How to make short and mid-term investments successfully

Many budding investors making progress with their savings goals are usually excited for the next step: investing their hard-earned money in financial products that help them grow their money.

Long-term investments are important for some of life’s important goals, like planning for retirement or buying your dream home.

And then there are some short- to medium-term goals that you can set for yourself that are just as important – and with some careful planning, may be achievable in as early as less than a year. You’ll have funds on hand specifically for these goals, instead of funding them on credit or directly from your monthly earnings.

The meaning of short-term and medium-term investment goals varies. Depending on your source of financial advice, short-term goals may range from six months to a year, while medium-term goals are five years or less.

Examples of a short-term goal might include trying to augment your monthly income or saving up for an overseas trip. Medium-term goals usually consist of planned expenses, such as paying for your children’s tuition, funding a solid healthcare plan for yourself and your children, or putting the down payment on a car. If you just got recently engaged and are planning your wedding, chances are you have to save for it anyway!

Just because the turnaround time on your investment is shorter doesn’t mean you cannot plan ahead. Our customers often ask us how much money you should have in the bank to start investing. As a rule of thumb, you’re on the right track if you are able to maintain regular expenses within the 60-70 percent of your monthly income. Then you can use the remaining 30-40 percent to use for a mix of short, medium, and long-term investments.

Shopping for the right products with your bank

Getting started on a short-term investment plan is easy to do yourself. Once you’ve set your goals for this activity, it’s time to start setting up your money to work for you – and choose the right investment products for your plan.

When we discussed short-term and long-term investment goals, we already suggested looking at investment products that will start augmenting your income. If you bank at a large universal bank, you have the chance to shop for products offered directly like time deposits and UITFs. Certain banks also assist with access to external products such as treasury bills and government bonds.

Let’s review some of these products and rate what kind of investor they are (Conservative, Moderate, Aggressive).

• Time deposit
  Investor profile: Conservative

The fastest and easiest way to start building up your savings is by investing in a time deposit product. There is usually a minimum peso (or foreign currency) placement requirement, with a tenor (or placement period) of 30, 60, 90, 180, up to 360 days. Withdrawing your investment before the end of your placement period will penalize your earnings, so try investing money you’re very sure you won’t need in the near future.

Earnings from your certificate of time deposit will vary depending on the tenor of your placement, as well as the size of your investment. Time deposits are modest but surefire – ideal for conservative investors.

• UITFs
  Investor profile: Conservative, Moderate, Aggressive

Unit Investment Trust Funds (UITFs) are a collection or pool of investment funds from various investors. These funds will be invested in different financial securities like bonds and stocks. To invest in a UITF, banks set a minimum initial investment and a minimum holding period from your date of participation. For example, all Metrobank UITFs have a holding period of seven days.

UITFs vary and you can choose the fund you wish to invest in based on your investment objective. If you’re on the conservative side, invest in Metro Money Market Fund. If you wish to earn higher potential returns, you can invest in medium risk funds composed of bonds such as Metro Max-5 Bond Fund or Metro Corporate Bond Fund. If you’re an aggressive investor, you may invest in a high-risk investment such as the Metro Equity Fund or Metro Balanced Fund that contains a mix of stocks and bonds.

• Mutual funds and Exchange Trust Funds
  Investor profile: Conservative, Moderate, Aggressive

Mutual funds and Exchange Trust Funds (ETFs) are a variation on the concept of UITFs. While not managed directly by a bank but by an investment company, mutual funds and ETFs also function like pooled funds. The First Metro Philippine Equity Exchange-Traded Fund is the first and only ETF in the Philippines, managed by First Metro Asset Mgmt Inc (FAMI) under Metrobank Group.

Just like UITFs, mutual fund earnings will be patterned along with the performance of the products in the “investment basket” contained in the fund. ETF earnings will be based on the composite performance of PSE Index-based stocks. ETFs also track the performance of any index it follows.

Just like UITFs, mutual funds and ETFs have low entry requirements. It’s easy to make an investment entry and exit as conveniently as buying stocks directly from the stock market.

Similar to the appeal of UITFs, many people like investing in mutual funds and ETFs because they have the potential to make you more money in the long-term. For this reason, longer-term goals like tuition payments and retirement might benefit from an investment in these products.

Venturing into stocks

Thinking about getting into the stock market?

While we recommend safer, more conservative financial investments for short and medium-term financial goals, if you can invest time and effort, there’s no harm in learning more about stock investments and experimenting with a small amount.

Thanks to advanced technology and finance, it’s become relatively easy to start investing in the stock market online. For instance, investors can easily get into stocks via banks through a fund/UITF – and all of these can be done through an online portal.

Metrobank’s sister company, First Metro Securities Brokerage Corporation, operates a website as well as an app that both allow you to invest in Philippine stocks. One of the biggest benefits of joining our online stock portal is getting access to research reports, chart tools (for those who are interested in technical analysis) – and only pay the lowest trading commissions offered on any online trading platform.

To get started, you simply have to register on the website for an account, transfer funds into the account, and you’re set. You can start making financial placements online for about the same price it takes to get into mutual funds or ETFs – only a few thousand pesos.

Diversifying your portfolio

Mapping out your short-term and medium-term financial goals becomes easier once you try to match specific goals to specific investments. You do not need to do this 1:1. You may, in fact, wish to spread out your seed money into different funds to spread out the risk; diversifying your portfolio and managing risk is always good.

Should you wish to start transacting any of these investments with us, Metrobank offers UITF investments that you can manage online through Metrobank Online. You can also enroll in Metrobank Online to manage existing UITFs.

Feel free to speak to our bank branch personnel about our various products or reach us through our website contact information. We are here to help you achieve your goals with confidence and success.