Best Investments for Beginners

What are some of the best investments for beginners?

1. Time Deposits
2. Mutual Funds
3. Index Funds
4. Unit Investment Trust Funds
5. Real Estate Investment Trusts

When you’re new to the world of investment, it can seem like a daunting and challenging activity. It might sound like there are many complicated ways to invest your money, and while the incentives sound nice, you might be wondering just where to start when it comes to investing.

Not to worry, because in this article, we compiled a list of the less complicated yet no less fulfilling investments that even beginners can make. These investment plans don’t require you to shell out a lot of money, can be made anywhere in the country, and hopefully aren’t too hard to understand.

Without further ado, here are the best investments for beginners.

Time Deposits

Time deposits are also called term deposits or certificates of deposit (CD). To make a time deposit, you put your money in the bank for a fixed amount of time and in return, you are given a higher interest rate than what you would typically receive on a regular savings account. When that fixed amount of time ends, you can either withdraw your funds or roll them over into a new time deposit at the current interest rate.

This is ideal for first-time investors because it is very low-risk, seeing as your principal is guaranteed by the government, the interest rate is fixed, and the terms are typically short, ranging from a few months to several years.

Mutual Funds

A mutual fund is a type of investment where money is pooled from many investors and is used to purchase a portfolio of stocks, bonds, and other securities. A professional fund manager facilitates the decision-making regarding what securities to buy and sell, based on the fund’s investment objective.

To invest in a mutual fund, you have to buy shares of that fund, and their value will depend on the performance of the securities chosen by your fund manager. Mutual funds are good for beginners because they invest in a variety of different assets, and management of the fund is done by a professional who knows how to make informed and experience-led investment decisions.

If you’re familiar with how the stock market works, you know that there are several risks that come with investing in stocks. The value of your investment is constantly changing, so it’s always good practice to study the market and do your research beforehand.

If you’re still unsure about going into stocks, and it’s the volatility of the market that’s stopping you, you can try an index fund instead. An index fund is a type of mutual fund whose portfolio of stocks mirrors that of a specific market index, like the Philippine Stock Exchange. Given this, the performance of your fund is expected to be similar to the performance of the index.

It’s good for beginners because, in addition to the benefits of a mutual fund, you gain exposure to a broad range of stocks or bonds without needing an active fund manager. Like mutual funds, index funds are also considered a liquid investment, meaning you can buy and sell shares any time the market is open.

Unit Investment Trust Funds (UITFs)

Similar to mutual funds, unit investment trust funds (UITF) pool money from multiple investors and invest in a portfolio of securities, but a few key points set these two types of investment apart.

Unlike a mutual fund, UITF shares cannot be bought or sold directly by investors. Instead, investors purchase units in the UITF and redeem them at the end of the investment term. Unlike mutual funds which are regulated by the Securities and Exchange Commission (SEC), UITFs are regulated by the Bangko Sentral ng Pilipinas (BSP).

Real Estate Investment Trusts

Investing in real estate when you’re a beginner may sound particularly challenging and scary because it often involves shelling out lots of money to meet property prices. However, there is good news. Real estate developers have worked together with financial institutions to implement a solution. This solution is the Real Estate Investment Fund (REIT).

REITs are managed like a stock portfolio, but they rent, lease, and sell properties. Companies collect rent income on properties they own, and from this money, they pay back investors through dividends. An additional benefit of investing in REITs in the Philippines is that these companies are required to distribute 90% of their annual income to shareholders.

REITs can be a good option for first-time investors who want exposure to the real estate market but don’t have the large amounts of capital or expertise required to directly invest in real estate. REITs are professionally managed, so properties in the portfolio are managed by experts. Finally, because REITs are required to pay out at least 90% of their taxable income, this can be a stable source of income for investors.

Key Takeaway

In this article, we discussed the best investments for beginners. We hope these options spark your interest and get you eager to invest your money in something worthwhile. Any of these five options sounds like a good place to start!

And who knows? Eventually when you’ve become an expert in your own right, maybe you’ll even move on to bigger investments like real estate. When you do, turn to the top developers of master planned communities in the Philippines—Pueblo de Oro!