When it comes to finances, it has been said to spend what is left after setting aside money as savings.
Saving is an important first step. But for many people, building long-term wealth may require investing. The question is: how do you begin?
Before investing, establish a financial buffer. An emergency fund may help cover unexpected expenses such as medical bills, job loss, or urgent repairs without forcing the sale of investments at an unfavorable time.
Those who are single should consider setting aside six to 12 months’ worth of living expenses. Meanwhile, those with families or variable income should consider targeting 12 months to 2 years.
Investing begins with understanding what the money is for. Different goals require different strategies.
Short-term objectives such as purchasing a vehicle or funding a child's tuition may call for more conservative investments. Longer-term goals such as retirement or wealth transfer can possibly tolerate greater market fluctuations.
Consider three questions:
Related Article: Here is where money market funds fit in your portfolio
A benchmark gives a reference for evaluating investment performance.
For Philippine equities, the Philippine Stock Exchange Index (PSEi) is often used. For fixed income, investors may compare performance against government bond indices or prevailing deposit rates.
The objective is not necessarily to outperform every year, but to assess whether a portfolio is helping achieve its intended goals.
Numerous studies suggest that asset allocation is one of the most important drivers of long-term investment results.
Rather than concentrating on a single asset class, investors may opt to spread capital across different investments such as:
The right mix depends on an investor's objectives, time horizon, and risk tolerance.
Once an asset allocation framework is set, the next step is identifying suitable investments within each category.
Investors may consider factors such as:
The goal is not simply finding the investment with the highest return potential but building a portfolio that works together. Always thoroughly research potential investments, understand the risks involved, and consider reaching out to licensed finance professionals for guidance and insights.
Investing is not a one-time activity. Financial markets move, asset values change, and personal circumstances evolve.
Periodic reviews may help ensure that a portfolio remains aligned with one’s objectives.
Rebalancing may involve reducing exposure to assets that have grown too large and increasing allocations to those that have become underrepresented.
Insurance is often viewed as an expense, but it may also serve as a safety net. Health insurance, in particular, may help protect investments from being liquidated to cover unexpected medical expenses.
Insurance may also provide investors with greater confidence to pursue long-term investment opportunities while reducing the risk of large out-of-pocket expenses.
The journey from saving to investing involves preparation, discipline, and having a clear plan. The earlier these habits are formed, the more time wealth has to grow.
[Grow and diversify your wealth with investment solutions that match your financial goals. Speak with your Metrobank Relationship Manager, Wealth Specialist, or Markets Sales Representative—or invest conveniently via Wealth Manager or UITF Online on the Metrobank App or Online site.]
ANNA DOMINIQUE CUDIA, MBA, CSS, oversees Metrobank’s Macro Research Department, steering macroeconomic and financial market analyses for clients. She previously led the Markets Research Department of Metrobank’s Trust Banking Group and was part of Investor Relations, supporting multi-billion peso and US dollar capital-raising initiatives. She holds an MBA in Finance, with distinction, from the University of London, and industry certifications in finance. Outside of work, she enjoys travel and exploring new perspectives.
