Start Growing Your Money: A Guide to Building Your Investment Portfolio 

You’re crushing it in your career, but are you making your money work as hard as you do? This is to say that if you want to achieve your financial goals, it’s not enough to just save your money. It’s important that you understand how to grow your money. So hold on to that bonus and see how it can significantly impact your financial future. Let’s explore some ideas on where to invest your bonus earnings and read up on some investment tips for millennials.

Why invest?

One of the realities of life is inflation or the general increase in prices of goods and services over time. It’s when money loses some of its purchasing power, a PHP 1,000 bill won’t go as far today as it did when you were in college.

This is where investing becomes your secret weapon. When you invest, that PHP 1,000 bill doesn’t just stay a PHP 1,000 bill. If invested, in say a fund earning an average of 7% annually (a reasonable long-term expectation), it can become PHP 1,114.50—enough to maybe afford what it could and more at the time you invested it.

Think of investing as your protection against inflation, making your money work overtime while you’re busy climbing the corporate ladder. This is especially crucial when investing for millennials who face unique financial challenges and opportunities.

Investment options for every time frame

Your investment time horizon—the length of time you plan to hold an investment before you need the money—plays a crucial role in determining your investment strategy. Let’s explore some options for investment for millennials in the Philippines suited for different time frames and goals.

Short-term: Funding your next career move

As you start to invest in your 30s, these are goals you aim to achieve in the next one to three years, such as building an emergency fund, saving for an advanced professional certification, or planning a sabbatical.

Sample options:

1. Time deposit: This offers better interest rates than regular savings accounts. You agree to leave your money with the bank for a fixed period, and in return, they pay you a higher interest rate than a regular savings account. It’s a safe bet for short-term goals. Metrobank online time deposit, for example, offers up to 4.5%* interest per annum. The minimum placement is just PHP 10,000 and you can choose a term between 1 to 12 months.
2. Short-term retail treasury bonds (RTBs): These are like lending money to the country and getting paid for your patriotism! RTBs are government-issued bonds designed for individual investors. They typically offer higher interest rates than traditional savings accounts and are considered low-risk investments. It’s a great way to earn while contributing to national development.

Sample scenario:

• Regular investment: Alex saves PHP 10,000 monthly in a time deposit offering 4.125% interest. After a year, they’ll have about PHP 122,479—that’s PHP 2,479 extra for doing nothing!
• One-time investment: Samantha invests PHP 50,000 in a 3-year RTB at 5.75% interest per annum, paid quarterly. After three years, she’ll have received PHP 8,625 in interest payments—enough to upgrade her work wardrobe!

(Note that interest rate of 4.5% per annum may vary based on the selected term and investment amount. Subject to 20% withholding tax.)

Medium-term: Leveling up your life

These are bigger goals that you aim to achieve in say the next three to seven years. Some examples are a down payment on a condo, MBA fund, or startup capital.

Sample options:

1. Balanced Funds: Think of these as the “best of both worlds” option. These funds mix stocks for growth potential and bonds for stability. It’s like having a diversified investment team working for you, balancing the excitement of potential high returns with the comfort of lower risk. The Metro Balanced Fund invests in both direct bonds and in blue-chip stocks listed in the Philippine Stock Exchange (PSE). Perfect for those who want growth but can’t stomach too much market volatility.
2. Real Estate Investment Trusts (REITs): Ever dreamed of being a property mogul? REITs let you invest in real estate without the headache of being a landlord. You get to own a slice of income-generating properties like malls or office buildings. It’s a way to get started in real estate while enjoying regular dividends, and potentially benefiting from property value appreciation.
3. Exchange-Traded Funds (ETFs): A type of pooled funds, ETFs give you a basket of stocks or bonds in a single package, traded on the stock exchange. They offer the diversification of mutual funds with the flexibility of stocks, often with lower fees. It’s a great way to invest in a whole market or sector without having to pick individual stocks.

Sample scenarios:

• Regular investment: Jess invests PHP 10,000 monthly in a balanced fund. Assuming a 7% average annual return, after 5 years, if the fund performs well, she could have around PHP 697,000—hello, MBA!
• One-time investment: Ryan invests PHP 100,000 in a REIT. With an average annual return of 6% (4% dividends + 2% capital appreciation), assuming dividends are reinvested, he could have about PHP 133,800 after 5 years—a solid chunk toward that condo down payment!

(Note that the percentage of the average annual return is a hypothetical example for illustrative purposes only. Real market returns fluctuate and actual returns may vary significantly and are not guaranteed.)

Long-term: Building your empire

These are your ultimate goals, or the ones that sit farther into the future or at least for more than seven years ahead. This includes achieving financial independence, preparing for retirement, and funding your own business venture. When investing for millennials with a long-term perspective, consider these options:

Sample options:

1. Index Funds: These are the “set it and forget it” champions of investing. They aim to match the performance of a specific market index, like the PSEi. It’s like buying a tiny piece of the entire Philippine stock market. With low fees and broad market exposure, index funds are a favorite for long-term, hands-off investors who believe in the overall growth of the economy.
2. Equity Mutual Funds: Think of these as hiring a professional stock picker. These funds pool money from many investors to invest in a diversified portfolio of stocks. The Metro Equity Fund is a long-term investment that achieves growth by diversifying into select blue chip equities listed in the Philippine Stock Exchange (PSE). The fund manager does the heavy lifting of researching and selecting stocks, aiming for high returns. It’s ideal for those who want the potential for high growth but don’t have the time or expertise to manage their own stock portfolio.
3. Individual Stocks: This is for the hands-on investor who wants to be in the driver’s seat. Buying individual stocks means you’re purchasing a piece of a company—you become a part-owner! It offers the highest potential returns, but also comes with higher risk and requires more research and monitoring. It’s perfect for those who have the time and passion to really dig into company financials and market trends.

Sample scenarios:

• Regular investment: Mike, 37, starts investing PHP 15,000 monthly in an index fund tracking the PSEi. Assuming an 8% average annual return, by 52, he could have over PHP 6.8 million! That’s some serious startup capital or a solid base for early retirement.
• One-time investment: Lisa, 34, invests PHP 150,000 in a diversified portfolio of blue chip stocks. Assuming an 8% average annual return, by the time she’s 49, the value of the fund could have grown to about PHP 478,000. That’s the power of long-term investing in quality companies!

(Note that the percentage of the average annual return is a hypothetical example for illustrative purposes only. Real market returns fluctuate and actual returns may vary significantly and are not guaranteed.)

Getting started

Just as you’ve strategically built your career, it’s time to build your financial future with the same drive and smarts. Every peso invested today is a vote for the life you want tomorrow. Here are some key investment tips for millennials:

1. Set clear goals: What are you saving for? How much do you need? When do you need it?
2. Assess your risk tolerance: Are you okay with some ups and downs for potentially higher returns (aggressive), or do you prefer steadier, slower growth (conservative)? Maybe you want something somewhere in between (moderate)?
3. Research: Consult with investment professionals to execute a strategy that aligns with your goals and risk tolerance. They will help you diversify your investments to mitigate risk. Check out Metrobank’s wide array of investment options with professionally managed funds and access to global markets. You can also go to FirstMetroSec to access investment options including stocks, bonds, REITs, and pooled funds.

Keep learning, and take time to review your progress. It helps to always remember that you are investing in achieving your dreams and living the life you deserve. Explore more guides about investing, credit management, and insurance at lifebanking.ph.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research and consider consulting with an investment professional before making investment decisions.