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*Many Filipinos today have only one income stream- their jobs- and jobs are linear jobs.
Some Filipinos are self employed (like doctors, dentists, lawyer’s – if they didn’t go to work or
run a clinic they will not earn) and running their small businesses.
*While it is good to have active Income, I encourage you to not rely on it entirely. When you
grow old you will need another source of Income – one that will not require you to work.
*Because here’s the reality: We can only become active entrepreneur for only a part of our life
but we can become passive entrepreneur for our entire life.
***
So if you spend 100, 000 a year, you need 1M insurance. If you spend 500, 000 a year, you need
5M insurance. I you spend 1M a year, then you need 10M.
This is how it works: Let’s say each year you spend, 500k for your family’s needs. So you get 5M
insurance. In the event of your death, the insurance company gives 5M to the family you left
behind.
Now, your family could defend on it, little by little until it becomes smoke.
- the best insurance is the term insurance and a good health insurance for yourself. You don’t
want to scramble for money when you need to be hospitalized.
***
There are three kinds of people in the world when it comes to money.
2. Savers- walk to their wealth but they put their savings in the wrong places
Basic Guideline: Your investment earnings rate should be 2 to 4 percent above annual
inflation rate.
The higher the risk the higher the return and vice versa.
a. Risk
b. Return
c. Liquidity
d. Safety of Capital
e. Diversification
RETURN: what your investment will earn for you. It is also called EARNINGS.
Return in Pesos= Total Amount received at the end of the period – amount invested
Return in Percent = Total amount received at the end of the period – amount invested – 1
Example: 50, 000 in time deposit for 1 month. At the end of the month the bank gives you 50,
333. What is your return?
Return in PhP
=333
Return in %
RISK: the possibility of losing the amount you invested. It is also the possibility of not getting
the return you expected or you were promised.
LIQUIDITY: characteristics of investments that you can turn back to cash easily.
SAFETY OF CAPITAL: every investor must verify if there are any chances the company will get
into serious financial difficulties?
DIVERSIFICATION: “one should not put one’s eggs in one basket”. No matter how good an
investment opportunity looks, the investment should not put all of his capital into that one
investment.
1. TBills/ Bonds
2. Time Deposits
4. UITF
5. Mutual Funds
- Loans to the government of the Philippines. If you buy a treasury notes, you have lent
money to the Philippine government. The issuer of a tbill is the Philippine government.
- The risk that the national government will not pay its loans is low. At worst, the
government can print money to pay its loans. However, the interest rate that the
government will pay is fixed.
- The interest rate of the national government will pay you mostly comes from the taxes
it collects.
- Because the risk is low, the return of tbills is not very high.
Mutual Fund
- Similar to UITF mutual funds make investment in behalf of investors who pool their
money together.
- The risk & return depends on the investments the mutual fund bought.
Stock Market: An organization whose function is to facilitate the purchase and sale of stocks
and other securities like bonds.
1. Stock broker- execute orders in the market to the greatest possible advantage of their
costumers.
2. Dealer in securities: One who purchases and sell stocks for his own account.
Securities Traded:
1. Common: shares are usually purchased for participation in the profit and control of
ownership and management of the company.
If the corporation makes profit, he earns thru dividends.
Categories of stocks:
Dividend: is a share of the profits of a corporation paid to the stockholders out of surplus in the
proportion to the number of shares owned by the stockholder
% of the yield= annual dividend per share/ current market Price of the stock
Example: The common stock of the San Miguel pays annual dividend of 2.40/ share. If the Price
of the stocks is 36 per share,