13th month pay: Invest or spend?


Posted at Nov 15 2016 03:25 PM

MANILA - It's bonus time! If you’re a salaried employee, you’re about to get your 13th month pay anytime soon, and you’re most likely thinking of how to spend your money, perhaps on a brand-new smartphone or that "it" bag that your favorite TV personality lugs around.

But have you ever thought about putting your money into something that can potentially grow in value? Investing can give you the same feeling of exhilaration that retail therapy does, and gives you the bonus of seeing your money grow.

Here are seven options on how to invest your 13th month pay:

1. Stocks. Investing in equities offers potential strong upside, especially if you take a long-term view. The good thing is that stock investing nowadays has become so much easier, especially with the emergence of online stock brokerages which let you purchase stocks conveniently. You can open an account for as low as P5,000. Before investing, do take time to understand the risks and opportunities of equities investing. Also, research on those companies whose shares you intend to buy.

2. Bonds. Less volatile than stocks, bonds are also seen as a smart investment, potentially offering more returns than simply putting your money in cash deposits. Bonds can be issued either by the government or companies. They are also very accessible to retail investors nowadays, with many banks offering bonds to retail investors for a minimal amount. Bonds usually offer a regular income stream and a fixed rate of return, which would vary depending on the nature of the issuing entity. If you have a moderate appetite for risk, bonds may be right for you.

3. Mutual funds. If you don’t know how to invest directly in stocks or bonds, mutual funds may be right for you. Mutual funds pool the money of many individuals then invest these in different asset types – bonds fund, equities fund, money market fund, or a combination of these. In short, a mutual fund allows you to invest in a wide range of assets, and even gives you the services of a fund manager for a fee. Choose a mutual fund that suits your preferences and your investment goals. Mutual funds are available through mutual fund agents of financial institutions.

4. UITFs. Similar to mutual funds, unit investment trust funds or UITFs are pooled investments that are professionally managed. These funds may be placed in bonds, equities, money market, or a combination. The main difference between UITFs and mutual funds is the way they are administered. UITFs are administered by the trust departments of banks, so you should be able to get these through your bank. Find one that matches your goals and appetite for risk.

5. Value-linked insurance. This combines insurance and investment, which means you get protection as well as a potential investment upside. The part that is invested may go into different types of assets, which can suit your risk profile. If you have a family or there are people dependent on you, this may be a smart choice to consider. VULs are available through insurance companies, and the cost will depend on amount of coverage and the investment goals you specify.

6. Real estate. You can also put your 13th month pay into a down payment for a property. There is a good number of condominiums and other developments that are now available for investors. One upside to owning real estate is that you can actually use it, or you can have it rented out. You also stand to gain from the appreciation of property values. It goes without saying, however, that you should choose a property well to ensure that you can realize these gains.

7. Your own business. Have you ever thought about investing in a business run by a friend, or putting up one yourself? Use your bonus as a capital to start your entrepreneurial endeavor. Of course, this is something that you should have long thought about and that you understand. Who knows, your bonus may be the seed fund that will set you off to the entrepreneurial path.

Still unsure how to invest your bonus? Consult professional financial planners who would take you through choices that match your risk profile and investment goals.

Investing, of course, carries a measure of risk, but if you’re choosing between blowing your money on a whimsical purchase and seeing it grow, the choice shouldn’t be too hard to make.



Grow Your Money is an editorial partnership between news.abs-cbn.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.

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