The P50M story

If I would win P50 million from the lottery, i'd probably retire from work and live on interest with my P50 million intact, stashed away in a time deposit.

But I do not have P50 million just yet, but I will, one day (claiming this in faith!). And I sure know I am ready for when that P50 million comes.

I read a blog over at Moneymatters about this story of a Chinese businessman who lives on interest from his P50 million investment and is yet to buy a house because he can afford to pay house rent at P85,000 monthly anyway.

Now isnt that both genius and stupid converging on one nerve.

If you have P50 million stashed away, your interest earnings for the next three months is enough to buy you a four-bedroom house. If you don't like that, a year of interest earnings from that P50 million will even allow you to buy a mansion.

But he'd rather rent, since nobody would know anyway if the house he had is his or not.

But you also have to give him credit for being wise enough to save up for the rainy day and P85,000 is just a fraction of at least P1.2 million he can possibly get from today's most conservative interest rate for a 30-day time deposit.

Perhaps this is one lesson we can learn about laddering certificates of deposit. I am happy that me and my husband are now trying to ladder our investments to increase our income streams. It is not yet P50 million worth, but at least, we are starting somewhere.

For a start, we have to learn the hardest part. Forego a chunk of what we have to a 30-day time deposit term and roll it over until it earns a substantial interest to be credited to our savings on a monthly basis.

As what most of my financial mentors say, liquidity is king nowadays. And we will be directing our investments to where it can be easily liquified or disposed of. And a house and lot is one of the more lucrative investments.

IS THIS A GOOD TIME TO INVEST?

As the global financial market continues to experience a downturn, would you think if it is a good time to invest while the market is volatile?

Based on my interview with Nishit Majmudar, president of Pru Life U.K., a time when there are financial uncertainties is always a good time to invest. Although human reason might tell us to hold on to our money, investing at a time when the market is down allows one to take advantage of low buying rates in the stock market.
Majmudar continued on to say that when people invest their resources, it must be for the long term. Otherwise, money invested in the short term will only bring back lower returns.

Besides, people can look forward to an upturn. It is just a wait and see situation right now as nobody really knows when actual market recovery can begin.

Another investment option that can be considered is by participating in a money market fund. Josefina Sulit, executive vice president of the Metropolitan Bank and Trust Company (Metrobank), said the money market fund is ideal for people who want “to minimize the risk on their capital while meeting their short term liquidity needs.”

So what does the money market fund do? It is like pooling the money of many investors into one big fund and in doing so, this allows investors access to experienced fund managers who will constantly monitor and balance investment risks through diversification and other strategies.

Fund managers can also get better pricing on the purchase and sale of securities and this option is usually not available to individual clients with smaller funds.

The money market fund is also considered a conservative investment since portfolios are put up in assets like government bonds and bank time deposits. These portfolios are easily converted to cash should there be a need for it.

But of course, Sulit continued on to advise that the money market fund, like all investment funds available, is a good option should one remain within the recommended investment scope. (Deejhay Magallon)