Online writer Shara made it her 2022 New year's resolution to revisit her pre-pandemic investments. It’s her way of regaining control over her finances and be more responsible with money in the third year of the pandemic.
The 25-year-old invested in mutual funds in January 2019 to bankroll her dream wedding. It was during the COVID years that she realized, she should have set aside an emergency fund for medical and other essential expenses.
“Nag-dawn sa akin na wala akong emergency funds. So kapag nagkaroon ako ng emergency, kailangan kong kunin yung investments ko tapos magbabayad pa ako,” she told reportr.
“Nandun na sa akin yung disiplina ko mag-invest or mag-save. Kinu-kwestiyon ko lang lagi kung tama ba itong pinaggagawa ko or sincere ba talaga ako,” she added.
In choosing to invest at the start of the year, Shara used the extra money she received during the holiday season wisely. It’s now just a matter of doing it with the right knowledge, goals, and priorities, financial coach Prej Prestosa said.
“Investing is letting your money grow without you doing anything so that you can use it in the far future,” she told reportr.
“If you have extra money and you have covered your bases, it's time to beat inflation. If you invest, you are buying a day in your life that you don't have to work,” she added.
Saving vs. investing
Many people get confused with the concept of saving and investing, as they both involve setting aside money for future use. The difference lies in how much the stored money has grown over a period of time, Prestosa said.
“When we save, it's not really growing our money, it's just keeping what we already have. Sa investment, you are gaining without doing anything,” she said.
“Investing is different from savings. For example, if you have P5,000, sinave mo, P5,000 lang talaga yung meron ka. Hindi nadagdagan, hindi nag-grow yung money mo, it's just that hindi mo ginastos yung money mo,” she added.
That’s why it’s important for people to save up some money first before investing to prepare them for whatever emergency that comes in the future, Prestosa said.
“You want your money to grow. Hindi mo naman sinabi na you want your money to grow so that kapag na-ospital ka, may pampagamot ka,” she said.
“If people skip the foundation and nag-invest sila, ang pinakamasakit na mangyari is i-withdraw mo lahat ng investment mo kung kakailanganin mo,” she added.
How to start investing
As year-end bonuses and other incentives are given during the holiday season, Prestosa said the new year is the best time to invest these extra cash.
For those who want to grow their money to buy a house, a car, or simply to go on a vacation overseas few years from now, Prestosa offered these tips:
Cover your bases
Before starting to invest, make sure that you have covered the bases first, Prestosa said. This means that you have enough emergency funds, you have set aside some savings for your short-term goals, and that you have your own insurance.
Why? Because this will give you the confidence in investing knowing that you will have other sources of funds if things don’t go well, like when there’s a health emergency in the family or you lose your job, Prestosa said.
“Investment is a risky business, pwedeng mawala yung pera mo, pwedeng mag-gain yung pera mo. Mas maganda mag-invest if covering the bases would give you the confidence that you need in investment,” she said.
“Ang iiwasan natin ay ma-withdraw siya in times of emergency. Hindi yun ang purpose niya. Ang purpose niya is payamanin ka in the future,” she added.
What kind of investor am I?
Once you have covered your bases, the next step is to assess what kind of investor you are, Prestosa said.
Usually, insurance companies will give you a test to determine how much money you are willing to risk for your investment. The result of the test will help you decide what types of investment you should get.
“Maraming options sa investing. Papaliitin natin yan by knowing what kind of investor you are,” Prestosa said.
What are my goals and timelines?
Ask yourself for what or whom you are investing, and for how long you want to invest, Prestosa said. Knowing the answers to these questions will help you determine which type of investment is for you.
Planning for a wedding that will take place two years from now? It might be good to just save up for it rather than invest, Prestosa said. Saving up for your 5-year-old kid’s college education? Invest your money where it can earn interest, she added.
How do I diversify?
Once you’ve selected the right investment for you, don’t be too confident and just put all your money there, Prestosa said. This is to ensure that in case your investments go south, you will still have other sources of funds.
“Don't put all your eggs in one basket. Even sa savings. Huwag lahat ng pera mo nasa iisang bank, tapos na-scam ka pa, wala ka nang pera,” she said.
Investing money can be tough job, but with the right strategy and knowledge, it will save you lots of trouble in the future, Prestosa said.
“If you have this picture of your dream retirement, of your dream house, of your dream car, and your dream lifestyle in the future, you can do it by investing,” she said.
“For as low as P500, pwede ka na mag-invest. Still better than wala ka talagang nasimulan at all. So start na ngayon. Start the new year right,” she added.