The Proper way of Investing

Typical poor investing ideas of Filipinos

"Utang kaya ako pang Invest"

"Invest kaya tayo agad sa Bahay at Lupa"

"Itataya ko na lahat ng pera ko sa Business"

"All investments are good, there is just a proper order of doing it"

Let me share you a real-life story

The father of one of my close friends. He was an OFW (Seaman in European Countries) who worked hard and had a successful real estate business. He invested all his hard-earned money into this kind of business, and he was able to build it over the years.

After many years of hard work, he retired and enjoyed his life with the income he earned from his business.

"All investments are good, there is just a proper order of doing it"

However, his retirement was cut short when he was diagnosed with hypertension. Although his family was able to manage his hypertension, it unfortunately led to kidney failure. This was a devastating blow for the entire family, especially since treatments related to kidney failure are expensive and he didn't have health insurance.

As a result, his family had to sell his assets to cover the costs of his treatment. However, real estate is not a liquid asset, and they had to sell it at a lower price to get the cash immediately. This meant that all his hard work and investment were gone in a flash, and all the money went towards his treatment.

The father of my friend had to go through a tough time, but his family was there to support him. They spent all their savings to cover his medical expenses, and they even had to borrow money to make ends meet. The family was devastated because they never expected this to happen.

The Financial Freedom Pyramid

High-Risk Investments

Growth Funds

Protection Assets

• Business
  
• Franchise
• Direct Stock Market
• Real Estate
• Foreign Exhange (Forex)
  

Although this type of investment provides higher returns, it also comes with higher risk, especially if you lack sufficient knowledge, experience, time, and effort to manage it. This should come as your last investment.

Savings Account in Banks

Why should we do it for ourselves when the Bank use our money to make money for them?

• Mutual Funds
  
• Unit Investment Trust Funds (UITF)
• Variable Unit Linked (VUL)
• Copy Trading
• Real Estate Investment Trust (REITs)
  

Growth funds are a way for individuals to pool their money together to invest in a diversified portfolio of assets, such as stocks, bonds, or real estate.

Investors get shares that show they own part of the investments. The value of the shares goes up or down based on how well the investments are doing. Investors can sell their shares whenever they want.

When investors pool their money, they can invest in more things and have experts manage their investments. The professionals make decisions for the whole group.

• Emergency Fund
  
• Adequate Life Insurance
• HMO/Medical Insurance
• Critical Illness Fund
• Educational Fund
• Retirement
  

Basically, you should prioritize this, because this will be the foundation of your finances.

"Kung gagawa ka ng bahay,' di naman bubong o pader una mong gagawin, kundi pundasyon"

Starting to build a house with a strong foundation, if unexpected calamities such as earthquakes or typhoons occur, the structure will not crumble.

Same with your finances, magkasakit ka man o kuhanin ni Lord di mauubos Investments mo

Emergency Fund

(3-6 Months Worth of your Expenses)

It is a sum of money set aside specifically for unexpected events, such as a job loss, medical emergency, or major home or car repair. The purpose of an emergency fund is to provide a financial safety net to help cover expenses during a time of crisis, without having to rely on credit cards or other forms of debt.

Having an emergency fund is important because unexpected events can and do happen. Without an emergency fund, you may be forced to rely on credit cards, personal loans, or other forms of debt to cover expenses, which can lead to high interest payments and a cycle of debt that is difficult to break.

Insurance

It is a way to protect yourself or something you own from potential risks or losses. In exchange for paying a fee, called a premium, an insurance company agrees to cover certain costs or damages that may occur in the future. For example, if you have car insurance and you get into an accident, your insurance company may pay for the repairs to your car or any medical bills resulting from the accident. Insurance is a way to help manage the financial risks that come with everyday life.

Life Insurance

(10X of you Annual Salary)

Health Insurance

(3M - 5M)

Medical Insurance

(150k - 300k)

Educational Fund

If you have a baby or young children, you can prepare their educational fund so that you won't have to pay the same expensive tuition fees at universities in the future. This is an investment in their education. The goal amount depends on where you want them to study.

Retirement

Retirement is when you stop working and have enough money saved up to live comfortably without a job. It's important to prioritize saving for retirement because you'll want to have enough money to cover your expenses when you're no longer able to work. Without a plan for retirement, you may struggle financially and have to rely on others or government programs to support you.

The amount you need to save for retirement will depend on your lifestyle and financial goals. At a minimum, you'll want to save enough to cover your basic living expenses, such as housing, food, and healthcare.

But to truly enjoy your retirement years, you may want to aim for a higher savings goal that allows you to indulge in hobbies, travel, and other activities that bring you joy. It's important to start saving for retirement as early as possible, even if you can only afford to save a small amount each month. Over time, your money will compound and grow, helping you reach your retirement goals and live a comfortable and fulfilling life in your golden years.

"If you are willing to work hard forever, then there may be no need for you to plan for retirement."

Pro investing tip: