From 'MU' to 'MF'

What is a Mutual Fund?

It is a type of investment wherein you join other investors and corporations to form a massive fund which will be handled by an expert/professional who is called fund manager for diversified portfolios of stocks, bonds, securities, money markets and other mutual funds.

Things are mutual just like a budding love and relationship. Are you familiar with MU (a.k.a. Mutual Understanding?) After you get to know each other and fell in love with MF, you still need to get to know MF and trust MF. Since you have a mutual bond, when the fund incurred loss, you incur loss too and when it incurred profit, you incur profit. Either way, you still invest.

Mutual Fund is like riding a bike with your lover. He/She drives and you just hug him/her as you journey along… You are going somewhere and obviously you just let him/her drive till you both reached the destination. Like a Mutual Fund, you let the Fund Manager drive his way and execute strategies to make your fund grow and maximize earning potential until you reap profit on your target period.

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Critical Illness Benefit discussed

The danger that lurks in your Heart.

What is a CRITICAL ILLNESS RIDER?

Critical Illness health plan is something that could be taken along with your life insurance or a variable investment product as a rider. It is just an extra premium along with your regular plans. It pays a lump-sum money in case of a diagnosis of any Critical Illness stated in the policy. Some examples of diseases covered are: Cancer, Stroke, Heart Attack, Renal Failure, and 30+ more dread diseases you don’t want to have.

So how does it completes a financial plan?

Imagine this:
When you get sick, (critically ill?) What happens to your life insurance/retirement plans? Can you still afford the premium?

Can you still continue to invest? Or you now need to liquidate all your investments to help you with your treatment?

The bottom line here is. If you think the above story will NOT happen to you and you will live a long, healthy life? Think again. According to statistics, 90% of Filipinos (that is 9 out of 10) have 1 or more risk factor for the number 1 Disease of Filipino: (Cardiovascular Disease):

- Smoking
- Drinking Alcohol
- Have High Cholesterol
- Inactivity (No exercise)
- Have High blood pressure
- Have Diabetes



Do you have 1 or more risk factor from above? If yes, then better check if your plans- does it have a critical illness rider attached to it? If there is, is the amount would be enough if in case you will be diagnosed with any dread disease in the future?



“A Single hospital bill can wipe out years of saving.”

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Which is better, Time Deposit of Mutual Fund?

We Filipinos have a common notion when it comes to saving money: keep it in a savings or time deposit account. We usually set aside a portion of our income, just let it sit there, and access the money when we need it.

Putting our money in time deposits gives us a sense of security, knowing that there's a fund that we can dip into for household needs and emergencies. But should we be happy and content with the interest that we're getting from our time deposit account?
If we want to grow our money, we need to complement it with a long-term financial instrument such as mutual funds. These could boost our money’s value and help address long-term goals (usually 3 years or more) such as funding for retirement, education, a dream vacation or even a business idea.

This is where the practice of diversifying comes in. We can have our time deposit account for immediate or short-term needs (usually 6 months to 1 year), and we can have another basket taking care of our money for the future.

The latter not only ensures that our money’s value is growing at a good rate; it also helps us combat inflation, or the general increase in prices of commodities and services.

A lot of us keep our money in a time deposit because it's "safe." The amount that we put in remains intact and the interest is guaranteed. Think again. There's a silent thief called inflation that slowly depletes the value of money over time. So if a time deposit gives 1% annual interest and the inflation rate is 3%* this means that the real value of money actually shrinks by 2%.

If we’re looking to beat inflation and at the same time be financially prepared for the future, then it’s high time to re-allocate a portion of savings or time deposit to invest in mutual funds.

So which is better between the two? The answer is we need both - time deposits for immediate expenses and short-term needs; and mutual funds for long-term goals. Each has a different objective and time frame.

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No Spend Day

Have you heard of this: "NO SPEND DAY" ?

 

This is a tip where you should set at least 1 day in a week to NEVER spend (or at least only your basics like transportation and food). Do you think you could do it? Technically, even if you don’t open your wallet, you’re still spending money on things like rent, subscriptions, and gifts — you just didn’t count them. But that’s even more of a reason to create a “No spending” day on the money in your wallet: because you can actively control it.

Take this scenario: if you use a car to go to work everyday, try gassing up your mobil at Sunday. As well as hitting the grocery for a week's worth. And then starting Monday till Friday, dedicate at least one day where you don't have to spend any of the peso in your wallet.

It might sound challenging but if somehow you managed to have a control on your spending habit in that particular day, you will know to yourself that you can actually save more the next time you will go to a grocery. And from that, you will worry lesser since you have the savings you'll need to pay for bigger bills at the end of the month like water, electricity, and even your life insurance.

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Ways to Prepare for Retirement

Putting money away for retirement is a habit we can all live with. Remember…Saving Matters!

1. Start saving, keep saving, and stick to your goals
If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you're not saving, it's time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it's never too early or too late to start saving.

2. Know your retirement needs
Retirement is expensive. Experts estimate that you will need at least 70 percent of your preretirement income – lower earners, 90 percent or more – to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead.

3. Consider basic investment principles
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you'll have saved at retirement. Know how your savings or insurance plan is invested. Learn about your plan's investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.

4. Don't touch your retirement savings
If you withdraw your retirement savings now, you'll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to your new employer's plan, or save them in an insurance policy or mutual funds.

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