Wednesday, September 16, 2009

bank deposit accounts as investments?

For majority of Filipinos, bank deposit accounts are the only form of investment that they have. This could be because of the fact that these are insured with PDIC, thus offering safety. It could also be that this is the only form of investment that they know of. But bank deposit accounts offer very minimal returns on your money. If you factor inflation, you are actually losing money the longer it stays with the bank. Plus, it is the banks that garner the most from your money, not the depositor (that is why they have very nice offices). It is not that banks are useless, I use them for my everyday needs like ATM, credit cards, personal loans and many more. But I would not even consider 1% per annum as a decent return on investment. The rule that I follow is: IF YOU WILL USE THE MONEY WITHIN A YEAR, PLACE IT IN A DEPOSIT ACCOUNT. Otherwise, there are many forms of investment available that give more than 5% returns. Banks themselves offer these through UITF or unit investment trust funds. Most people seek the safety of bank deposits because of the lack of information on other forms of investments. As they say, you fear what you don't understand. This is sad because you are losing so much potential returns on your money. In my opinion, DIVERSIFICATION offers the best safety net for investments.

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