Time deposit vs bonds vs mutual funds vs stocks: which do you choose?

Time deposit vs bonds vs mutual funds vs stocks:
which do you choose?

Long-term financial planning is crucial when you are looking forward to enjoying a stable life in the future. I believe now is the right time to do that. The younger you start saving and investing, the greater wealth you’ll accumulate when you rich 40, 50, or 60. If you plan to build your own investment fund, rather than completely rely on your government-sponsored pension plans, then, you’re on the right track. Remember, it’s never really easy to be a retiree. Other than enjoying the sun-drenched holidays on some white-sand, tropical shores, the rest of an average retiree’s life is so full of financial worries, stemming from frequent visits to the doctors and trips to the pharmacy that could easy wipe out your hard-earned savings. You don’t want to suffer that way. At least, if you’re going to be ill, you want to be ill with tens of millions of assets and cash right under your name.

Financial planning this early makes you want to consider the various instruments available. There are time deposits, bonds, mutual funds and stocks that you can choose from. If you are not business savvy and yet you are not happy with the meager interest rates that an ordinary savings account offers, then, these options are ideal for you, although, your choices will also have to depend on your risk tolerance and your financial goals.

Time deposit

For very conservative investors who are afraid of putting their capital at risk, then time deposits are the most ideal investment instrument for them. However, the returns can be very meager and even negligible. Time deposits sit at the far end of the investment spectrum. However, compared to regular savings accounts (less than one percent a year), time deposits offer higher yields in exchange for getting your funds locked anywhere from 30 days to one year. Almost all banks offer time deposit services for balances as low as P10,000.

The money placed in time deposit account is guaranteed by the Philippine Deposit Insurance Corporation, whereas money placed in bonds, mutual funds and stocks may be lost.

Bonds

If you are looking for a fixed return on your investment, then bonds are most ideal for you. Bonds are ideal for clients who want their principal investments protected from loss. Bonds include short-term Treasury bills and long-term bonds sold by national governments and private entities to raise funds.

While bonds are not as common as stocks, investing in bonds, though, is not that complicated. Simply contact your banker and he can help you. While the return on investments may be lower compared to stocks, bonds provide a certain type of security for the principal amount.

Stocks

Stocks are so far riskiest and most aggressive but also the most financially-rewarding type of investments. If you have the time and expertise to manage your portfolios, then, stock marketing investing is the best for you. If you want to play safe and ensure of getting a decent return on your investments, then, go for blue chip stocks. Blue chip stocks are considered as the best performing stocks in the market and their growth is gradual over time.

There are numerous stock brokerage firms in the Philippines, which accept startup investments of as low as P5,000. In fact, you can open an account online. Citisec Online (COL) Financials is one of the best performing online brokerage firms in the country. Constant communication is important to succeed in stock market investing. If you are a newbie, it also helps to attend seminars, trainings and short-term courses so you’ll get enough information to help you become an even better (if not an expert) stock market investor.

Mutual funds

If you don’t have the time to manage your stocks and other investments, opening a mutual fund account is the best for you. Some of the biggest banks in the country offer asset management services, which include mutual funds. Compared to other types of investments, where success or failure largely depends on the investors’ management skills, mutual funds allow you to relax and let the team of expert fund managers take care of your fortune.

With mutual funds, investors’ money are pooled together so that the fund manager can leverage them for higher returns. You have your option on what risk profile to choose from, which includes equity, balance, low-risk and money market. You can open a mutual account for as low as P10,000.

Now the return on your investment depends on the skills of your fund manager and you can expect to earn for as low as 5 percent or up to 20-25 percent per annum.

Choosing the right type of investment is key to financial success. However, you need to seriously assess your financial goals and risk tolerance. Do you want to be a millionaire in 10 years, then be more aggressive and invest in stocks or bonds. Do you want mere capital preservation? Then time deposits and bonds are ideal for you. Whatever choice you have now will determine the status of your finances in the future. So, invest wisely.