MANILA, Philippines - When it comes to saving money, most Filipinos seem to be content to deposit their hard-earned money in the bank, thinking that interest from the time deposits would be enough to make their money grow. But with the low interest rates, it's no longer enough.
Investing is key to personal financial success, but why don't people invest more? Some say they don't have extra money to invest, others say they don't know where to invest their money. Some are worried about the risks involved in investing, while others are admit they don't know much about investments at all.
"The investment literacy of Filipinos is not that great," BDO Trust & Investments Group senior vice president Ma. Lourdes T. de Vera told ABS-CBNnews.com in a recent interview.
"Ang alam lang natin ay bank deposits, paluwagan. But investing is for everyone, not just the super-rich. But the bottomline is - investing is a need, not a choice,"
De Vera said people need to start saving and investing their money for the future. "We all know that we need to save and invest because we don't want to work forever. One day we want to rest and we don't know until when we can work. Investing provides you with more options," de Vera said.
But the question remains, how do you start saving and where do you invest your hard-earned money? Would-be investors are often concerned about affordability, risks, returns, convenience and flexibility.
De Vera said the Unit Investment Trust Fund (UITF) addresses these concerns. A UITF is a collective investment scheme where money is pooled from various investors into a single fund. The funds are invested in government securities, equities, corporate bonds, and other tradeable securities.
"UITF offers good value for investors. BDO has the lowest fees in the industry. There are no agents' commissions, no backend fees. The performance (of the UITF) is better than benchmark. Liquidity and underlying assets are tied to your objectives, so the underlying investment works for your objective. This is very transparent, regulated by the BSP. Prices are available daily, while reports are available monthly and quarterly," de Vera said.
To make it easier and affordable for Filipinos to invest in UITFs, BDO is offering the Easy Investment Plan (EIP). Under the EIP, once you enroll your account, the bank will debit a certain amount (as low as P1,000) on a regular basis (once or twice month) to be invested in a UITF.
If you enroll in BDO's EIP, your money will be invested in a UITF that is most suited to your needs and concerns.
"UITF is not a one-size-fits-all product. How do you know which is the right UITF for you? Where are you in the investment life cycle? Are you in the 20-40 age group, 40-50? If you're around 20-40, you can afford to be more aggressive. But if you're around 40-50, you have to be more conservative. And you have to ask where you intend to use the money. The more immediate your need, the shorter your time horizon," de Vera said.
BDO offers 4 kinds of UITFs: Peso Money Market Fund (short-term fixed income securities), Peso Fixed Income Fund (medium to long-term fixed income securities), Peso Balanced Fund (combination of fixed income securities plus stocks) and Equity Fund (predominantly stocks). These are aimed at people with different risk appetites.
"If you're the type who can't take a lot of risk, you should in short-term fixed income securities. But if you're bolder, you can invest in a bond fund. But if you have excess money and afford to invest longer, you can buy a combo of fixed-income securities and stocks. If you're a risk taker and you're young, and you have time, you can go to an equity fund," de Vera said.
De Vera said UITFs offer better returns than time deposit rates and beats inflation. It also offers flexibility and liquidity, since it can easily be withdrawn.
Whatever your choice of UITF, de Vera said it is always good to remember the risk-reward rule: the higher the risk, the higher the reward; the lower the risk, the lower the reward.
However, UITFs do not offer any insurance or guaranty on principal and returns, so it is important to understand the risks that come with your investments. You should also choose a credible and seasoned fund manager, and know the regulatory safeguards for investor protection.
"When you invest with the trust department, we're on the same side. We're doing business for you as the client. We place your interest above all. We listen to you, what your investment goals are and we invest for you," the BDO executive said.
The BDO EIP also benefits from the "Peso Cost Averaging" strategy, where "fixed amounts of investments in regular intervals over a period of time allow you to average your costs." This allows one to invest without constantly monitoring the market.
De Vera said the EIP addresses the investing and saving concerns of investors. "With the EIP, saving and investing becomes a habit. It's simple, easy and automatic," she said.