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Saturday, November 15, 2008

Investing Tips for Beginners

Here are some investing tips for beginners:

1. Invest in what you know.Choose investments that you know and understand.

Forms of investments:

a.) Savings accounts - Probably the safest type of investment. There is low risk involve and the yield is also low. If you availed of it through a bank, your investment is insured by the PDIC upto P250,000.

b.) Time deposits - Similar to savings accounts with the exception of you agreeing not to touch your money for a certain period of time. With this, the bank will offer you a higher yield compared to regular savings account.

c.) Bonds - Bonds are IOUs from the government or corporations. Initial investments in bonds and risks are higher compared to bank deposits. But the yield potential is also much higher. It may be preferable to invest in Mutual funds or UITFs (pooled resources) which offer lower initial investments.

d.) Stocks or Equities - Stocks are traded in the stock market and prices fluctuate everyday. There are mutual funds and UITFs investing in stocks and equities.

e.) Money market - Money market refers to short term commercial papers maturing in 1 year or less. There are mutual funds and UITFs with portfolios made up of money market only.

f.) Real Estate

g.) Art and Jewelry

2. Don't follow the herd.Before following what the others are doing, think and assess first the situation. Don't panic. Sometimes panicking can force you to sell at a loss.

3. Focus on the business, not the stock.If you invest on the stock market, focus on the business and not on the stock prices. Know the business behind the stock, assess its future and see if it will be profitable. As the stock market prices fluctuate everyday, looking at the prices everyday may cause you to lose your mind.

4. Think long term. When investing in stocks, mutual funds, and UITFs, think long term. Be prepared to just leave your money and let it compound. Learn to sit back and relax. Investing long term allows your investments to average out over that period. Averages have the tendency to rise over the years so you need not worry when the market is down because it will tend to average itself in the long run.


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