Invest now or regret later

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Avatar for rayselp
2 years ago
Topics: Recommendation

Why do you need to invest as early as possible? There are two main reasons why investing is a good opportunity to grow your money.

The first reason is INFLATION. In Economics, this term is defined as "a general increase in prices and fall in the purchasing value of money. This means that every year, the value of goods/products is increasing. To illustrate further, in the average inflation rate of 2.7% from 2012 to 2020, the value of your PhP100.00 in the year 2012, is only at around Php81.00 in 2020.

As of April 2021, the inflation rate of the prices of goods/products in the Philippines is recorded at 4.5%. This figure was steady from March 2021 and is actually double the 2.2% inflation in April 2020. The Philippine government's target range is only about 2%-4%.

So, what does this mean?

Even if you are good at handling your money, you're thrifty and contented, when you decide to put this money in your savings account, your money is still losing its value. The only way to beat inflation is actually to INVEST. One's goal is to grow your money faster than inflation.

This leads me to my second reason. When you start early, this allows you to take advantage of the power of COMPOUNDING RETURNS. To explain this simply, let's look at the compounding interest of your retirement fund.

If you want to retire at the age of 60 with PhP5 Million assuming that there are 5% returns year on year. When you start investing at the age of 20, then you only need to save around PhP3450 monthly within 40 years to have a total investment of PhP1.7 Million. Now, let's compare it if you invest at the age of 40, you will need to save P12,600 monthly in a period of 20 years for a total of the invested amount at Php3 Million.

As shown below in my little summary, starting at an early age means that the amount that you need to set aside monthly is lower than the amount when you are older. Not only that, the total cumulative amount is much lower when you start young.

  • 20 years old - Php3450 monthly - PhP1.7 million in 40 years

  • 40 years old - P12,600 monthly - PhP3 million in 2o years

So, investing early is a win-win for an individual.

But why is it that in the Philippines less than 1% of the population is investing in UITF, mutual funds, stocks and bonds? There are two top reasons why Filipino adults don't invests. The first reason is the perception of high cost - most of us think that you need to have a big amount of a capital to start investing, and the second most common reason is the lack of awareness - not knowing how and where to invest.

Just recently, I've come across the GInvest platform in GCash. This platform aims to address the abovementioned two reasons why Filipino adults are not investing. In GInvest, you can start investing for as low as PhP50 (WOW!) using your GCash app in your smartphone.

What is GInvest?

GInvest is the investment feature of GCash app. This feature allows the users to invest in various investment funds such as those that are itemized below:

GCash partnered with ATRAM and Seedbox Technologies to offer unit investment trust funds or UITF. Instead of us individually investing on stocks, bonds, and others, these are professionally handled by fund managers. These fund managers will be handling the research, placement, and monitoring of the funds.

How do I invest via GInvest?

If you are 18 years old and above, with 1 valid ID, you can get fully verified in GCash. Once you're fully verified, you can now go to the GInvest feature in the app and register for an account.

It's easy to register, just indicate your email address, ask the risk assessment questionnaire (Don't worry, there's no right or wrong answer.), and fill out other information required in registration.

Once registered, you can click on "View Investment Products" to choose from the funds available. You will also be able to see the "Risk Appetite" based on the questionnaires that you've answered before this. Remember that you have to be critical to the type of investment that will best suit your financial needs.

What funds are on GInvest?

There are 5 different funds to choose from. There are 3 local funds and 2 global funds. You will see the Risk Rating under each type of fund. You can check if it's aligned to your Risk appetite if you click the "View Details" as it will show you the details such as investment information, fund description, minimum initial investment, minimum additional investment, and the return rate in the past 1 year.

The minimum initial investment in the local funds such as the ATRAM Peso Money Market Fund, ATRAM Total Return Peso Bond Fund, and the ATRAM Philippine Equity Smart Index Fund is just PhP50. The minimum investment amount for global funds is PhP1000, which is actually relatively affordable especially if you are a working professional.

How to Invest?

After careful consideration of the type of investment that you would like to invest on, you can now click the "Buy" option. Please take note that the effective price (navpu) when you subscribe already includes the management and other fees. You just need to wait 2-4 business days for processing of your order.

Once it's processed, you can easily monitor the market value of your investment via the GInvest feature of your GCash app. For me, one of the best features of the GInvest is the "Set Reminder" where you can choose how often you want to be reminded to invest, and the amount of investment. You can choose either of the following: Every middle and end of the month, every end of the month, or every end of the quarter. An SMS alert will help you remember to invest regularly.

Pros and Cons of Investing

I know that the term invest/investing/investment is still a little bit intimidating. But, when you invest using GInvest, its interface is actually user-friendly and not intimidating especially for beginners. It seems like you're just shopping (add to cart) products from Shopee or Lazada.

Another good thing about GInvest is that it has a variety of funds to choose from, and there's a fund for each risk appetite. It doesn't require you to become a high risk taker or aggresive to invest, as it's the common impression. There are certain funds that are good for moderately aggressive investors, and even to the conservative ones in terms of the Risk Appetite.

To give you an idea of how much will the return of your investment will be, here's an example. If you are 20 years old and you set aside an investment of Php1000 monthly and you get to grow it by 5% per year, the total amount that you would have to set aside from 20-60 years old is PhP480,000, but it can increase up to PhP1.5 Million since there's a compounding returns in the investment. So, if you think that PhP1000 is small, imagine that it will grow over time due to the compounding returns. However, please take note that returns of UITF are not guaranteed since these are investments, and they are not insured by the PDIC unlike deposit accounts.

Here are some things that I think should be improved by GInvest that you can consider first before trying.

  • The processing time of orders take 2-4 banking days and the processing of sell orders take 3-7 banking days. So, if there's an urgent need for you to withdraw the money, it will not instantly be credited to your GCash.

  • There's a limit/cap to the amount that you can invest. This is based on your GCash wallet's limits. To know this, you can go to your GCash profile, click "View Benefits".

  • One of the investment funds which is the Money Market Fund because there digital banks that offer guaranteed higher returns like the GSave which is also in GCash.

  • Management fee is slightly higher for Philippines Smart Equity Index Fund at 1.5% as compared to other UITF offerings. However, here you can start investing at PhP50, whereas in other UITFs, the minimum required amount is at least PhP10,000.

So, what do you think? Do you want to try investing in the simplest possible way? Try GInvest now, or regret later. :)

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Avatar for rayselp
2 years ago
Topics: Recommendation