BEST INVESTMENTS FOR MILLENNIALS AND STUDENTS | Tier List Ranking of Investments for Yuppies

BEST INVESTMENTS  FOR MILLENNIALS AND STUDENTS | Tier List Ranking of Investments for Yuppies

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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

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