BEST INVESTMENTS FOR MILLENNIALS AND STUDENTS | Tier List Ranking of Investments for Yuppies
Hello everyone! Today I'm ranking and putting into a tier list common investment options. I'm going to be generalizing a very complex and broad topic so I'll have to set the context properly. When making this list, I had in mind the average millennial - this would be students who are about to graduate university and about to join the workforce, as well as yuppies, young professionals who are a few years into their careers. What we're also talking about here is the average transaction. What is it like for everyone?
Of course everything here done right and with the right amount of luck will yield to outperformance. But what does it really look like for the typical investor? I'm going to use five criteria to evaluate these investment options. The first one being the earning potential, how fast and how much of a return are we expecting? Number two which isn’t as talked about but goes hand in hand with the first one is the amount of risk you are accepting whenever you sign up for an investment opportunity. How much of your initial investment are you risking to lose? Number three is barrier to entry. How easy is the
investment outlet to be understood? (Especially for someone who doesn't know a single thing about it.) How easy is it to sign up for? Do you have to go to a particular office? Or can you just stay at home and sign up online? Number four is resource intensiveness. How much time of the day are you going to need to be able to do this successfully? Do you have to spend one hour, two hours of your day looking at your portfolio and managing it? Or is it something that you can just buy one time and then just wait a few years and then collect your returns? Number five is a bit similar, it's the convenience factor. How easy is it to manage this investment? How easy is it to withdraw from your investment? Do you have to call someone over landline? Do you have to email someone? Do you have to go to an office? Or can you just go through an app in your phone and click a few things and then you'll be able to manage, and if need be, withdraw from your investments. When I thought of this video concept, I thought to add this item as a bonus one. But I thought hey, this is actually the most important one so let's put it at first. This would be
investing in yourself or in a knowledge or a particular skill. Without rambling on too much, I will give it this score. And give it a top tier rank of SS (Super Sugoi!) or double S. Let's start with the most tangible investment which is real estate. I've sub-categorized this into three (four actually) with the first one including lots - residential and farm lots, as well as those with houses built in them. I think this is a pretty good and solid investment
outlet but in terms of return it pretty much just preserves capital. Of course if you are investing in an area which is being developed then that will have a chance to outperform. But probably you'll be waiting a lot of years before you are able to reap the reward. In terms of risk land banking isn't really very risky because land is land. There is a limited resource of land and I don't really see anyone selling land at a price lower than they had acquired it. Unless you know,
there's an emergency. In terms of barrier to entry, I would give this a lower score mainly because you would need a lot of capital. Researching for investment opportunities and prices in the real estate, it's not that easy. Residential deals, unlike in the US, aren't publicly available here in the Philippines. Of course you can benchmark against those listed in Facebook Marketplace and Carousell but I find that it's not really that accurate. You would
still have to go out and really ask the residents of that area what the going rate is. It's also not as easy to purchase real estate. You would really have to go out and meet a person. In terms of resource intensiveness, I would also give this a median score. The good thing about real estate is once you’ve purchased it all you have to do is wait. That's it. You don't have to do anything. That's why it's actually called a parking facility. In terms of convenience factor, unless
you have a broker, then it's not that convenient. Everything is still paper-based and there's no app to manage your real estate development. There's also no ready resource which will tell you how much really is the market value of your property. With this, I’m giving this category a rank of A. Number two subcategory is condos. Condos, I think are the most popular real estate investments for
millennials as well as OFWs. I myself am paying for two condos, one in Pasig and the other one in Quezon City. In terms of earning potential, I don't think it's that great. I've been asking around and also been doing my research. My goal once the condos have been turned over, is for the rental income there to fully pay for the amortization. So far my calculations are still
off. Well, that's okay. I just convinced myself that even if the rental income is not enough to pay for the entire amortization, then I could just add on to that, and then eventually, I would still own the place. Still, the ideal scenario is for the entire rent to pay for the bank amortization. I think there’s an oversupply of condos. And with what has happened in the world, there's an exodus. The main business districts are being decongested. The growth here might slow down.
Generally, I think condos are overpriced. I mean you're going to pay five to six million for a one bedroom, two bedrooms. That's a mansion in the province. The reason why I bought a condo is I had no choice. I can't really buy (afford) a lot here in Metro Manila. And I'm not from here.
I'm from the province. I thought to myself why would I consider moving to Cavite or Antipolo? I don't know anyone there. I might as well just bite the bullet and stay here in Metro Manila. Anyway, we have our house in the province. But if you are someone who is from the vicinity areas within
Metro Manila, say Marikina, Antipolo or Cavite. Then you could still opt for land there. I'm looking at the lots there which are the same price as the condo I bought and I'm thinking you know this is like a whole house and lot already. Meanwhile, I only have a condo. In terms of risk, this would have the same risks as the first subcategory. In terms of barrier to entry, I think this would be a little simpler because there are a lot of condo sales agents who are ready to assist.
Condo prices are posted online and those who are reselling their condos would also have their prices set online. Since it's a bit more competitive, the prices listed are a bit more accurate - because it's benchmarked against the developer set prices. Barrier to entry is a bit similar, you would also need a larger capital or at least a large down payment. In terms of resource intensiveness, pretty similar, but again all you have to do here is look for the property and then once you’ve decided on it, you'll have to pay and pay and pay and wait for it. If you are looking at it as a possible rental income source, then that will entail more work once the property has been turned over. But if it's like a buy and sell situation,
then that should be a bit simpler. In terms of convenience, it’s not that convenient. I mean, I have an online portal which I look at just to check if the payments I’ve made every month goes through. But other than that, with anything that you want to do, you'll have to go to their office, you'll have to talk to someone, or call someone. It's
not as easy as clicking a few buttons in your phone. I'm giving condos a grade of B. The third subcategory is foreclosed properties. These are properties which have been repossessed by the bank and is now being resold. Done right, investing in foreclosed properties can give you more of an edge in terms of earning potential. Banks would want to offload these assets. In terms of risk, there's also a bigger risk. There are a lot of things that need to checked before
purchasing a foreclosed property because someone has already lived there. In terms of barrier to entry, this would be similar to other real estate. You would need a larger capital. The institutions which are selling these foreclosed properties would help you in purchasing but there is still a lot of paperwork involved when investing in foreclosed properties. There's also
a lot of research that come with investigating a foreclosed property to check if it's being sold at a discount. After all that, you would also probably have to spend time and money in having the place renovated because again, someone has lived there. And you wouldn’t want that to be obvious. In terms of convenience, it's not that convenient. You would need to sign a lot of papers and talk to contractors and lawyers or notaries. Investing in foreclosed properties take a lot of work but if done right I think it could yield you a good return. I'm giving it a rank of S.
There is actually a fourth category and this would be commercial lots or commercial properties or even apartment complex. To have a commercial property is a goal of mine, hopefully I’ll be able to achieve it in the future. I think this is very similar in investing in foreclosed property. You would really have to put the investment mindset, investment hat on. The only difference is this would take more capital. In terms of earning potential there's more, but in terms of risk there's also more. In terms of resource intensiveness, it would also entail more because there's a whole new regulation set when it comes to dealing with commercial properties.
When it comes to convenience factor, I don't think it's very convenient at all especially when you are just starting out. Maybe if you're a few years into managing your commercial property, it will be easier. But when you are just starting out, it would be like a business, which you are also propping up. It will take a lot of grinding for you to set it up properly.
For these reasons, I'm going to give commercial properties or apartment complexes a rank of S. I've actually already alluded to the second type of investments that we are going to talk about. This would be setting up your own business. Rental condos, foreclosed properties and commercial properties would actually be similar to running a business. Setting up your own business
would really have a very good earning potential simply because you are setting the prices. Now would people be buying from you? That's another question. In terms of risk, a business would also have a very high amount of risk attached to it but this is something that you can manage on your end.
In terms of barrier to entry, this would depend on the type of business which you are starting so I'll just give it a median score. In terms of resource intensiveness, now, this is something that you will have to understand and commit to. Starting your own business is not going to be easy. Are you tired of doing overtimes? Try starting your own business, then you would have to be turned on 24/7. In terms of convenience factor, it's going to be very similar, it's not going to be convenient. Especially at the start,
you are probably doing everything on your own. You might also be still studying or still working and would have to juggle and balance those two aspects. I'm going to give starting your own business a top-tier ranking of S+ because I think it's very rewarding to start and succeed in your own business. The main drawback is the resource intensiveness aspect of it but if you are able to overcome this I think it's really very rewarding and fulfilling. The next investment outlet is Crowdfunding or Angel Investing. This is for people who would want to own a more tangible business but don't really have the time or capacity to start their own.
Of course you wouldn't earn as much as you would had you started the business by yourself. But the good thing about angel investing or crowdfunding is that you have someone else managing the business for you. In terms of convenience, I think it's a bit more convenient to start, especially since there's a lot of platform that caters to angel investing and crowdfunding these days. I think there's also a considerable risk especially when it comes to crowdfunding simply because it's a very new concept. I'm not even sure if it's really clearly covered by the
current laws that we have. Initial investment capital would depend on the setup but typically I've seen for as low as twenty thousand to fifty thousand, a hundred thousand pesos, you could already be a co-investor in a business. In terms of convenience factor, I don't think it's that convenient yet. I've had an experience in angel investing in a café and whenever I
have to ask about the current financials, I had to email someone and they had to email me back manually. It's not that instant. For this, I'm going to give angel investing a score of A-. The next outlet we're going to discuss is direct bonds investing. Bonds are basically debt instruments. Utang (loan). These are government debts for project funding, say, they want to build new infrastructure - a bridge or a new toll way. Or of corporations, say a corporation wants to open a new mall, or a new venture. They have the option to
issue bonds to source capital for that new venture. In terms of earning potential and risk, bonds tend to generally be classified as having more moderate earning potential, but also more moderate risks, especially when compared against stocks or equities. It’s fairly easy now for the average millennial to buy a bond on their own. Upcoming issuance are announced online and then once it's ready for purchase you can just go to your bank and ask for it. You would then have to fill out an application form and then that's it, you'll be able to buy the bond that you want. This is what I did when I bought my bond a couple of
years ago. Bond rates now are a bit low. There is a lot of buzz around Premyo Bonds but I think the interest rates are very low. But if you are someone who is interested in that, then please, by all means. I was able to buy a bond a few years ago and I think the return on that was around five
to six percent. The principal for that is about to be released by June next year. In the past, typical bond initial subscription prices I’ve seen were around 50,000 pesos but now for as low as 500 pesos you could already own a Premyo Bond. It has a very good point on resource intensiveness, a lot of the information you would need is available online. All you have to do is decide
whether the bond issuer is a trustworthy debtor. Is this someone who is not going to default on their loan? For the bond I have, they release quarterly coupons directly credited to my bank account. They also share quarterly statement of accounts which I receive in the mail. It's pretty easy to manage and because of this I'm going to give bonds a top-tier score of S. The next outlet we we have is cooperatives. I love cooperatives. In terms of return, I think it’s very similar to either a bond or a bond fund. But it would usually have a lower minimum initial
investment requirement. It would depend from one cooperative to another, but generally how it works is the cooperative will have a loan structure for their members. Those availing the loan would have to pay interest. This interest is redistributed to everyone who is invested in the cooperative. Aside
from this, most cooperatives would also have its own main business. The cooperative I'm with is the provider of the food in our pantry in the office. The good thing about this is you would also have certain perks when you are a member. Whenever I buy food from our office pantry, I also get a rebate from the purchases I make. In terms of returns, at least for the cooperative I'm with,
I really like the returns that they have posted in the past. It's very comparable to a very good bond, averaging at around six to eight percent per annum. It's also very convenient for me to to invest in the cooperative because it's tied up with the company I'm with. Investments every month is through salary deduction. My cooperative also shares statement of accounts, every so often, I think just once a year. But it's okay for me because I don't really like to be reminded of my
investments in the cooperative. When it comes to redemptions it's fairly simple, I would just have to email the HR in our company if I want to redeem and then they would directly credit it to my bank account. Everything was paper-based when I signed up for that cooperative and I suspect that most cooperatives would also still have a paper-based system. With this I'm giving cooperatives a tier score of S. The next outlet is stocks. Stocks are equities or share ownerships in company. If you find this too technical it basically means that you are a kasosyo (partner) of these big corporations. It's similar to Angel Investing and Crowdfunding but has a more formal and recognized setup.
The way you earn from stocks is through capital appreciation or through earning of dividends. We can discuss this more in detail in another video. In terms of earning potential, stocks would tend to outperform all other asset classes, especially over the long term. However, it is more volatile in the short term. There's a difference between stock investing and trading. Trading is more of speculating, I don't really classify it as investing. Right now it's really very popular and there's a particular market for that. Stocks would tend to be more volatile especially
in the short term so it's not really for short-term investors. With the advent of online brokers, investing in stocks has been democratized so much. For as low as 5,000 to 10,000 pesos you can already invest in a stock. It's also easy to monitor, you can actually see the real-time market value of your stock investments from an app or from your computer. In terms of research intensiveness, if you really want to research on a stock then it could a toll on you because there's a lot of material available. You may want to to go through it one by one, personally. I don't
think it's really that worth it to spend a whole lot of time researching into stocks especially if you are just investing a small amount. With this I’m also giving stocks a rank of S. The next investment outlet which we are going to discuss are high interest savings accounts. They usually come in the form of digital banks – your CIMBs, INGs, and GSaves. They are very popular right now. In terms of return, of course it would be more sober because they are still savings accounts. A lot of them have four percent promos right now and that would net you a return
of 3.2 percent per annum. I expect that after some time these promo interest rates would go down, maybe to 2 to 2.5%. In terms of risk, it's also very low risk. The good thing about it is if you are putting in within 500,000 they are PDIC insured. They have a very low initial investment or initial savings account requirement. For us low as 100 pesos or even 1 peso you may already open an account. It's also very convenient. All you need is an app or to sign up online and then you would have an account. I really like high interest savings
accounts and I initially gave it a top-tier rank of SS (Super Sugoi haha). But I thought about it and I don't think it’s really an investment outlet. It's more of a very good savings outlet. Talking about savings outlet, it's a double S. But in terms of investments, I don't think you would want to put your money here for the long term. It's more for capital preservation, maybe an
outlet where you could place your emergency fund. As an investment outlet, I'll give it an A. Let's tackle the next two very quickly. Very similar to high interest savings accounts, they would be time deposits and long-term negotiable certificate of deposits or LTNCDs (phew). Time deposits were very popular with our parents but I think it's very outdated now especially since we have these newer instruments. I don't like the lock-in aspect of time deposits, especially since
you don't really want to lock in something for a very long time with those interest rates. I mean, high interest savings accounts can give those rates and are already good for emergency funds. Why would you lock your emergency fund in time deposits? They don't even earn that much. With this I'm giving time deposits a score of B.
LTNCDs would usually have a higher interest rate but would also require a higher capital. It’s very similar to the last two and it’s also PDIC insured. Simply because of the generally higher interest rate, I'm giving it a better score of B+ or maybe A-. Let's get into pooled funds. This would be your mutual funds, UITFs, ETFs, and even P.E.R.A. How this works is it pools money from different investors, give it to a professional fund manager to manage, and the returns are redistributed to investors pro-rated based on their share of the fund. I've subdivided this into five categories, basing mainly on the type of assets it invests in.
The first pooled fund we're going to discuss is very similar to high interest savings accounts and it's also the most conservative type of mutual fund. It’s called money market fund. I really like money market funds because it's a very conservative product. Most money market funds would have a mandate for the fund never to have a down day. It would rather maintain its market value than risk losing money trying to grow. Money market funds are a good capital preservation tool. It's a good outlet to put your retirement pay as well as your emergency funds. These days it's also
very convenient to sign-up for a money market fund online. The minimum initial investment would range from 100 pesos to 1,000 pesos. It's also very easy to manage most asset management companies would have an app or an online platform where you can look at the current value of your investments. Money market funds are one of my favorite mutual funds and I really wanted to give this an SS rank. But it's not really an investment tool, more of a capital preservation tool as well as
a savings tool. With that, I'm going to give it a score of A. The next type of fund we're going to discuss is bond fund. Of course it invests in bonds. In terms of minimum initial investment, ease of application, as well as resource intensiveness, all of the mutual funds here would have a very similar situation. Let's focus on the earning potential as well as the risks. As mentioned bonds would have a lower risk attached to it
when compared against equities and bond funds and equity funds would follow a similar pattern. While bond funds would generally have a lower initial investment requirement, personally I would rather invest directly in bonds since these types of assets would have a medium horizon anyways. When investing in bond funds, part of your capital is paid as management fee to the fund manager. This would affect your overall returns. With this, I'm giving bond funds a score of A.
Let's talk about equity funds. Of course these funds invest in stock and they are actively managed. Meaning fund managers would have free reign on which stocks to invest in. Because these funds tend to have higher management fees, it typically hits the
overall return of the fund. Because of this, I'm going to give it a score of B The next one I’m going to discuss is called index funds. It's very similar to equity funds, the key difference however is it is a passively managed fund. It tracks a particular index and for
our case it probably will be the Philippine Stock Exchange Index (PSEi). I really like index funds. I believe it is perfect for young professionals or those who are just starting in their careers. It is very easy to track and manage. You don't even have to open an app to know how your fund is doing. All you have to do is turn on the telly or google the PSEi and if it's down then
you would know that your fund is down and if it's up then you would know that your fund is also up. Another good thing about index funds is since it's passively managed, it tends to charge a lower fee over equity funds. The lower fee structure produces more favorable returns for the fund especially over the long term. With this I'm going to give it a very high tier of double S or SS. The next type of fund is called balanced fund. It would invest both in bonds and equities
and try to shift based on the current market, whether to invest more in bonds or in equities. Very similar to equity funds, I find that balanced funds tend to have higher management fees which tend to hit the overall returns of the fund. I would also be giving balanced fund a rank of B. The next outlet is VULs or Variable Unit-Linked Insurances. This works very similarly to pooled funds but in reality it's an insurance with an investment component. I'm putting it here because it tends to be sold as an investment vehicle. But in reality, it's not. Again, it's an insurance with an investment component. VULs are convenience products
because it combines insurance with an investment component. Of course, it would also entail a convenience fee which comes in the form of higher management fees. One aspect I don't like about VULs is that you don't readily know how much of your premium goes into the fund. You don't really have a good gauge of how your investment is performing. I don't think VULs are the devil. I have a VUL myself and it serves a particular market. However, if you are someone who is looking to maximise their money it's not a very optimal product to start with.
Besides it's really not an investment product to begin with so I'm giving it a score of C. The next outlets we're going to discuss is government sponsored investment instruments. These are your MP2s as well as the SSS P.E.S.O. Fund. I have a Pag-IBIG MP2 and in terms of return, I think it has given a generally good return over the last few years. I don't know about this year,
with what's going on with the world right now, but in the past I think it's given a generally good return. In terms of risk, it is a government sponsored fund so there's lower risk when it comes to that aspect. It also has a very low initial investment requirement. I think my MP2 was only 500 pesos when I started. It's very good that it's more accessible for everyone. My personal experience signing up for the MP2 was I had to go to my Pag-IBIG branch.
There was a long line so I don't think it's that convenient. The good thing about it is you can sign-up for their online portal after the initial sign-up process. There you can view your account and make subsequent investments. You may also use tools like GCash. What I don't like about it though is there's a fee attached to adding to your investment.
I don't really like that extra fee. I haven't tried redeeming from my MP2 so I’m not that familiar with the process. I do hope that it's easy and you can just have the proceeds credited to your bank account. One thing I don't like about MP2 is the lock-in period. You will have to lock-in your investment for five years and for that particular rate of
return I think it's a bit low (for a 5-yr lock-in period). I'm going to give MP2 a score of A. Let’s talk about the SSS P.E.S.O. fund. I personally don't have an SSS P.E.S.O. fund but I've been looking at their prospectus. I think the return is a bit low. I suspect it's very
similar to the MP2 where you have to go to an SSS branch and fill out a form for the initial sign-up process. SSS also has their own online portal so hopefully investors are able to view it there. Returns-wise, Idon't think it's worth it. I'm going to give it a score of around B+ to A-. The next instruments I'm going to discuss are FOREX or Foreign Currency Exchange and Cryptocurrency trading. I don't think these are investment options. These are more speculative products. When it comes to returns, it would have a higher potential return especially over
a shorter period of time mainly because you are trading. On the flip side, when it comes to risk it would also have a very high risk attached to them. You can lose a very large amount of your capital within minutes or even seconds. When it comes to initial investment requirements, I think it's also democratized now. For as low as 1,000 to 10,000 pesos, you could already start.
When it comes to resource intensiveness, I think you'd really have to put in a lot of your time to be able to do this correctly. You would have to research on it because otherwise then you're just throwing away your money. In terms of convenience, I think it's also very convenient to do this. Everything is available online. I've been researching on it myself and one
thing I found interesting is that some setup would require you to have an external device, like a USB for you to save the Cryptocurrencies. There's really a lot of research that you would have to do to be able to get into this and do it properly. Again, strictly speaking, I don't think it's an investment outlet, it's more of a speculative instrument especially for millennials and young professionals. For this reason I'm going to give it an investment tier score of C. I think this has been a very long video. I've been trying to film this for a few days now. If you are interested in more personal finance, self-development and investing videos don't forget to subscribe to the channel. Please like this video and please also comment. Thank you. It helps me out a lot. That's it, bye!
2020-12-22 10:00
