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Diversify Your Money

diversification
Most of us heard the saying,”Don”t put all your eggs in one basket”  which I totally agree. You can do this in financial aspect by diversifying your money. It has benefits and let’s define its meaning, according to Investopedia:
Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

But, most of us don’t really do it. Most of us put our money in the banks. The total deposits as of June 2016 was Ph 9,638,125,481,000 according to PDIC.

There is a need to diversify for us to minimize the risks that might happen and also for us to maximise the returns of our hard-earned money. Even the bible tells us about diversification, as it reads “Cast your bread upon the waters, for after many days you will find it again. Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.” (Ecclesiastes 11:1, 2)

In diversification, you should know where to put your money and what will be your purpose. You have to know your financial goals so that you can choose the appropriate returns that fit your goals.

These are the three portfolios that you must have when diversifying.

1. Savings- Your purpose of saving is to accumulate money that you need for short term like from 1 year to 3 years. This can be your buffer fund that you can use if emergency expenses arise. Ideally, you have at least 3 months of your monthly expenses or your salary in the bank. Savings can be easily withdrawn  thus the interest is low,  it ranges from 0.5% to 1% per year.

2. Insurance- There are different kinds of insurance. There is Life Insurance,HMO and Non-life Insurance. Insurance can give you peace of mind if risks happen like accident,diseases and death. This can protect you of the expenses that you cannot control which can give you funds to answer to the risks that might happen. Without insurance, your savings will be used up easily if risks of life happen.

3.Investment- This can make your money grow. These are the investment vehicles you can choose: Money Market,Bonds,Stocks, Pooled Funds, Real Estate or start your own business. Investing should be carefully studied because it is possible to lose all your hard-earned money. You have to understand the risks that might happen and the opportunity to earn. Ideally, you have to think long term when you invest,it requires patience and discipline thus you can earn in the future for your future financial goals. In long term investing, your money can grow from 6%-20% per year on the average for at least 10 years.

It is wiser to learn to diversify as early as possible so that you can manage your money well and maximize the returns you can get. This can be done by creating a Financial Plan which you can ask an advice from a professional Financial Planner. You will have a hard time to do it alone unless if you have time also to professionalize yourself when it comes to Financial Planning.

I hope that you learn something about diversification. You may share this blog for us to spread Financial Literacy to fellow Filipinos.

Let’s all be FREE!
Archie M. Yuki
Financial Planner,Investment Consultant and Insurance Specialist
The Insular Life Assurance Ltd.,Co.
4th floor Karina Bldg., No. 33 Shaw Blvd. Pasig City
Tel No. 571-3274
Mobile Number. 0917-5769607, 0923-4941362
Email Address: archieyuki30@gmail.com
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