There are two (2) ways a person can reach his/her financial goals: Saving and Investing. However, a lot get hurt once they choose the latter due to misinformation or lack of knowledge.
I’m not claiming to be a genius but rather I am here to share the basic knowledge I learned as I undergo financial goal-setting training in order to equip me on how to save and invest for the betterment of my future.
There are six (6) types of investment assets that a person can explore on:
- Mutual Funds
- Fixed Income Securities
- Common Trust Fund
- Equity Securities
Let us run through a quick brief of each. For this post, let’s talk about the first.
Fixed Income Securities are investments with a fixed principal amount, a fixed period of time (called Term) and a specific rate of interest (or coupon). Essentially, this type of investment asset, the investor loans money to a company or the government organization and they, in turn, guarantees to pay a certain percentage of interest every year. Then at the end of the pay period (term), the original amount loaned is returned to the investor.
Invested: PHP 10,000
Term: 1 year
At te end of the term, you will get back the PHP 10,000 you initially invested plus PHP 500 as interest. Generally these types of assets offer a lower return on investment because they guarantee income. (Much better than leaving your money in a savings back, right?)
There are two (2) types of fixed Income Security Assets:
- Money Market Securities – ” cash and deposits” These are deposits instruments with maturity of one year or less and therefore very liquid and accessible. (i.e Time deposits, money-market savings)
- Bonds – debt loans that pay a specific interest over a fixed period of time. The indebted entity issues certificates or bonds to the investors tha state the interest rate that wil be paid and when the loaned funds are to be returned. (Safest to keep your money in this kind is 14 years)
Check on the next post for the second type of Assets.
WordPress for iPhone