Ask Your Advisor: First job, first investment

(Part 1 of 2) At a family gathering, I met with a relative by the name of “Lucy” (not her real name), a fresh graduate who recently got accepted into her first job. Lucy asked me for advice on how to manage and invest her salary.

The first thing I asked her to do was to open another bank account separate from her payroll. I personally maintain as much as only PHP 5,000 in my payroll ATM/debit card at any given time for security reasons, and then transfer the rest of my salary to the other account. It’s important to build an emergency fund that consists of six months’ worth of living expenses and this fund should be easily withdrawable.

Lucy doesn’t actually have to complete her emergency fund first before she can start investing. The good news is that investing has become so much more accessible in recent years. Products like the Unit Investment Trust Fund (UITF) pools clients’ money and invests them in a variety of financial instruments, immediately providing newbie investors with a diversified portfolio that is handled by a professional fund manager.

A money market fund, such as our Metro Money Market Fund, is one such product. This is a UITF that invests its clients’ pesos in a mix of time deposits and short-term Philippine government securities. It’s an appropriate product for conservative clients who are just starting to invest but may want a return that is potentially higher than regular deposit products.

The money market fund requires a minimum initial investment / maintaining balance of PHP 10,000 but can accept additional participation in increments of at least PHP 1,000. This means that Lucy can already allocate a couple thousand pesos every payday to this type of investment.

By staying invested, the underlying time deposits and government securities provide returns to the money market fund and its “price” or Net Asset Value Per Unit (NAVPU) increases. Lucy will only be able to realize her earnings after redeeming her investment. The recommended investment horizon for this fund is at least 30 days but she can redeem much earlier if she suddenly needs access to her money.

For those who have US dollars at their disposal, there are banks that offer dollar-denominated funds. For Metrobank, there is the Metro$ Money Market Fund. This can be a good product to park one’s excess dollars while planning for that next trip overseas. Clients can open one starting at USD 500 and add to the fund for as low as USD 100.

Money market funds are a good start for fresh graduates who want to get a head start in saving and investing. Stay tuned for Part 2 for more UITFs and how they can help diversify Lucy’s portfolio and provide potentially higher returns.

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EARL ANDREW “EA” AGUIRRE   is the Head of the Investment Counselor Department under the Financial Markets Sector of Metrobank. He has over 10 years of experience in foreign exchange, fixed income securities, and derivatives sales. He has a Master’s in Business Administration from the Ateneo Graduate School of Business. His interests include regularly traveling to Japan and learning its language and culture.