Updated: September 1, 2022
A few days ago, I saw on an online news website a sponsored article, which gave the best investment options for young professionals.
The post enumerated four items, particularly life insurance with investments, real estate, stocks, and business as possible investments.
I couldn’t help but react to the article on my Facebook account, particularly on the advice about life insurance and real estate.
On Life Insurance with Investments
First, young professionals, particularly those who don’t have dependents, should NOT “invest” in life insurance. Their money is best put elsewhere.
And for those who do have dependents, it’s best to get term insurance, which provides the needed protection at a more affordable cost than investment-linked insurance products.
Investment-linked insurance policies are expensive and if you’re just starting with your career, then it will probably eat up a large portion of your salary.
This is not an ideal situation given that there are better places to put your money in, which I’ll enumerate later.
On Real Estate
Buying real estate that will serve as your future home is NOT an investment. The reason because that property will technically not make money for you unless you’re willing to sell it later or you will have it rented out. Of course, this is unlikely if you’re living in it.
Also, the return of your money will take years. Instead, remember that flipping real estate is best done through foreclosed properties where it’s possible to realize profits within months, even weeks if you have the right network.
There’s nothing wrong with buying real estate for personal use, especially if it’s your dream house or condo unit. But it’s wrong to think that it’s an investment if you don’t have the strong resolve to make money from it later.
I’ve met too many people who said they’ll sell the condo unit or have it rented out in the future – only to succumb to using the property instead because they fell in love with their “investment”. So be realistic and practical with your decisions.
7 Great Investment Options for the Young Professional: My Recommended List
Spend your money on books. Attend seminars and workshops, both free and paid ones. Increase your knowledge and enhance your skills.
The learnings you’ll get from these will help you make more money in the future that’s why this is a great investment.
2. GOOD FINANCIAL HABITS
Learn the habit of saving regularly and following a spending budget.
If this means buying an app, getting a book, or paying for a money management seminar, then go for it!
Don’t hesitate and invest your money in things that will help you become more financially responsible.
3. PERSONAL NETWORK
Getting ahead in life, it’s not just about knowing the right things, but also knowing the right people.
Invest in personal development skills training if you must, if this will help you get over your fear of talking and networking with strangers.
More importantly, attend events even if you have to pay entrance tickets; join organizations even if you have to pay membership fees; do volunteer work even if there’s no cash allowance – just get yourself out there and start meeting people.
When you’re young, your greatest asset is yourself – so do your best to protect it.
If you’re employed, then learn all your HMO benefits and take advantage of them. If you’re a freelancer, then get health insurance, even if it’s just PhilHealth.
But more importantly, take care of yourself and don’t abuse your body. Invest in a sport and start living an active lifestyle while you’re still young.
The stock market is a high-risk investment. But given that you’re still young, you can afford the risk – especially if you’re buying good companies that have long-term growth potential.
Apart from investing in knowledge about the stock market, remember that when it comes to stocks – the longer that you’re in it, the safer your investment becomes.
Based on the history of the Philippine Stock Market, all index stocks bought before 2009 are currently net positive.
Don’t know what companies to buy? Then check out this post: The Best Philippine Stocks For Long Term Investment
6. POOLED FUNDS
Pooled funds are Unit Investment Trust Funds and Mutual Funds. When you buy investment-linked life insurance, the insurance company invests your money in these. So why not just invest in pooled funds directly, right?
Remember that when you fail to pay your insurance premiums, your policy will get canceled. But if you fail to top-up your investments, then nothing bad happens and your investment just stays there.
Need a primer about pooled funds? Read: How Do You Make Money From UITF Investing?
Finally, investing your money in a business is one of the best things you can do while you’re still young because if your business fails, then you still have many years ahead to rebuild your finances.
While that’s a worst-case scenario – remember that the best way to learn about entrepreneurship is to become one – and as always, the earlier you do it, the better.
More importantly, if creating your own business is difficult given your financial resources and limited free time – then consider joining a network marketing business.
Don’t dismiss and avoid multi-level marketing companies because they’re one of the best ways to learn and practice your entrepreneurial skills.
Signing up with the right MLM company will develop your selling skills, presentation skills, and people skills; and teach you how to build effective and efficient teams – traits of all successful entrepreneurs.
How do you choose the right MLM company? Then read this: How To Choose The Right Multi-Level Network Marketing Company
Young professionals have the whole world in front of them. They have within their reach countless opportunities just waiting to be seized.
You may have little or limited funds now, but remember that you have on your side the most valuable asset in wealth building – TIME.
So don’t be afraid to explore, make mistakes, learn, and eventually become better, wealthier, and happier.
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Photo credits: Aimee Curtis
AWESOME!!! You rock forever, Fitz! I’ve been looking for an article like this!
Hi! Do you have any suggestions of professional groups where we can join? I’m quite curious about that. Thanks! 🙂 and btw, I loved your article. 🙂
Awesome article… it would be great if you can also write an article about Great Investment Options for young parents or for parents.
Thanks Fitz for this! I have only been reading your blog articles in just less than a week and it feels like I have known a lot already. Keep posting!
The recommendation above seem ill-advised. Why fight so strongly against investment-linked insurance?
1. Untoward accidents or illnesses can happen anytime in your life. Where will you get the 1 million worth of medical expenses if in case these happen? Can you get it from the person who advised you not to get insurance? Good luck!
2. Yes it can be expensive but insurance premiums will only get expensive as you age. What if you decide to get an insurance coverage at 40 but you are not healthy anymore i.e you already had a stroke that means you are not insurable anymore.
3. Returns of pooled funds of the insurance are pretty much at par with the performances of mutual funds and uitfs, maybe even better. You can see fund performances at online pages of companies to compare.
4. Premium payments should be continued as stated in the contract. If a person skipped payment, yes the policy may lapse but it can be reinstated again. The premiums already paid before won’t be lost if reinstated. Also, savings entail discipline. Don’t skip payments if you really want to save seriously.
P.S I have UITF, investment-linked insurance and individual stocks, and a house rental planned to my satisfaction at 25 years old. Successful investing depends on the investment objective, discipline and diversification. Investment products have their pros and cons but don’t advise against a product that brings good to people.
1. For untoward accidents and illnesses, you can get health insurance and even disability insurance to cover that. And another reason why it’s good to invest on your health and living a healthy lifestyle.
More importantly, there are term insurance policies which have disability and critical illness benefits and other possible riders.
My term insurance from Philam Life for example is renewable until age of 70, has terminal illness benefits and accidental death, dismemberment and disability benefits (ADDD). I’m paying less than P7,000 a year for this for a P1M coverage. How much would a similar plan cost for a VUL?
Furthermore, a friend of mine has a similar plan from SunLife, and I’m sure other insurance companies have these as well.
2. Insurance premiums for both term and VULs will get expensive as you age. But term insurance premiums will always be much cheaper than VULs at any given age.
For the unfortunate case that you’re not insurable anymore and your existing term insurance is about to lapse, then an individual’s investments will become their financial protection – one reason why young professionals should invest early and as soon as possible.
While it’s the best solution, life insurance is however, not the only tool you can use for financial protection. So should this becomes unavailable to you, there are always other options.
3. I would disagree on you that pooled funds of the insurance will be better than the returns of the mutual fund because the best case scenario is that they will be at par.
If I were to get a SunLife VUL for example, I have the choice which fund to put the investment part in. And those funds are actually mutual funds of SunLife that I can actually just invest in directly.
This is the beauty of BTID. Instead of getting a SunLife VUL and choose the Equity Fund, I will just get a term insurance from SunLife and invest in SunLife’s Equity Fund directly.
Again, when you fail to pay your insurance premiums, your policy will get cancelled. But if you fail to top-up your investments, then nothing bad happens and your investment just stays there.
4. That is exactly the reason why if a person has no saving discipline or just plain lazy to invest on his own, then getting an investment-linked insurance would probably do them good.
But I prefer helping people with getting the habit of saving, and teaching them that it’s not really hard to invest on your own, instead of telling them to get a less optimum product.
Number 1 and number 2 of the investment options above are knowledge and good financial habits. When you’re young, it’s best to invest in those first so you won’t have to settle for investment-linked insurance later in your life.
Investment-linked insurance vs term insurance is always a debate among financial advisors. I choose to make a stand on the side of Salve Duplito, Dave Ramsey and Suze Orman.
Read my commentary on these videos here: https://fitzvillafuerte.com/my-reasons-why-you-should-get-a-vul-or-whole-life-insurance.html
Though also a good investment, one of the real purpose of bitcoin is to solve the problems of monetary inflation inherent to our current system and lower transactions costs. Filipinos should start to take a look at this emerging crypto-currency. Start saving bitcoins now.
What do you think sir fitz?
great article Fitz! Now I know what a VUL is..the video clips help nail your points 🙂
Thank you for this article. I unfortunately have read it a little too late.
I just recently got myself a 20 year life insurance as my first “investment”. I’m just 3 months into it though. Should I cancel my policy and just use my funds to other investment vehicles you mentioned? Hope to get your response sir. Thanks!
I agree with you Fitz! You are just sharing to others what you know and believe in. And we thank you for that!!! 🙂
Hi Lester, ask your agent if it’s possible to convert your policy to a term insurance.
If you cannot, and if you can honestly and confidently afford the premiums, then just continue with it.
If you cannot afford the payments, then study your cashflow and find a way to afford it by decreasing your expenses and increasing your income.
If you cannot really afford the payments, then just cancel the policy now.
Hi, Fitz! I’m not young anymore (50+). I’m drawn to the bancassurance products of banks. They’re one time payment of as low as 100,000 pesos, and in five years, drpending on which fund you chose to place them, can earn at least 6-7% to at most 20+%. But these are also VULs. I have a lot of catching up to do to study investing in mutuals/uitf. Is it ok to place some of my savings there? Btw, i already have an emergency fund.
Great article, but I would advise younger folks to buy a duplex of a 4-plex. I just wrote a post on how to get your real estate funded and I speak to multifamily housing.
I totally agree with your article here. It’s easy to list down investment options where you can invest your money but the question is, for young professionals, where are they going to get the money?
I personally invest on books and businesses that are low risk capital and that’s where I get my multiple streams of income that I am able to use to invest in real estate and stocks which are my personal choice for investment options.
OMG. Why did I have to read this post now?!?!
Like Lester, I had been depositing to a life insurance (SunLife Flexilink, to be exact, which is a VUL). But unlike him, I had been depositing for 6 years already (since 2008 pa).
Reading your post Sir Fitz made me really worrisome so I contacted SunLife right away and asked them questions.
There are three things which “annoyed” me.
1.) The things the sales agent told me to buy the policy were not 100% true. (Or should I say, I wasn’t just really listening and studying enough before I bought the plan.) The sad part is I can’t find her now. So I might as well ask another agent for this.
2.) As far as I knew back then, since VULs have an investment component, I would be entitled to dividends later on. But according to the email SunLife sent me, “VULs do not earn dividends”. (So what happened to the investment component?)
3.) Another case of misinformation (or lack of comprehension) on my part, is the time for the plan to mature. I was just shocked that it will mature when I turn 88! I didn’t remember that being told to me. Okay, it’s a life insurance so that is probably understandable. But since I am more knowledgeable now and thanks really to this post, I know where to put my money instead.
As of the moment, I am requesting SunLife if I can change my Life Insurance to a Retirement package instead. Or would you recommend another plan Sir Fitz so that I can use it while I am still alive, say 40, 50 or 60 years old?
If my request can’t be granted, I might as well cancel my VUL plan and withdraw my money instead. (Hopefully, this works too).
Thanks for the advice! I will now cancel my VUL with SunLife.
I agree with you Sir Fitz. Your advise is comprehensive which is a must to young individuals and late bloomers. No matter how hard we try in making money but if we lack financial literacy, nothing good will happen. Everyone has his/her own streams in making an income and having the right knowledge in managing your hard earned money is a big big must. Just speaking from my experience at the age of 50, my only regret is – – if I should have stumbled upon this wake up site of Ready To Be Rich a long time ago (wala pa eh.)., maybe I’m already enjoying the so-called financial freedom. Well, it’s not yet too late, I’m still ready to be rich.
You rock, Sir Fitz!
What is the difference between actively managed fund & passively managed fund.
I don’t understand between the two.
I have a uitf at bpi ( bpi Philippine equity index fund) now i am looking at onother investment from bpi also, it is called bpi Philippine high dividend equity fund.
Which is better from the two? It says that the bpi phil equity index is passively managed fund & the bpi phil high dividend equity fund is actively managed fund.
Thank you, i am your avid reader and learn a lot from your blogs.
By the way, i am a 43 years old employee, trying to save for my retirement
Same with you, Raymond. When i get my plan at grepalife, my agent told me that the paying period is 20 years after that i will wait until my 60 years old to redeem my plan, i been paying 17 years religiously. (3 or 4 years way back grefa and sunlife merge.) Last month after paying my premium i ask one of the personnel how long i will gonna pay my plan, in my mind i only have 3 years left. And i was shock what she told me: i will pay until 2046 (75 years old) to get my plan matured, how i am able to pay my premium when i am already a retired senior citizen by 2031. It really sucks, i surrendered my plan after seeking advice from different people. I lost 17 years and lost lots of money. I didnt got the whole payment i made, i only got â…” of it.
Hi po! Maganda po ba un Kaisen ng IMG? Thanks
Hi. What do you mean sir by the excess premium in sunlife VUL. Thanks for comparing VUL and term insurance. I haven’t really decided yet but its good to know other options than VUL.
Excellent discussion between Charmaine and Mr Fitz. I always run from any insurance linked investments. You have to ask yourself how the “advisor “get paid. Many mutual funds have exceedingly high sales loads. Why on earth put that money into a salesman’s pocket? I do like the concept of term life and put the savings into investments. There is a BIG BUT here. Put those savings into investments that YOU have carefully chosen. Educate yourself on low cost mutual funds or even better ETFs (Exchange Traded Funds) with low expense ratios. The very best thing to do would be own individual high quality stocks once you do your research.
To Eva, this response is way too late to help her but for others in the same situation: What about contract law? Has anyone taken these dishonest institutions to task and brought them to court for breach of contract? I think many big companies get away with near murder only because ” the little guy ” feels so powerless against these giants.
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