How to Invest Wisely: No Risk, No Gain

Tip No. 2: No Risk, No Gain
                          
                                                                                                                                                              
Some of you may be tempted to ‘play it safe’ and put all your money in conservative investments. You want to keep your hard-earned money in a ‘safe’ place like a bank savings account. 

Yes, it is safe but it doesn't grow. But think about this – the threat of inflation on the purchasing power of your money is real! 

To understand inflation in simple terms, I will use my comfort food – Jollibee spaghetti (with extra sauce and cheese please, yum!) as an example. I remember three years ago, it only costs Php38 but now it reaches to the amount of Php44. Every time I need my comfort food, I always asked the manager why the price keeps on increasing and I asked myself there is no such a basic commodities' price that will lower its price, it's always going up and up. 

You may say that this is okay with you but the harsh reality will tell you that prices will continue to increase but income will always stay the same. You can't blame your company but there is something you can do about it.

But some of you who are earning well now might say you will have a comfortable life ahead. Think twice. If you are 30 years old now and spending Php30,000 to sustain your current lifestyle, the moment you reach 60 – with the same basket of goods and basic commodities (meaning you still have the lifestyle you want) the amount Php30,000 will now become Php76,000 after 30 years. 

If you will only put your money and savings in bank accounts and time deposit, it won't beat inflation. Your money will decrease its value. So if you are content with simply saving money instead of investing it, don’t be surprised if you don’t achieve your goals. You should be wise in managing your finances, aside from the habit of savings you should also learn how to invest. 

As the saying goes, "if you want to learn how to swim, you should be in the water". I am not encouraging you to invest all your money since we all have to follow the basic steps of financial success

Don't invest yet if you don't have funds for emergency needs. You also might consider the simplest way of saving money wherein you can try the 10-20-70 rule. That the 20% of your income can be invested and will be set aside for your long-term goals. 

Take a look at the table below to give you the idea of the types of investment vehicles available with the corresponding time horizon, liquidity, risk and potential yield.



The table simply shows  that you can invest part of your money in the different investment vehicles depending on your time horizon with its respective liquidity. And you may notice the investment that has a higher risk produces higher potential yields.

Ask help from your friends whom you can trust. Don't do it alone, there is always somebody who is willing to help you. You can leave a message below or simply send me an email (jacquinoynay@gmail.com) if there is something I can help you. I'm hoping that you will make a plan now and take necessary actions as early as possible.

More investing tips will be discussed in the next post.

photo: source

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