Where and How Much Should You Invest? A Simple Formula for Creating Your Portfolio

Updated: August 21, 2023

“I have extra money; where should I invest it?” asked a friend of mine.

“Wherever you want, as long as you know how that investment works,” I answered.

“But I don’t know anything about investing; that’s why I’m asking you,” he replied.

“Then I guess you should invest in yourself. Buy books, attend seminars, and read about investing online. Invest in learning about investing.”

“Come on. Be serious.”

“But I am serious,” I replied. “If you buy me dinner, I’ll give you a beginner’s crash course on investing.”

He fell silent. He was contemplating. And after a few seconds, he agreed.

“Good decision,” I exclaimed. “You just made your first investment.”


I know what you’re thinking. I just scored a free dinner. Ha! You’re absolutely right!

However, I did give my friend a crash course on investing and how to create his first portfolio.

Are you curious about what I taught him? Then read on, and there will be no need to buy me dinner for this. 😛

Before You Invest

A few things are required before you start investing. These are non-negotiable.

In my opinion, if you haven’t done these yet, then you shouldn’t really invest:

  • You spend less than what you earn every month.
  • Saved up for an emergency fund.
  • You have health insurance.
  • For breadwinners: you have life insurance.

Making money from investments, especially risky ones, takes time.

If you can’t live below your means, and if you don’t have an emergency fund — then you’re at risk of needing to liquidate your assets when their value is low.

Medical emergencies and other unexpected events can happen, too. That’s why you need health coverage and life insurance. It’s for the financial benefit of you and your loved ones, just in case something happens.

So, assuming that you’re able to pass these requirements. What’s next?

It’s time to have some fun with your money. 😀

The 30-Day Time Deposit
Your emergency fund is a substantial amount of money, and there’s no reason why you can’t invest it. However, you can’t afford to lose any of it, so the best place for that is a zero-risk time deposit.

I recommend half of your emergency fund be put in a 30-day time deposit. That way, it’s earning interest higher than a regular savings account, yet easily accessible when you need it.

Stocks, Bonds, and The Money Market
How does the stock market work? What are bonds? What is the money market? Mutual funds? UITFs?

If you don’t know the answers to these questions, then you should invest in learning about them first. You don’t have to be an expert, but you must understand them at the very least.

My rule of thumb is: “If you don’t know how it works, then you can’t invest in it.”


The Age Formula

Now it’s time to use what I call “the age formula.”

I can’t remember where I got this, but I’ve always believed it’s a good rule to follow. This formula will tell you how much percentage of your money should be invested in low, moderate, and high-risk investments.

The formula is simple, and the rules are:

  • Invest half your age in low-risk investments.
  • Invest half in moderate-risk investments.
  • For the rest, invest in high-risk investments.

So assuming you’re 30 years old and you have P100,000 to invest (your emergency fund is NOT included here). Then your portfolio will look like this:

  • 30 / 2 = 15% or P15,000 should be in low-risk investments such as government bonds, treasury bills, etc.
  • 50% or P50,000 should be in moderate-risk investments such as mutual funds, blue-chip stocks, etc.
  • 100 – (15 + 50) = 35% or P35,000 should be in high-risk investments such as speculative stocks, forex, etc.

And that’s it! You have now created your very first diversified and well-balanced portfolio.

As you can see, the younger you are, the more high-risk investments that you have. This is because it is assumed that you have more time to ride the market through bad times and you have more active income potential to recover from losses.

I hope this post helps you in your investment decisions and portfolio allocation.

Do remember, though, that the best way to design your portfolio is to tie your investments to a concrete financial goal.

Do you have more time? Then read this next: A Beginner’s Guide To Investing in Anything and Everything.

What to do next: Click here to start your financial journey with IMG Wealth Academy


  1. Very good insight bro!!! I like the formula you created…ako medyo takot ako sa mga high and moderate risk investment but I started my high risk investment recently…medyo bagsak pa sya ngayon but I know in due time tataas din un all I need is patience =D

  2. Very Nice and clear article, Sir — easy to understand!

    I’m reading your article as often as possible, I was wondering if there is a way you could compile them into an ebook(pdf) format? Your blog is highly commendable, I’ve actually invite my friends to this site so they can as well learn a lot just like I did.

    Keep up and God Bless!


  3. thank you for this great article Sir Fitz…
    although wala pa akong emergency fund, at least i now have ideas
    once i got those 2 required things…thanks

  4. Hi Fritz, don’t forget to invest in a life insurance plan with critical illness coverage and total and permanent disability coverage too. This is especially crucial when you are just starting to save and invest. If you’ve been saving P10,000 a month in stocks and bonds and you’ve saved up for a year, you’ll now have P120,000 plus any increase in stock prices. You do this for three years, so now you have around P360,000 plus all the stock price increases.

    Now, suppose you get diagnosed with cancer, where would you get money for your medical treatment? You have no other savings but your stocks or bonds or UITF, so you sell these just so you have funds for medical treatment. Your P360,000 vanish quite quickly. In fact, you’ll be in debt quite soon thereafter.

    However, if you had critical illness coverage, your plan would have given you funds for your cancer treatment WITHOUT touching your other investments in stocks or bonds or UITF. Six-months worth of emergency funds can only go so far if you get hit with a major, life-threatening illness.

  5. Hi Willeus, you’re absolutely right. Getting proper protection through insurance should be part of anyone’s financial plan.

    As I’ve shown in my previous post, Steps to Financial Peace, it is indeed an important aspect that one should consider.

    Building your investment portfolio is just one part of the whole personal finance scenario, it particularly just refers to building long-term savings.

    Discounting insurance, as well as estate preservation, will definitely lead to a financial disaster in the future.

    Thank you for your insightful comment and lastly, I would like to invite you to submit a guest post here to share more of your thoughts regarding life insurance and why should people get one today.

    I would very much love to hear more about this topic from an insurance professional like you.

  6. I learn your blog from a friend who were doing investments from quite some time. I found it very interesting and informative. i also wish i could start investing ASAP, but as you have said, i need to invest first in myself. Its true i really need to digest first how bond,mutual fund, stock, etc works before engaging into it.

  7. I am planning to open my BPI account and avail for the BPI short term fund. i am a newbie on this and i want short term at the moment. i appreciate if you could give me some piece of advice. Thanks

  8. There’s absolutely no reason why any individual investor should be in ForEx markets. They have zero net expected return and a ton of risk — only slightly better than a casino.

    The distinction between “speculative” or “high-risk” stock and “blue-chip” stock is tenuous at best as well.

    Here’s an even simpler, safer, and more profitable in the long run formula: 50% in bonds, 50% in lowest possible cost, most possible diversification index funds.

  9. This is my first time to hear about the Age formula. Sounds like a good plan. I’m going to try it. But I’ll modify my emergency fund to cover me for a year instead of 6 months.

  10. Hi Fritz,

    I’m really glad to stumble in your blog before I impulsively buy investments. I wanted to ask why a 30 day time deposit and not 1 year time deposit or even 5 years? Wouldn’t the long term give you a higher interest unless I’m mistaken. Thank you. 🙂

  11. Hi kumirei,

    Getting a 1 year or longer term time deposit would freeze your money too long, earning only meager interest, which to my knowledge, at best, would be around 5% per annum.

    A moderate-risk investment, like a balanced fund, historically earns at least 8% per annum, and you have the freedom to redeem your investment anytime without paying any pre-termination fees (holding period for these investments are just 30 days).

    A time deposit is a great place to park your emergency fund, that’s why a 30-day term is my suggestion, so you can have access to it if you need it.

    But for money which you can afford not to touch for at least a year (which is not part of your emergency fund), then it will earn more in an investment such as UITF or mutual funds.

  12. Good day Sir Fitz!

    I am very thankful I was able to see yiur blog last month. I almost read and backtracked reading the past articles that you wrote. Those articles were all helpful specially to newbies like me entering the Stock Market. Had started on MFs last year and added also this year.

    I am on continues learning process now and I am always looking for investments that I can afford to maintain since I am not yet able to do handson business.

    I am sharing what I read and learn from your insights/articles to my colleagues, friends and relatives.

    Will always visit and support your blog Sir.

    Again, thank you and Godspeed!!! 😉

  13. Hi Fritz,

    What if I don’t have bulk of money like 100,000 as for your example? I can only invest amount of money per month using my salary.

  14. Hi Jed. You start by investing in low-risk investments. When that reaches P15,000; then you move on to moderate-risk ones, then high-risk ones. And before you know it, you have P100,000 invested and properly diversified.

    Just repeat and/or adjust to how much you can afford to invest.

  15. Hi Fitz, would real estate, gold, precious metals, and/or bitcoin as investment vehicles fall under high risk ?

  16. @D yes, they all fall under high risk. Among them, real estate is the one that you have better control. And it would normally have lower risk through time because property values are more likely to appreciate after many years.

  17. Excellent way to think about proper diversification. I do wonder how, at my age (now 66) I should be thinking about the balance of investing in our local Philippine business ventures and my other activities such as the US stock & options markets.

    For the most part, investing in the start-up of each new business my wife developed had me filling the roll of “venture capitalist” while my beautiful bride and our attorney/tax advisor did almost all of the leg work. For me, the investments I make in my wife’s ventures will yield passive income along with the return of my capital. I really do very little beyond provide the capital and offer occasional guidance where I have some technical expertise.

    I am not sure how many people consider investment of their capital in a portfolio of family business ventures as a true investment. I think a lot of folks feel they are just buying themselves a job. Maybe on this one I have to tell myself, “different strokes for different folks?”

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