You should start investing as early as possible.

If there’s one thing that I wish I did earlier in life, it would be putting a chunk of my savings in a reliable investment vehicle. Granted that I didn’t really have much back then, whatever money I had in my savings account would have grown much faster somewhere else. That, of course, isn’t to say that a savings account doesn’t work (because you still should open and keep one active especially if you travel a lot), but it seems that many people have the notion that it’s the only thing you can do with money you’ve set aside, and that included me.

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One reason for this is probably the fear of losing hard-earned money when an investment fails. While this is quite reasonable—any investment carries a certain risk, after all—researching about your financial options can help you make sound and educated decisions that can suit your earnings and lifestyle, without the burden of worry. It took me a while to actually feel comfortable enough to put my money in the hands of fund managers, but once that I saw that they actually do their best to keep your money safe (since it means keeping their company thriving), then I kind of breathed easier.

If you’re looking for where to invest safely, especially if it’s your first time doing so, here are a few options you may want to look into.

1. Variable universal life insurance

This is probably what your high-school-classmate-turned-insurance-agent has been offering you from the moment she slid into your DMs. A variable universal life insurance (VUL) is a kind of permanent life insurance with an investment variable. This means that a part of what you put in goes to your life insurance (which can usually cover you until you’re 100 years old) while a huge chunk acts as your investment which grows as you continue to pay your premium.

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Here are the upsides of variable life insurance depending on your contract:

  • You can withdraw your money after a certain amount of time in case you need it for anything—from paying for your grad school tuition to covering an emergency expense—and still be covered as long as you continue to pay your premium.
  • You can have health insurance coverage through “riders” or add-ons to your plan. Depending on what you and your agent agree on, VULs can get you covered for a number of diseases.
  • You’re basically saving your money, investing it, and ensuring that your family won’t worry about finances in case something happens to you; and that’s a lot considering that payments can automatically be deducted from your savings account or charged to your credit card. This is the ideal setup especially if you’re too busy to monitor your investments.

As with all investments, VULs have their downsides:

  • It’s more expensive than most life insurance policies, especially if getting a life insurance policy is really your goal. Your agent can talk you through your priorities to sort things out.
  • You’ll have to put money into it if you want to stay covered, since, after all, it’s a permanent policy; however, the rate will remain set regardless of inflation and other economic issues. If you’re faithful with paying your premium, there’s a good chance that you’ll stop shelling out money by the time you retire, because by then, your investment will start paying for itself.

FN Tip: If you find VULs to be way out of your budget, you may want to consider the “buy term, invest the interest” strategy, which means you’ll buy term life insurance (which only covers you for a certain number of years) and you invest the money you’ve saved from fees involving VULs to other vehicles. It comes out cheaper, but it’s a bit more work as you’ll be the one to monitor your investment.

2. Funds

As Female Network’s resident accountant Pamela Lloren wrote in a previous article, “Funds are generally managed by banks or other financial institutions. A professional fund manager invests money pooled from various investors in bonds and stocks depending on the investor’s risk appetite.” These can be mutual funds or UTIFs—but they’re basically you investing your money together with a group of people and growing your funds together.

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Here are the upsides of investing in a fund:

  • You don’t need a lot to invest in a mutual fund. There are some institutions which require only a P10,000 capital for you to participate, which they’ll invest in different assets depending on your risk appetite.
  • Someone manages the fund for you. Sometimes, you don’t even need to put in money regularly—you can allow your initial capital to grow on its own.
  • You can pull your money out of a mutual fund any time you wish as long as it’s past the holding period. If you do decide to withdraw before your holding period ends, you’ll need to pay a redemption fee.

The downside

  • If you like playing it safe and you’ve only put in the minimum amount of money without depositing any more, it may take years to even earn P1,000 (true story). So really, it still takes a bit of monitoring and maintenance. Basically, the fluctuations of your investment depend on what kind of an investor you are—if you’re a risk taker, expect your that investment can earn and lose a lot of money in a short span of time. If you’re way too safe, your money won’t earn that much.

3. Time deposit

Time deposits are like savings accounts, only that you can’t withdraw your money any time you want. “Time deposits are invested for a fixed period of time called term. The term ranges from as short as thirty (30) days to as long as one (1) year (some banks even offer a two [2] year term),” writes Pam Lloren. “At the end of the term, you will receive your original placement plus interest, net of tax.”

The perks of time deposit

  • It’s forced savings which gives you bigger returns than your usual savings account. The longer your term is, you more you earn.
  • There’s less risk involved, and the returns are fixed, no matter what happens to the economy.

The downside

  • As mentioned, you can’t withdraw your money before the term ends.

4. Bonds

Bonds are basically money being borrowed from you by a certain institution to help fund certain projects. The borrowed money is your “investment” which can grow quarterly, bi-annually, or annually at a certain percentage.

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There are many kinds of bonds, the most popular of which are government and corporate bonds. The only difference between them is to whom you’re lending your money—the government, or a corporate entity.

Bonds can have huge returns because the borrower will have to compensate you with a pre-agreed upon amount by the maturity date, or the time that the borrower will need to have paid the money you lent. When the term ends, you can either pull out your money and invest it somewhere else, or roll it over and allow the same institution to borrow it (inclusive of what you earned) again.

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The upsides of bonds

  • As mentioned, bonds can give you huge returns, especially if you’re fast enough to get to them once the government or a company announces a sale.
  • It definitely gives better returns than a savings account, so if you’re buying bonds from a reliable institution and the rates are good, you can earn as much as a quarter of your initial savings in around three years.
  • It’s a long-term investment that usually is pretty low-risk, since the institutions that offer bonds are often quite stable. This isn’t to say that there’s no risk, which is why you’ll really have to look into the reliability of the institution you’re buying your bonds from: What’s its reputation? How has it performed in the past year? How much has it earned annually in the past five years? Has it recently been involved in an issue or a scandal? How has the economy affected it, and vice versa?

The downside

  • Your money is tied for a number of years, depending on the terms of your bond. That means you can’t touch it until it matures, or else you’ll need to pay a penalty fee (which can cost a lot). If you’re investing in bonds, you won’t be using the money you’re putting in any time soon.

FN Tip: Banks usually offer bonds, but you'll have to ask their treasury department for them. Create a good relationship with your bank, and some will even offer you bonds prior to their public sale announcement!

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