happy young couple inserting coin in piggybank

Top 6 Investment Ideas For Millennials

One of the most compelling reasons to invest is the prospect of not having to work your entire life. By investing, your money generates more money by earning interest on what you put away or by buying and selling assets that increase in value.

Compared to our neighboring nations, it’s glaring how only a few Filipinos see the value of investing. In the Philippine Stocks Exchange alone, the number of investors don’t even come close to 1% of the country’s population. Comparatively, Singapore has about 33% of their population actively participating in their stock market, Malaysia with 18%, and Hong Kong with 17%.

Since time plays an important role in investments, being young will put you in the best position to engage in it. While investments aren’t necessarily exclusive for the young, it is however more beneficial to start at a young age because you’ll have more time accumulating interests from your investments.

Today, millennials enjoy a wide variety of investment options which were not available years ago, like mutual funds and online trading in the stock market. Contrary to what most people think, investing isn’t really that hard, especially today. Here are a selection of investment options that millennials could easily engage in.

Here is a list of investment options for millennials that are worthy to consider.

1. Peer-to-peer (P2P) lending

Peer-to-peer lending is a new form of lending and borrowing money that is performed through a platform that connects both the lender and borrower. P2P lending platform basically aims to help both investors and borrowers. While they may seem like middlemen, the transaction is done independently by investors and borrowers. The platform will just function as a tool for investors to connect directly with the borrowers and vice versa.

As with any investment, there is a risk that comes with this type of investment. However, the reason why these P2P lending platforms exists is to bring down that risk for investors.

How does it work?

Investors can grow their money by accumulating interests for lending their money to borrowers. Dealing with borrowers will be done through a platform to ensure that both parties’ interest are protected.

The interest rates are reasonable and can promise a good sum of return to investors. This may not be exactly a lucrative platform to invest your money on, but it’s secured and can give you a good sum of return. After all, money is money.

Among the popular P2P lending platforms are the following:

Pro tip!
  1. You don’t need to invest millions altogether. The safest way to go is to start slow, as most of these P2P platform can give you a jumpstart for as low as $25 (₱1, 250.00)
  1. You’ll never know when an investment defaults or flops. Just like with any investment, you should always have a contingency plan in case your investment defaults or flops.
  1. Invest within your risk tolerance. The platform categorizes the borrowers according to their risk level – the higher the risk, the higher the interest.
  1. Even then if the borrower that you’ve chosen to invest on has a low risk record, it’s still worth doing a complete assessment on their profile before pitching in your funds to their pool.
  1. Reinvesting can be a good move. Try to reinvest your earnings instead of your capital to get more than what you expect.

2. Real estate

If you have bigger funds to spare for investment, real estate can be a promising candidate. Not only will you own a property by investing in real estate, but it can also work as a passive income instrument. The best thing about this is that, you don’t need to have millions to buy a foreclosed property.

While it is indeed cheaper to buy even foreclosed properties with cash, they do have installment options that would only cost around ₱5,000 to ₱10,000 a month, spread into a number of years.

Fortunately, there are various ways to own a home without costing you an arm and a leg. With the aid of the Home Development Mutual Funds (HDMF), better known as Pag-IBIG Fund, it’s possible to buy a foreclosed property from Pag-IBIG without spending a fortune.

Here, you have 3 options to purchase the property.

Let’s assume that you win the auction at ₱900,000.

Option 1: Cash
(With 30% discount)
Option 2: 1-year installment
(With 20% discount)
Option 3: Housing loan
(With 10% discount)
Total payable: ₱630,000Total payable: ₱720,000Total loan amount: ₱810,000

Monthly repayment (8.80% p.a.): ₱5,571.89

Loan tenure: 20 years

Estimated total interest incurred: ₱527,252.93

How does it work?

The key feature that makes real estate investment good is its significant proportion of total return, accruing from rental income over the long term. It is a less volatile investment as it can rely on income return by having the property leased out instead of capital value return (through capital appreciation).

Pro tip!

  1. Uncover the reason of foreclosure prior to buying the foreclosed properties.  Inspect the property thoroughly to avoid buying properties that may have issues hidden from plain sight. The problems could be as simple as water supply, flooding, or recurring blackouts, but they can affect not just your quality of life if you end up living there, but also their market value.
  1. Ensure that your financing is ready and legitimate. Having an approved bank loan or Pag-IBIG loan pulls sellers more effectively. This becomes a leverage against other potential buyers/investors.
  1. Do the math. Know how much the outstanding balance is and what will be the monthly repayment if you take up the property with a loan. When you are calculating the cost, it is important to also consider all the hidden costs and out-of-pocket expenses that you may incur in the process of purchasing the property.
  1. Buy a property that you can lease out. That way you will not have to rely on the long term return of your property.

3. Mutual funds

A mutual fund lets investors pool their money and is used by experienced fund managers to buy carefully selected stocks or other assets from large and stable companies. Mutual funds take the stress away from those who want to invest in the financial markets. This is because mutual funds are handled by professional fund managers who will choose the right investment for investors.

How does it work?

Investing in a well-managed mutual fund will spread your investment over numerous companies in which the fund will be invested. This assortment of mix investments is called a diversified portfolio, which is an effective way to lessen your risk. As long as you have the money to open an account, it’s all good. Additionally in order for you to slowly increase your investment, adding funds as low as ₱1,000  every month is the way to go..

Pro tip!

  1. Know your risk tolerance. Your risk tolerance is a measure of how much fluctuation (a.k.a. volatility—ups and downs) or market risk you can handle.
  1. Determine your asset allocation.Once you determine your level of risk tolerance, you can determine your asset allocation, which is the mix of investment assets—stocks, bonds and cash—that comprises your portfolio.
  1. Review the types and categories of mutual funds. Learning how mutual funds are categorized helps an investor learn how to choose the best funds for asset allocation and diversification purposes.

4. Stocks

While it’s true that the stock market can grow your money exponentially, it goes without saying that due diligence in learning the trade must come first. Figuring out how and where to put your money in the Philippine Stocks Exchange can be a challenging feat.

It will take a lot of homework to make a well-informed decision even on your first trade. However, it isn’t as hard as it once was with the existence of  online stockbrokers today. You can easily trade stocks online through COL financial – one of the country’s leading online stock brokers.

Setting an account with online  stockbrokers will give you a headstart that you will need.

How does it work?

Buying stocks is like buying your share of a certain company; shares that you won’t be able to buy under normal circumstances. In the stocks exchange, you buy shares (stocks) in the hopes that their value increase over time. Eventually you sell these shares when their value is higher than your buying price, making them profitable.

Pro tip!

  1. Before heading onto the real deal, study everything first. Being too confident in the stock market can be too risky. Try observing first and studying how they play the game.
  1. “Buy Low, Sell High” this technique is the key to stock investing success. Buy stocks at their lowest and sell them when they’re at their peak.
  1. Do not expect too much. Even if the industry is lucrative, you cannot expect to have your money doubled overnight. Of course, just like any other business, it would still require perseverance, time, and patience.

As per a professional stocks investor, expecting that your money will double in a year can lead to heartbreak and tons of frustration. If you opt to invest in this kind of business, think of it long-term; maybe 5, 10 years, that’ll be the safest and least expectation you can have.

5. Cryptocurrency

Cryptocurrency is a digital asset that is developed and designed to function as a medium of exchange – just like real life money, albeit – online. It is maintained and managed by cryptography which functions as a security measure.

While Bitcoin may be the most popular cryptocurrency right now, there are other cryptocurrencies that are also on the rise which aren’t as expensive but are as good. Among the few cryptos that are worth considering are Ethereum, Ripple, Litecoin, Stellar, and a lot more listed in coinmarketcap.com.

How does it work?

The cryptocurrency market has been very volatile since its inception. The price of Bitcoin alone can swing up or down hundreds of dollars in a day, and the price more than quadrupled in 2017. While it does not necessarily promise an overnight wealth, it is worth investing for the long term.  Despite the relentless volatility of Bitcoin, its value still managed to skyrocket and stabilize to what it is now (around 8,000 USD to 10,000) compared to its value since its inception.

There is a significant upside to investing in cryptocurrency. That is, the cryptocurrency market is still young, and the most optimistic of investors are projecting future prices that would make buying any of the major cryptocurrencies a good bet.

Pro tip!
  1. Be educated enough about cryptocurrencies for you to be able to make informed decisions. Just like other investments, you should be knowledgeable enough in that field before putting any money in it.
  1. Just like the stock market, if you’re acquainted with its trends, you shouldn’t have any headaches – analysis is the key to success in this market.
  1. Trade it for real money. Rather than exchanging your cryptos with cash through your bitcoin wallets and banks, you can save more on the fees if you exchange it with actual people.  
  1. If the cryptocurrency managed to survive after its bubble period, then that crypto is worth considering.

6. Sustainable and socially responsible investments with a purpose

How Does It Work?

In an era of heightened awareness about environmental and social issues, sustainable and socially responsible investments have gained prominence. This investment approach involves putting your money into companies that prioritize environmental sustainability, positive social impact, and responsible governance practices. Essentially, it’s about aligning your investment choices with your personal values while still aiming for financial returns.

This investment avenue focuses on companies that demonstrate commitment to:

  • Environmental sustainability: These are businesses that prioritize eco-friendly practices and take steps to reduce their carbon footprint. For example, Ayala Land has been at the forefront of sustainable property development, integrating green spaces and energy-efficient designs into their projects.
  • Social impact: Companies that create positive social change, such as Globe Telecom, which has been actively involved in community development programs and initiatives aimed at bridging the digital divide.
  • Governance: This aspect focuses on strong and ethical corporate governance, including transparent financial reporting and ethical leadership. BDO Unibank, for instance, has been recognized for its robust corporate governance practices.
Pro tip!
  1. Thorough research: Delve into the practices and values of the companies you’re considering. Look for those that have a genuine commitment to their stated ESG goals.
  2. Positive contribution: Seek out companies that make a tangible and positive contribution to society and the environment. Assess their efforts beyond marketing claims
  3. Specialized investment vehicles: Explore investment funds that specialize in sustainable and socially responsible investments. For example, the Philam Vitality Funds from BPI Asset Management offer options that focus on ESG factors.
  4. Long-term perspective: Sustainable investing often aligns with long-term goals. Be patient and recognize that the impact of these investments may become more apparent over time.
  5. Engage in proxy voting: Some sustainable investment funds allow you to vote on corporate resolutions. Participating in these votes gives you a say in a company’s sustainability practices.
  6. Performance analysis: While aligning with your values is important, remember that financial performance still matters. Analyze a company’s financial health and its potential for growth alongside its ESG efforts.
  7. Stay informed: ESG is a rapidly evolving field. Stay updated on global and local ESG trends, regulatory changes, and emerging best practices.

Integrating sustainable investing in the Philippine context

Sustainable and socially responsible investments are not just a global trend; they’re also gaining traction in the Philippines. Local companies are recognizing the importance of ethical practices and environmental responsibility. Various investment platforms offer opportunities to invest in companies that are making a positive impact on society and the environment.

Before you invest, assess your risk tolerance, financial goals, and values. While sustainable investing aligns with personal values, remember that all investments come with risks. Diversifying your portfolio, seeking expert advice, and having a long-term perspective remain crucial components of a successful investment strategy.

Closing Remarks

If you’re uncertain about your investment choices, consider consulting with a financial advisor who understands both sustainable investing principles and the Philippine market dynamics.

Whatever investment vehicle you choose to invest in, always remember that they come with risks. The only way to mitigate these risks is by educating yourself further with the investment vehicle of your choosing for you to make informed decisions. Also as a golden rule, only invest the amount that you can afford to lose.  Lastly, starting early is the key to a more fruitful investment as time is the most valuable component in any investments.

This article was originally published in May 2018 and has been updated with current information.

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