Updated: March 28, 2022
What do you want to do this summer? Do you want a one-week vacation in Boracay?
What do you want to buy within the next few months? Do you want to buy a new smartphone? A new laptop?
What about next year, or two years from now? Do you want to buy a car? Start your own business? Pay that downpayment for your dream home?
It doesn’t matter what you want to do, or what you want to buy, as long as it’s happening in three years or less, then it’s considered a short-term goal.
And when it comes to short-term goals, these are the best investments where you can put your money in.
Savings Account
Yes, a savings account is technically an investment because it earns interest over time and always better than leaving your money under the mattress.
It’s a great place to put your money for your short-term goals because it’s almost zero risks, with bank closure and inflation as the only reason you’ll lose money (or the value of your money).
When should you invest in a savings account? When your goal is set to less than a year.
Where should you invest? At any financially stable commercial bank so that the risk of bank closure is almost negligible.
What type of savings account should you open? A passbook savings account is okay, but ask your bank if they have similar products that have better interest rates.
Short-Term Time Deposit Accounts
Time deposits are the most popular type of investment among Filipinos, in my observation.
Your money earns at higher interest rates than a savings account in exchange for some liquidity. But just like the former, time deposits are almost zero risks.
When should you invest in a short-term time deposit account? When your goal is set to 3 years or less.
Where should you invest?
Shop around and see which banks can offer you acceptable terms. If you’re looking for the highest interest rates, then rural banks will have the best offer, but understand that they are less stable than commercial banks.
What type of short-term time deposit account should you open?
It depends on your goal. If it’s less than a year, then I suggest a 90-day (or shorter) time deposit. If it’s more than a year, then you can go for the 6-month or annual term.
Low-Risk Pooled Funds
Pooled funds are either Unit Investment Trust Funds (UITF) or mutual funds.
Your money has the potential to earn higher than a time deposit account, but you’re already subject to possible losses if the market goes down by the time your goal deadline comes.
But historically, the value of units or shares in low-risk pooled funds rarely dip unless a massive financial crisis happens in the country.
So if the economy looks good, or even just “flat”, then low-risk pooled funds become a good investment choice in the short-term.
When should you invest in low-risk pooled funds? When your goal is set to 1 year or more.
Where should you invest? For UITFs, you can just go to any commercial bank. For mutual funds, go to any SEC-registered mutual fund company.
What type of low-risk pooled funds should you invest in? The most common types are the Money Market Fund, Fixed Income Fund, Government Securities Fund, and short-term Bond Funds.
There are many others, just ask the bank or the mutual fund company for their products with the most conservative risk profile.
Summary
If your investment objective is happening in 3 years or less, then the best investments are the three mentioned above.
Don’t put your money in the stock market and other investments with a moderate or high-risk profile because you might come up short when your goal is due (unless you’re willing to take the risk).
Always remember that low-risk investments are for your short-term goals, moderate-risk investments are for your medium-term goals (3-5 years), and high-risk investments are for your long-term goals (5 years or more).
Looking for a place to start? Here are some suggestions:
- BPI UITF: Short Term Fund
- BDO UITF: Peso Money Market Fund and Dollar Money Market Fund
- Sunlife Mutual Fund: Money Market Fund and Government Securities Fund
- For those in the armed forces and police service: AFPSLAI
Invest in knowledge, subscribe to Ready To Be Rich today.
What to do next: Click here to subscribe to our FREE newsletter.
———
Photo credit: SalFalko
Hi Fitz,
In the latter part of 2012, I tried investing in a fixed income mutual fund.i never really had a specific timeline in mind. I just invested with the thought of just leaving the money there for as long as possible.
It was fairly recently that i realized that i should’ve invested the money in a high risk mf Now that im pretty sure about not touching it for a long time.
I dont want to go through the hassle of pulling it out and moving it to a higher risk fund.
Anyway, aside from not being able to maximize the potential earnings if it sits in a low risk type of fund, what else could i be potentially missing?
Hi av,
You’re not missing anything else actually. My suggestion is to just allot the money in that fixed income mutual fund as part of your emergency fund.
For example, if your emergency fund is P100k, which is in a simple savings account; and you have P50k invested in the fixed income fund. Then you can withdraw P50k from your savings account and invest it somewhere else.
So now, 50% of your EF is in the savings account, and 50% is in the fixed income fund.
watching “on the money” with guest fitz villafuerte brought me here…
Hi Fitz,, im currently working here in japan and my goal is to save money until my contract ends…its my first time to work abroad and i dont know yet what to do with my savings..can you give me some advice where to invest my money?im planning to invest in mutual funds but i think i dont have enough information and knowlegde about it.which do you think is the best investment for the beginners like me?
Hi Helen. As always, the best investment is in knowledge. First, save up for an emergency fund, and then look for opportunities to learn about investing before you actually invest in them. There are many resources, books and possibly seminars you can attend to help you understand mutual funds, stock market and other investments.
Hi Fitz,
I need your advice, I’m planning to invest my savings at a high-risk (as you call it) investment where in it requires 5 years minimum placement but it will yield me a higher interest rate and the latter is reprising every month. Heard of the BDO’s Premium Flexi Earner? P100K is the total money I have and I am thinking of investing the whole amount to earn a higher interest since I won’t use it within 5 years. And considering that I’m just 17 years of age and still dependent on my parents and I don’t have regular expenditures. I also consider the idea of investing only the 50% so that I have 50K on hand waiting to be spent.
What do you suggest? I will invest my money entirely or just a partial of it?
@Kent, BDO Premium Flexi Earner is not a high-risk investment, it is a time deposit account, and therefore, a very low-risk investment.
If you’re very sure that you are financially capable of not touching the money for at least 5 years, then invest in the BDO Equity Fund UITF instead.
But if you’re not confident that you will not need the money in 5 years, then as you suggested, leave half in a savings account and invest half in the BDO Equity Fund UITF.
Hi sir i am saving up the money because we are planning to buy a house after a year is it best if i invest our house fund in a short term investment such as bpi or bdo? I dont want to take risk in equity as we would get the money after a year, also where can i buy your book? Thanks