Skip to main content

investment risks

With the financial crisis, most people's investments have decreased in value and a good number will get discouraged because of this. In the Philippines, we also have the collapse of several rural banks and pre-need firms. Some might decide to forego investing after all of this. Let us clarify RISK - IT IS ALWAYS PRESENT. If you keep your money as it is by hiding it under your pillow, there is the risk of theft, of your house burning or termites destroying the crisp P1000 bills. If you keep the money in a bank deposit account earning less than 4%, inflation will lessen its value year after year. Inflation is not just risk, it is a certainty. Thus, a prudent investor will not strive to avoid risk at the expense of losing to inflation, rather, he will strive to beat inflation while MINIMIZING risks. Here are some tips to protect your investment while making it grow:

1. Stay away from firms that offer unbelievable returns.
Be very wary of companies that offer unbelievably high returns. If it's too good to be true, it probably is. Don't be greedy, remember that our goal is to let our investment grow steadily.

2. Spread your investments.
Diversification is the name of the game. Do not put all your money into one investment vehicle or one particular company. Spread it out so you can be protected even if a particular investment does not work out well.

3. Invest only with reputable companies who have shown consistent performance over the years. If these companies survive the 1997 and 2008 financial crisis, they will most likely survive upcoming ones.

4. Learn all you can about the types of investments available. The internet has made it easier to acquire such knowledge. Place your hard earned money in those that you thoroughly understand. Investing is not synonymous with gambling.

5. Be proactive. Investing will involve decision making. Use your head and not your emotions. Analyze and think through your decisions. Remember that no one in this world will have more concern for your money than you, not even the investment companies.


Popular posts from this blog

do not invest in Philippine pre-selling condos

I would rather shoot myself in the head than invest in pre-selling condos in the Philippines. My brother and I were interested on getting a condo unit not really as an investment but as a vacation home. However, when I read a contract to sell from one of the Philippines' top developers, I was shocked at how skewed it is on the developer's favor. There is very little protection, if any, on the buyer's side. I think you would have to be either really stupid or overly trusting to sign one of those contracts. The first issue I had was that they require the full post dated checks even before providing the contract to sell. What the hell? They should give the CTS when the buyer has paid 10% downpayment. Next, if they failed to deliver the unit as scheduled, there is no compensation to the buyer. They can practically construct the condo as slow as they can. Then they are also free to alter the floorplan as they please. So if you expect 10 units per floor, you might be surprised t…

a financial mistake most business owners make

What could offer the biggest potential returns of your investment? A profitable business. It can turn P1000 into millions but it can also turn into 000. Putting some money into a business is a must for any investor. Aside from the possibility of raking in profits, having a business actually helps you understand investments better. To quote Warren Buffett, "I am a better investor because I am a businessman and a better businessman because I am an investor". When it comes to learning about finance, running a business is the best teacher. We also need to apply investing principles in our business and what I would like to emphasize is the concept of diversification. A financial mistake most business owners make is the lack of diversification. This is especially true to small business owners. Let us illustrate with the typical lechon manok business. A young entrepreneur decides to start a lechon manok stall. He has great tasting chicken, has good location and people buy it. Needl…

from little things, big things grow

Most of us know this is true with investing but it takes discipline and a lot of patience to see this through. From little things, big things grow.  As investors, we need to realize that small amounts do matter and nothing should go to waste. We see pocket change, but the real value of those coins is many times over if it were invested and given time to grow.Yes, a few coins would not buy you much now but if invested well, it can grow to such that it can actually buy more in the future than what it can today. So if you see a coin, pick it up. It may only buy a piece of candy now but if invested well, it could pay for a decent meal 30 years later. Happy investing!