors. This overwhelming choice of investment options can be a factor why fewer people invest.

Let’s discuss the most common investment vehicles for beginners and explain their differences, as well as how you can get started.

1. High-Yield Savings Account

In this post

A High-Yield Savings Account is a type of savings account that pays a higher interest rate than what traditional savings accounts offer.

The difference is almost 20 to 25 times higher sometimes. Given the difference between the returns of a high-yield savings account and the known average, your money will not be stale.

Here’s a comparison between a high-yield savings account and a normal savings account.

For example you want to save your Php 10,000 for a year. With a normal savings account of 0.125% yield your money at the end of one year will be 10,012.50. With a high-yield savings account that earns 2%, your money would have grown to Php 10,200.00.

How do high-yield savings accounts work?

When you put your money into a high-yield savings account, it earns interest better than a traditional savings account. You can use it to park any of your money for any of your short-term goals like dream vacation, condo or house downpayment, and fund your first big investment.

How to open a high-yield savings account in the Philippines?

Step 1. Choose your bank provider

When it comes to choosing where to park your money I suggest checking the following facts – number of years in the service, recommendation from others and how good the customer service is.

Most high-yield savings account providers are digital banks which means they don’t have a physical branch to cater to you in an instant. Thus, it’d be best to consider how responsive the bank is on social media or on email, if possible.

Step 2. Prepare the necessary requirements

Here are the common things you will need to open a bank account in the Philippines:

Account Opening Fee. Depending on the high-yield savings account provider you will choose, the account opening fee may be high. For some banks you’ll need at least Php 100,000 in order to be eligible for the higher interest rate.

Also, there will be cases when the minimum balance should be kept in order for the account to stay active or else your account will have a deduction.

Identification Documents. You will surely be asked to present a valid identification card such as your Social Security ID, TIN ID and or Voters ID.

Filled-out Forms for Personal Information. Like what I mentioned in the beginning, most high-yield bank providers cater to the digital nomads. You might not need to fill-out a printed form but rather be redirected to an online account opening form.

You’ll be asked to answer a series of questions and provide your personal information such as contact number, email address and residential address. There are also banks who only purposely offer an account opening if you are 18 years old and older.

Check out this list of high-yield savings accounts available in the Philippines

2. Time Deposits

Aside from savings account, Time Deposits are the most common investment option of Pinoys.

How Time Deposits work?

The money you invested will be kept by the bank for a fixed period of time. The duration is usually 30 days and can be extended to 60 days or 90 days and more.

Your money will earn an interest higher than the usual savings account. Remember though that your money must stay on the back within the given period you choose for if not it may cost you a fee.

How to open a time deposit account in the Philippines?

When it comes to time deposits, it is a prerequisite that you have an active savings account first with your chosen bank. Once you secured this, there is no need to submit other requirements.

You can simply ask the teller or bank manager of your desire to open a time deposit account and you will be assisted accordingly. Proceed with depositing money to your time deposit account and the waiting period for your money to earn interest begins.

Top 3 Time Deposit Accounts in the Philippines

For this list I will be naming the time deposit accounts of the top three banks in the country – BPI, BDO and Metrobank. You can still opt to research other bank provider if their interest rates are better.

3. Mutual Fund

A mutual fund is a pool of money managed by a professional fund manager and invested in a specific type of securities to answer an investor’s financial goal in life.

How mutual funds work?

There are two important terms you need to remember when it comes to mutual fund.

First, the Fund Manager. This is a licensed trader unknown to you who acts as your own fund expert. He handles every step of your investment guided by strict regulations. He monitors the value of your investments and see to it that the earning potential of the fund is maximized. He invests the fund’s capital to produce gains and income on your behalf.

Second, the Portfolio. Your mutual fund portfolio is the very composition of the fund you invested. It is structured and maintained to match the investment objectives stated in the prospectus of your chosen mutual fund. Each portfolio differs depending on the type of mutual fund.

Types of Mutual Funds in the Philippines

Equity Funds

An Equity Fund, also known as stock fund, invests in selected stocks and equity securities. A typical portfolio mix involves shares on properties, holding companies, transportation, telecommunication and power.

Bond Funds

Bond Fund invests in government and corporate debts. A typical portfolio mix includes treasury bills, preferred stocks and corporate bonds.

Money Market Funds

Money Market Fund invests in short-term securities. A typical portfolio mix are composed of high-quality liquid debt and monetary instruments, short-term treasury securities, certificate of deposits and the like.

Balanced Fund

Balanced Fund invests in a mixture of debt instruments and equity securities. A typical portfolio mix contains stocks, bonds and deposits.

How to open a mutual fund account in the Philippines?

Step 1. Visit the website of your chosen mutual fund asset management company.

Step 2. On their website you can easily find the page for Mutual Fund and/or Investment Products.

Step 3. Read the differences of each mutual fund offerings. Select your fund based on your personal investment objectives, investment horizon and your risk profile.

Step 4. Download the needed forms. This will depend on your chosen mutual fund asset management company.

Prospectus which is required and filed with the Securities and Exchange Commission. This document provides details about an investment offering as well as facts that an investor need to make an investment decision.

Account Opening Form which is required to be filled up for your information and other personal reference.

Investment Risk Profiling Questionnaire which will know your investment risk profiles and match you with the right companies to invest with.

Step 5. Prepare your IDs.

Step 6. Have you initial investment ready. Initial investment for a Mutual Fund account ranges from 5,000pesos to 10,000pesos. Additional investment is minimum of 1,000pesos

Step 7. Submit all your requirements. You may need to go to the nearest office or send through mail. Sun Life for example introduces an online facility that allows you to add, transfer and redeem shares anytime, anywhere. In FAMI, I opened my account by submitting all the forms and requirements via courier.

Step 8. Wait for your proof of purchase and/or statement of account to arrive.

Step 9. Fund your account.

7 Advantages of Mutual Fund

4. Unit Investment Trust Fund

Unit Investment Trust Fund or UITF for short is a collective investment thing that banks offer. Think of it as a mutual fund but instead of a trusted private financial group, known commercial banks provide this investment option to the public.

How UITFs work?

Money from various investors are pooled together into one fund to accomplish an investment objective.

How to open an UITF account in the Philippines?

Step 1. Prepare your requirements

Here are the common things you will need to open an UITF account in the Philippines:

- At least two (2) valid IDs
- Duly-filled Account Opening Forms which contains almost the same forms and statements as opening a mutual fund account.
- Minimum money to invest (depends on your chosen UITF product)

Step 2. Go to the nearest branch and apply

For this investment vehicle, you will also need to visit the branch and submit your prepared requirements. The Trust Manager will check and confirm if you have supplied all the needed documents to successfully open an account.

Step 3. Review your Certificate of Participation (CoP)

Once you have successfully opened an account and made your first UITF investment, you will be receive a Certificate of Participation (CoP). Depending on the bank you will choose, opening an account is as low as 10,000pesos. You can top up this with as low as 1,000pesos a month.

5. Stock Market

Investing in stocks means owning shares of ownership in a corporation.

How investing in stock market works?

A company will need money to support and maintain its overall operation. Thus, it may opt to open its company to the public. You, as an individual, can now invest in the company by buying its available stocks.

There are two ways you make money in the stock market:

First, Capital appreciation

An increase in the value of your investments due to increase in the potential value and demand of shares in the company you invested.

Example :

Let’s say in 2013 you bought 100 shares of Jollibee (JFC) at Php 107/share. The total value of your investment is Php 10,700.

At present 2017 Jollibee stocks is at whopping Php 189/share. Meaning you make Php 18,900 out the 100 shares you own.

That is Php 8200 earned within 4 years of passive investing. Without you actively participating or working for it.

Second, Dividends

A payout issued by some profitable companies to its shareholders/investors that reflects the company’s respective earning. This can be by additional cash to the shareholder’s accounts.

Example:

Given the example above let’s say Jollibee also gave a Php 1/share dividends to its shareholders every three months from 2013 to 2017.

This means above from the Php 8,200 you earned from the capital appreciation of the money you invested, you also gained a dividend of Php 1600.

How to invest in stock market in the Philippines?

Step 1. Choose your stock broker

Here in the Philippines you can only buy stocks through a broker.

Accredited Philippine Stock Exchange brokers are paid to trade stocks on your behalf. Brokers provide you with a platform where you fund your account and start investing or trading. This same platform is used to manage your investments.

Every time you buy a stock as well as every buying or selling you do your broker gets a commission.

Now there are plenty of brokers you can choose from depending on your budget and confidence. COL Financial is one of the leading and recommended brokerage firm in the country. BPI Trade is BPI’s own broker platform. If you are already a BPI user then this could be a better option for you. They have easier application for BPI card holders. 2TradeAsia is another platform available for those who want to invest in the stock market. And of course First Metro Securities, which is Metrobank’s investment firm.

Step 2. Next you need to open a trading account.

Just follow the account opening instruction, answer important investor surveys and submit the needed requirements. You will receive an email confirmation once your account application is successful.

Step 3. Fund your account and start investing.

Decide on how much you will invest to the stock market. You can buy your first stocks via the platform provided by your broker.

My Tips when in comes to stock market

With what’s happening in the stock market, here are some winning strategies I want you to apply to mitigate the risks.

1. Invest only in stocks that you know

Choosing which stock to purchase can be very confusing. So I personally suggest you only invest in stocks familiar to you. What commodities do you always use? What fast food giants do you often visit and dine-in? What services do you frequently avail?

2. Invest in giants

Make your stock portfolio more stable by investing in giants. Although the return is not as high, you be assured that there is a return for your investment!

Giants such as any of the companies in PSEi will make your investment portfolio strong. They may be expensive but they are most likely worth it to own.

3. Invest in yourself

You know the drill in personal finance – the more you know, the better. If there is a chance for free seminars on stock analysis, join them! Your broker mostly host seminars on a weekly/monthly basis which will enable you to make sound decision on your stock moves.

4. Invest in accordance to your goals

In every investment you do define your why. And make sure that you follow your why. This is important so you avoid getting easily swayed by your emotions in case the market goes down or you see most of your investments hitting rock bottom.

Your objectives will also clearly define who you are as an investor. Whether you are conservative – can’t withstand risk, balanced – can moderately withstand risk or dynamic – can withstand risk no matter how high it can be.

Because you know who you are as an investor it is easier for you to determine which investment vehicle is right for you.

5. Invest with your spare money

Before you even begin investing in the stock market, I plead you to do two things:

Pay your debt, if any

Secure your emergency fund

It is important to only invest with your spare money because investing in stocks comes with certain risks. If you invest your emergency fund or your savings and your investment became negative you will be forced to sell at a loss.

6. Exchange Traded Fund (ETF)

Exchange Traded Funds or ETFs is just like a normal mutual fund. You are investing in a bucket of stocks BUT, it can be bought and sold like a common stock in the Philippine stock market.

How ETFs work?

ETF works in a rather simple way. Like mutual fund, when you own a share of ETF, you are owning a rather diversified investment portfolio.

What makes ETF different is that it can be bought and sold like a regular stock.

ETF has its own stock code (FMETF) and unlike mutual fund, you can see ETF in the list of stocks in the Philippine Stock Market.

Another major difference is that an ETF tracks a specific index not necessarily created to match your goal unlike mutual funds.

Sir Fitz Villafuerte did a great explanation on how ETF works you should definitely check.

Example of ETF:

First Metro Exchange Trade Fund, the first and only ETF in the Philippines to date.

How to invest in ETF in the Philippines?

There are two ways you can invest in ETF in the Philippines, (1) Through opening a brokerage account and (2) Through account creation.

Through Brokerage Account

Step 1. Open a brokerage account

Step 2. Buy your first shares of ETF

Step 3. Keep adding to your ETF investment

Through Account Creation or Bulk Order

Account Creation or Bulk Order is recommended for those who are enough money to buy at least 10,000 ETF shares. To proceed with this option, please see below steps:

Step 1. Visit to http://www.firstmetroetf.com.ph

Step 2. Download and Fill-out the Order Form

Why ETFs are considered good investment?

Passive Investment

Unlike mutual fund which is actively managed by a fund manager, investing in ETFs offer passive investment.

What do you mean by passive, Izza?

FMETF is created to mimic or track the market aka PSEi which consists the 30 “biggest” publicly listed companies in the Philippines based on PSE’s standard.

The movement of PSEi is closely monitored by investors, fund managers, economists and everyone who are into investing in stocks because it indicates how good the Philippine economy is.

If PSEi is up then it is a good indicator that the general economy of the country is doing well. Thus, it is the best time to invest.

The components of PSEi are already the top of the top, companies that best represent how good the Philippine economy is. If you invest in FMETF you are simply following the wave.

No fund manager is involved to make decisions which securities to buy or sell. It simply tries to replicate or get as close as possible to the index.

7. Index Fund

Investing in index fund can be confusing at first because it seems similar to mutual fund and ETF.

How investing in Index Fund works?

Your money is passively managed and run by a program to match the performance of a given index.

Now that sounds like an ETF, Izza!!!

I know,

But unlike Exchange Traded Funds, Index Funds are not traded like a stock.

Index Funds are simply mutual funds that mirrors a given market, commonly the PSEi.

Examples of Index Funds:

One Wealthy Nation Fund, Inc.

Sun Life Prosperity Philippine Stock Index Fund

Philequity PSE Index Fund

Philippine Stock Index Fund

PAMI Equity Index Fund

BPI Philippine Consumer Equity Index Fund

How to invest in Index Fund in the Philippines?

Index Funds are sold by top asset management firms in the country. Opening an account is the same as opening a mutual fund.

Depending on the financial company you will entrust your investments with, you will may need to do/to present the requirements as mentioned in the mutual fund account opening procedure.

What does this mean for you and your retirement fund?

As long as your chosen market is green, your index fund is green too.

Something I realized now that I’m investing in direct stock market is that I have a tendency to be emotionally attached.

As the market move up and down, I am easily consumed by fear and greed. This feeling force me to make sudden financial decisions here and there.

With Index Fund, there is a lesser chance that you get affected by your emotion. Index Fund has a simple job – track the market!

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8. Personal Equity Retirement Account (P.E.R.A.)

Personal Equity Retirement Account or PERA is the most recent retirement account made available in the Philippines.

It is a personal and voluntary retirement savings plan where you can contribute as long as you have a TIN Number.

PERA is created to encourage Filipinos to invest for their retirement. It took 8 long years for PERA to be implemented in the country.

How P.E.R.A. works?

To understand how Personal Equity Retirement Account works, you need to imagine SSS or other government-mandated contributions.

In SSS the contributions you make are used to fund government projects. In return to your investments, SSS provides you with financial benefits like:

Salary Loan
Paid Maternity Leave for Women
Retirement Pension

The amount of pension you’ll get with your SSS or GSIS contributions is only 4,000 pesos at most.

With PERA, your contributions are invested in, wait for it,

A MUTUAL FUND.

By the time you reach your retirement age (55) the money earned through the said investments will be given to you as a retirement benefit free of tax.

You get to avail your retirement benefit in lump-sum or single payment, regular pensions like SSS or a combination of both.

How to open a P.E.R.A. account in the Philippines?

Requirements and procedures will differ depending on your chosen administrator but just like any other investment account opening you will need to prepare the following:

Step 1. Accomplish the Application Form

You can visit your chosen administrator’s website to download the account opening form.

Client Sustainability Assessment (CSA) – This is to identify your investment objectives and risk tolerance.

Risk Disclosure Statement – This contains provisions on the general risks associated with your PERA investment.

Step 2. Attach your valid government ID

You can refer to the List of Acceptable IDs to bring supporting documents to prove your identity.

Step 3. Make sure you have your TIN ID

You can also use a copy of your Income Tax Return or any other valid document that can support your TIN.

Step 4. Pay the initial money you will invest.

9. Crowdfunding

Crowdfunding rose to fame last year as an alternative investment vehicle. Famous crowdfunding startups in the Philippines include Cropital, PhilCrowd and Farmon in which the proceeds are used to fund local farmers.

How crowdfunding works?

Your investment will be pooled together with the others and be used as capital for local farmers. After the harvest and selling of produced goods, you’ll get your share of profits.

Crowdfunding Features and Benefits

Alternative Investment Vehicle

Crowdfunding rose to fame just last year, 2017 and it is already considered as an alternative investment vehicle. It is ideal for those who would like to maximize their money and reinvest it to something new.

Perfect for short-term investment

Since all of the known crowdfunding startups in the country invests in agriculture the expected return of investment is around 6 to 8 months only. It means if you invest in January you can expect an ROI by July or August.

How to start investing in crowdfunding?

Step 1. Sign up and Register for an Account

Here you need to visit the website of your chosen crowdfunding company and create your own account by filling out your details.

Step 2. Pay for Membership Fee/Fund Your Wallet/Choose Your Farm to Invest

The next step varies depending on your chosen crowdfunding startup. Philcrowd has a membership fee you need to pay before you can even invest.

Cropital on the other hand lets you fund your Cropital Wallet first before you can choose a farm to invest. The minimum investment is 5000php (with minimum increments of 5000php; i.e. 10000php, 15000php up to 50000php.

For FarmOn, you can start choosing the farm you want to invest with and just pay the amount that sums up the number of plots you wish to invest.

Step 3. Process your payments

All three crowdfunding startups have different payment options available from bank deposit, cash payment or Paypal.

Step 4. Wait for your ROI to reflect

After 6 to 8 months depending on the crop you invested you will see your return reflect on your account.

Here’s my crowdfunding experience with Farmon for more information.

10. Real Estate

Real Estate has been part of investment ideas ever since. This vehicle requires a higher starting capital but it guarantees an instant ticket to financial freedom.

How investing in real estate works

There are different ways you can start investing in real estate. You can either buy foreclosed properties, improve it and rent it to others.

Another is investing in condo with prime location and turning them into Airbnb rooms.

You can also do commercial spaces, boarding house for location near university and/or “sanla” especially if you know properties within your neighborhood.

How to Invest in Real Estate Properties in the Philippines

Buying properties in the Philippines can be a daunting task for there are a ton of paper works you need to accomplish.

If you are 100% decided to invest in real estate properties here are the brief things you need to do.

Step 1. Research, research and research

This is a critical step you must do before shelling out any money for a real estate property.

Consider all your option from location, price to payment choices, etc. You also might want to engage with a licensed broker to help you in every step of the property investment process.

Step 2. Verify the title of the property and/or transfer certificate and other necessary documents

Always check that the title of the property you are buying is authentic. Also make sure that the land described on the title presented to you is the actual property you are buying.

This also applies whether you are buying a condominium, commercial space and/or previously owned property.

Step 3. Apply for a housing loan

Property can be a big financial move. Unless you can buy one on spot cash, you will need to apply for a housing loan to finance your mortgage.

Here you have the option to apply on your preferred bank. The tip here is to contact as many bank as possible and get to know their offer.

Step 4. Prepare necessary documents

Just like any other buying-selling transaction you will be asked to fill up different forms, sign contracts, present valid IDs and more.

As always, read everything before signing. Contracts are meant to be read and studied thoroughly so you won’t suffer from problems later.

Final Notes from SavingsPinay

If you’re hesitant to start investing due to fear or lack of information on where and how to get started, you’re not alone. Investing is a big financial decision, and one that shouldn’t be taken lightly. However, the more you know, the better.

Here are 10 different investment vehicles we discussed:

High-Yield Savings Account
Time Deposit
Mutual Fund
UITF
Stock Market
Exchange-Traded Fund (ETF)
Index Fund
Personal Equity Retirement Account (PERA)
Crowdfunding
Real Estate

I hope this article helps you.

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