Maybe around 50 times every year since I started writing about personal finance for newspapers and magazines, people ask me this question: What do I do with P100,000? (or P50,000 or some other amount)
These days, P100,000 can be stretched in every which way especially by us Filipinos. "Stretched" though can have many different meanings! I can give you a short list of things I can BUY with P100,000 and guarantee that in a couple of hours, I will be happily looking at paper bags of baby stuff and home décor!
But no, I am NOT recommending that! The fact that people ask how they can save or invest this amount of money is a good sign. Remember, it’s not the amount that matters especially in the beginning of financial literacy. It’s the discipline and the habit that matters.
In a casual conversation among friends over dinner perhaps, people might offer suggestions along with the dessert. Put the money in time deposit or special deposit account in a bank especially since you should keep yourself liquid because of the crisis. (Being liquid means you can easily get the money if you need it). Someone else might say buy shares in mutual funds or unit investment trust funds now that they are cheap. Or stocks. Or a retail corporate bond if you can get access to them. Or government treasuries.
Or perhaps invest it in a small business like a food cart.
Do I hear someone suggesting putting the money under the mattress and never use it to buy a pre-need plan?
The thing with advice is that they need to be tailored to the person asking.
So, let’s apply some assumptions here. Let’s say the person who is asking for suggestions has been working for 5-10 years, meaning he is roughly 25 to 30 years old, is starting a family, has parents that are starting to have health issues and who don’t have long-term health care, is gainfully employed and has a spouse who is also in a good job.
So far, he has little consumer debt (maybe P10,000) and he pays roughly P3,000 monthly on his credit card debt. His money in the bank is around P20,000.
For sure, you would want your P100,000 to grow as quickly as it can. But first things first: pay off ALL consumer debt and fatten your emergency fund. It doesn’t make sense to be paying the credit card company 3.5% interest and earning that same amount from the bank.
Second, the problem with investing if you don’t have a buffer fund is that you might be forced to pull out the money due to an emergency when the investment is still losing.
If you already have an emergency fund good for three to six months of your family’s needs, I would then start to think of setting it aside for protection (insurance and health care). Getting sick when the job market is full of layoff horror stories can be a nasty wake-up call for all of us.
Assuming I already have insurance and health care, then I figure out which investment instruments my appetite for risk can tolerate. Personally, I will add to my UITF and mutual fund shares right now and forget about it for the next three to five years. I have also been thinking of opening up a stock brokerage account for my retirement. But that’s me.
How about you? What would you do with P100,000?
SURVEY: What to do with P100,000
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Since I am free of any consumer debt, have adequate health/life insurance, no more parents to take care of and have a stable job (so as my wife), I would probably invest P30,000 each in a Time Deposit/SDA, in a Mutual (Balanced) Fund, and in bonds. Depends on where the P100,000 came from, if from a windfall, then I will splurge the rest of the money (P10,000) with my wife and kids, probably go on a short leisure trip, eat out, visit an amusement park or go malling. Maybe shop a little as well.
I would place chunks of 10k weekly for 10 weeks in BPI Direct's 35 day time deposits at 3.25%. Placing them in chunks instead of a one time big time placement takes care of any need for liquidity.
first, pay off credit card debt.
second, compute your monthly expenses. once you have identified how much you need every month, see if you have eight months worth of emergency fund. if not, put the remaining money in a high-interest time deposit and earmark it as your emergency fund.
if you have still some money left, get a life insurance for you and your wife.
if you have done all these, that's the time you can start investing in MFs or UITFs.
Personally, I'm in that category which you described Salve (30-something age group starting a family without debt and had a good coverage for life insurance, emergency fund and with parents starting to feel pains).
So what to do with the 100k? I'll probably put 100k in an instrument that pays out around 8% (at least) annually. The next year when I will expect to receive the interest (around 8k), I will use as payment for a medical insurance (dunno if its enough though).
Or I could put the whole amount in a UITF/Mutual fund for growth. Its two options but I'd probably do the first one.
i have more than 100k debt in the credit card. so its easy..
i'll just pay the 100k in the credit card that would lessen my debt by 75% and finish the remaining 25% in my salary...
I might put half of it in a peso time deposit, part of it to start my health insurance and the rest treat myself and my husband.
i don't think P100,000 means anything at all. I hope I am wrong. But will little money I got, that much only to come home after working abroad, P100,000 would last during recession. Which God only knows until when it will be. Nonetheless, if I'm ask where I'm going to use this, I'll probably invest in stocks. Or just put it in TD.
Hi there.
I'm intrigued with what you said, about opening a stock brokerage account for your retirement.
What is that?
Grateful for your help.
Maryzyle F. Galinato
The latest DBP has is great for OFWs. Double your money in 9 yrs. (that is 8.5% p.a.) P50,000 or USD1000 minimum placement. Since DBP is government-owned, ur money is at low risk compared to the scary pre-need contracts. If you have a 7 year-old child, for me this is the best investment and will surely get your child to college. Early redemption is also possible with corresponding penalty fees, if you want it out. Unlike pre-need contracts, you'll only received about 5% of the total contributed premiums.
Salve! you might give me a financial advisers fee for this!! Just kidding!! I really like your article in MoneySense. In the magazine, you can learn lot of financial stuffs. Now, I can be your endorser as well! hehe!
Fulfill your goals guys!!!
Cheers!
Since I have a job right now , no credit, and have adequate emergency funds (around 6 months)for my family, and if you'll give me 100,000 , then i'll start a small business , that will create 1 to 3 jobs.
I don't like uitf because stock market is unpredictable. You can try putting it is BPI's BSP SDA. The rate is around 3.6 to 3.8% net. That will yield about 300 pesos /month. Not bad because the risk is low. It is a Special deposit account from the BSP so it is safe. BPI accepts 100k for SDA but I think other banks require at least 1M
Waaaaaah!!
Ayaw nila comment ko. Di-nelete, I smell pro pre-need in this blog. I'm just trying to help.
Kaya sa mga gusto mag-comment sa blog na to, wag nu laitin ang mga pre-need companies. Protektado cla d2!
Tsaka alam ko din na made-delete din ang comment na to.
Adios!!
definitely, want to put 100k into corporate retail bonds, or government bonds, but the problem is the access to it, it is really very hard to find a bank that will give u a share worth a 100k. Honestly, still haven't found one...
Anyone who knows where to get bonds just for a 100k worth.. let me know..
This is strange!
Just minutes ago, I did not see my old comment. Now, there it is again.
If the administrator of this blog accepts my first comment. Babawiin ko cnabi ko.
put it in a cooperatives that give 6-10% interest per annum. just make sure the coop is in stable condition and not run by unscrupulous individuals.
I Read a quote which goes like this "LUCK is when opportunity comes and you have the resources to go for it." With 1ook, start looking and planning of an investment which fits you - i can recommend several but it will be based on my experiences and liking. PERSONALITY and ATTITUDE, SKILLS and INTERESTS would be a nice place to start. Getting knowledge from the INTERNET, Magazines, books and specially information from people who had gotten into it already to add more to what you know is a MUST. This will give you more TIPS(in life, business and also creativity) and also lessen the chances of losing your investment. - SPECIALLY IF YOU ARE NEW TO THE ENDEAVOR.
If you are going to ask me? I'll get 4 more Athlon x2 with 17" LCD monitors and an air-conditioner to add to my existing cafe.
I'm 35, married, double income household with 1 baby. I have pre-need educ for my baby's college (Loyola) and investment in Equity MF (First Metro) intended for his high school. Got emergency fund as well.
So what to do with P100,000? I have two options: Get a traditional Life Insurance, coz I only have what the company offers. Or, put it in a money market UITF. I know in BDO the minimum investment is 100,000 and it is primarily invested in BSP SDA.
P100K is not a big amount of money nowadays to invest in a financial instrument that will be enough to reap a bountiful interest in the future (even when you factor in compound interest). Best thing to do is to settle your debt, especially if your creditor collects a higher interest than what you will earn in a term investment.
If you have money left to spare, invest it to empower yourself. Go to school and equip yourself with new ideas. A wiser you is the best investment you ought to consider while we face the ever changing challenges of our future.
Most pre-needs lack credibility right now. I would rather put the money in Tier2 Bonds offered by most banks and big institutions. But my guiding principle is to make sure that the interest rate on the investment must be bigger than the current and foreseeable inflation rate. This more like Capital Preservation plus a little though.
if I'm that guy, I'll put the 100K as part of my emer funds. Save 2 years worth of living expenses. 6 months is not enough since we are in a recession.
I'm saving mine for now for an emergency..if it turned ok will use the amount for my condo construction, i already have a nice yet affordable interior design in mind...i already opened a dollar time deposit at PSBank :P
onyok, all comments here have to be moderated first before it's reflected in the site. wag kasi masyadong mabilis magreact. =D
sherwin, depende sa bank kung tatanggap sila ng 100K for bonds. sa BPI, 50K lang ang minimum nila for corporate bonds. sa ibang banks, gusto nila 500K.
i dont see any sense putting the money in investments that yields only 3% to 8% becuase inflation is higher than that. last year inflation is around 11% to 13% based on that there is a negative difference on your investment. i also dont recommend mutual funds or uitf because their fees are very big and take up half or more than half of one's investment. what i recommend is everyone learn how to invest. go to powerbooks and buy books on investing. just spend time learning, growing and depending on yourself to take care of your money. dont let other people do it for you. use the greatest leverage God gave you - your mind. As a final thought, once you have enlarged your increase your investing skills, invest in stocks, forex, commodities or start a new business. the risk is higher but the opportunities far outweighs the risk. also risk is a part of life just learn how to manage risk. i will leave you with this thought about risk. what is riskier - a person who drives maniacally around the metro or a defensive driver? driving is risky but the defensive driver because of proper knowledge knows how to manage risk and as such makes his journey safer. it is the same with investment - learn how to invest properly, gain the proper knowledge and it will make investing safer than time deposits, corporate bonds, government bonds. kudos!
let's see.. I'm currently saving 20% of my salary and put it in time deposit. I have life insurance and no consumer debt. I need to beef up my emergency fund which I consider separate from the 20% savings. I also have MF so I really don't know what I'll do next.
If I get 100k, I'd probably put half of it on emergency fund and treat myself to a trip abroad. :)
pierre, good point. but what investment instrument right now earns more than the inflation rate?
pierre,
Before you invest, you need to cover the basics like emer funds. This is where those saving instruments come into play. If you already have a very high net worth, then you don't need to take on much risk.
Note that you don't always need to invest in risky assets. It will depend on what you have and/or currently earning.
Now a days, everybody knows how much is a 100k. with low apr offers on savings or time deposit, unstable real estate here. I’ll convert that in U.S. dollars and buy cd’s overseas or parked that with my emergency fund until I smell a better opportunity.
claudine,
with 100K, you will not be able to save for emergency fund... 100K is just enough to buy plane tickets ! hehehe... you still have to "steal" extra amount from your TD for your expenses while travelling abroad! lol.
i'll buy term insurance first then follow the rest in the suggestion of Salve. and when i get to the stage (in Salve's suggestion) to buy insurance, i'll convert my term to whole life insurance.
term insurance is cheapest, renewable and convertible. for a 30-yr old, the annual premium for a 500k cover is only 2,310. that's less than 7/day.
btw, i'm working to become an insurance agent.
Maryzyle, opening a brokerage account will mean directly investing in the stock market. Hope this helps.
If an emergency fund is in place, then what to do with P100k is quite difficult to answer, at least for me.
If you are limited to the domestic market, it is difficult because the opportunities are meager. If you subscribe to a corporate bond, the minimum investment is P50k, a hefty 50% allocation and exposure to a company that could go bust despite what credit ratings agencies will tell you.
I believe the buying opportunity for RP government bonds had already passed sometime in October last year, when the 10-year paper hit double-digit yields. Now the BSP is in a rate-cutting cycle so interest rates are bound to fall. If you invest at current rates, your only consolation is that inflation MAY fall to an average of 3% this year, according to a BSP forecast. At a 3-year yield of nearly 6% pa gross, the investment gives you a positive real rate of return.
It appears that stocks or equity funds may be the right place to park your money. But not just yet. My gut feel tells me there will be another round of a massive sell-off before a very painful bottom is put in place. But that's just my gut feel. I suggest peso cost averaging as a tactical maneuver in entering equities. Set up a 30-day or 60-day TD with P100k. Then withdraw P5k-P10k every time it matures and transfer the money to an equity fund. This allows you to scale in your investment over a period of 10-20 months. It smooths out the volatility because you don't go all-in at once. I don't bother with balanced funds because RP bonds and RP equities are positively correlated anyway so neither of them balances the other.
An index fund is the best choice but the minimum investment is a hefty 100k, so you are forced to go all-in. Risky. Anyway, most Philippine mutual funds are "closet" index-funds because their top-ten holdings are usually the top ten components of the PSE index, and these components are what move it up or down, especially PLDT.
I don't know much about starting a business. I'm still learning.
Better if you have an account with a foreign discount broker like TDAmeritrade or Schwab or Saxobank, because then you can diversify into gold, energy contracts, chinese equities, foreign currencies etc. I believe every serious Filipino investor should have an international exposure.
I will buy a second-hand car. Now is not the time to save but spend, else the economy grinds to a halt. We don't want that, right?
My wife and I are retirees and would like to stay in the Philippines for six months yearly.
My question is, how much is the rate of return on time deposits .From what I understand, so far from comments on this topic is the safest ! Or ,is it ?
@berniejohnpaul
yesterday, i asked citibank the time deposit rate... something like 5% and net of withholding tax, around 4%.....
they also offered some corporate bonds thats around 7-8%..... and then there's this san miguel bonds coming out with rate of around 8-9% ..... you can inquire with your friendly banker..... open first an account with them
For me the best thing to do with your 100thousand pesos is time deposit. Just what i have did . I've started doing this when i was 33years old but i said to myself it's not too late to save this kind of amount now im 56years old and have my money in the bank of 23millions pesos. Just Distribute the money you have to those bank who have a nice big interest in time deposite. Now im happy receiving my interest every month and while relaxing at my farm in Davao philippines..
Do you have any more info on this?
ember, it’s not the amount that matters especially in the beginning of financial literacy. It’s the discipline and the habit that matters. In a casual conversation among friends laptop sleeve manufacturer,
Since I have a job right now , no credit, and have adequate emergency funds (around 6 months)for my family, and if you'll give me 100,000 , then i'll start a small business , that will create 1 to 3 jobs.
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So, let’s apply some assumptions here.
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Okay, let’s say you have a hundred grand to spare. You have no financial obligations like credit card debt or immediate financial needs like travel. Where do you invest P100,000? Here are some options:
Special savings deposits. You can place the money in a special savings account that earns a much higher interest than a regular savings account for future Ginault Watches
Time deposits. “P100,000 can be invested in a variety of ways. If you can’t tolerate any risk and would like your money to be near cash, or very liquid, stick with time deposits,” says J. Randell Tiongson, a Registered Financial Planner (RFP).
T-bills. If you want relative safety, place your money in short-term government securities like Treasury bills (T-bills).
I think investing in mutual funds is the way to go. I like getting this great return each year. This is what i would do. big rig accident lawyers orlando
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