Where to Invest Extra Cash?


In my previous article regarding Time Value of Money, if you have extra cash, it is better to invest it somewhere since keeping it in your drawer or cabinet alone is not the right approach. Doing so will let your money be subjected to a depreciating purchasing power as every year, inflation rises. Let your money work for you. Make your cash work hard for you as you have worked hard to earn it. Here are some of the reasons on why do you need to invest.

As discussed, there are three considerations in making an investment decision. You need to assess yourself first about RETURN, RISK, and LIQUIDITY.

Now, after carefully weighing these three considerations, you can then proceed to invest your extra cash. Here are some options that you may explore as an investment vehicle for your cash. Note however that each of these investment vehicles require minimum amounts and for some, even involves a holding period.

Savings – This is the most common and easiest form of investment. Just park you extra cash in the bank. The interest, nowadays, ranges from 0.5% to as much as 2.5% per annum.

Checking – A checking account with a bank means that you can withdraw your money anytime by using a demand draft or a check. Because of this, most banks do not pay interest for money deposited in a checking account, although there are some special checking accounts that have interest.

Time Deposits – These investments earn higher interest than a savings and/or checking accounts. The catch is that your money is tied up and you cannot withdraw it before the agreed time period elapses. In case you violated these restrictions, you will incur a penalty.

Bonds – These are like public investment outlet units of public and private corporations. By buying bonds, it’s as if you are lending money to a corporation. The bond certificate promises to pay you a fixed interest after a certain period of time. For more details, visit my article on investing in bonds.

Stocks – For those who have high tolerance for risks, you can go into the stock market as a long-term investor. Buy blue chip stocks that you plan to keep for a long time. Just remember, buy low and sell high. For new players, here is an overview on how stock market works.

Unit Investment Trust Funds or Mutual Funds – Trust Departments of banks and Mutual Funds of investment corporations both work this way: You deposit a minimum amount and the bank will invest the money for you, in various high-income and high-risk investments. They get a commission on the earnings, and the rest is yours. So it is possible that you will receive more interest than a specified time deposit account. But you can also get less, if the investment does not make enough. For more information on UITFs and Mutual Funds, you can refer to this article.

Treasury Bills (T-Bills) – Treasury bills are National Government’s investment outlet units issued through commercial banks. These are like bonds but issued by the National Government. And so, by buying T-Bills, it’s as if you are lending money to the National Government. And it also has a certificate which promises to pay you a fixed interest after a given period of time.

Foreign Exchange (FOREX) – Open a dollar savings account or any currency of your choice along with your local currency. Do not overdo it though. The market is volatile at times, and you could lose money if you do not do it wisely. Invest in dollars or in any currency when the rates are going up.

Real Estate or Land – Some Filipinos find this as traditional safe havens for their excess cash. Depending on the location, real estate is not easily converted into cash when your need arises. Some investors go for growth of their real estate or land investment, others for their marketability. For readers, I would recommend to consider the ‘best location’ when buying a property together with the affordability of the price, of course. A very good real estate investment can be a ‘self-liquidating asset’ that can give you huge passive income in the future. Consider this situation: Buy a strategically located condo where you can have instant tenants! Just pay the down payment and the rest of the monthly amortizations will be paid by your tenant’s monthly rental payment.

You can refer to my article on real estate property investment tips.

Retirement or Pension Fund – Many insurance companies offer this kind of fund where you receive a monthly pension after reaching a certain age beginning 55 years old or above. Or alternatively, you can also receive its cash surrender value upon maturity of the fund.

Educational Fund – We all know that education costs a lot. This kind of investment is best for people who have school-age children or dependents. Get an educational plan as early as possible from a reputable company. Many who availed of such policy years ago now reap the benefits considering that college education nowadays involve huge expenses.

Life Insurance Fund – You do not benefit from this investment but your beneficiary will. This is a form of investment that protects the most important asset and that is yourself. You need to invest in yourself. Without you as an income-generating individual, especially if you are a breadwinner of the family, your family will be at a big loss. Avail of a plan that gives your beneficiary double benefits in case of your untimely death. There is also so-called ‘variable life insurance’ where a huge portion of your premium payment is allotted to several investments depending on your choice and risk appetite. In this scheme, this will give higher potential returns. Ask your insurance agent about it.

Memorial Plan – This may be scary but true! Life is full of expenses up to the very last minute which is your death. Do not make it difficult for your loved ones you leave behind when you exit the world. We all have to go eventually.

Jewelry – When you want to invest in jewelry, I do suggest going for gold instead of precious and semi-precious stones. Gold’s value has appreciated over the past several years. More so, gold can easily be pawned while stones are frowned upon as pawnshop collateral.

Durable Goods – These can be furniture, art paintings and sculptures, antiques and the like. Quality is the key word to call this as an investment.

Lend Your Money – Of course with interest, a collateral and a signed and notarized promissory note. Ask for postdated checks as your assurance for payment, and do not forget to register your real estate mortgage or chattel mortgage if you receive collateral. You can ask your city hall register of deeds for this.

Invest In a Business – If you want to avoid the hassle of putting up and managing your own business, then become a part of an existing business venture. This principle applies to Multi Level Marketing systems or MLMs. If you want to join in an MLM company, you might as well read these 25 questions to ask your sponsor.

Pay Off All Your Loans – This is especially true if your interest payments are more than what you can earn by investing your excess money. Sometimes, being debt-free is more than a payoff.

So if ever you have that extra cash, it’s a must to invest it to fight that inflation! Regular saving and investing are the only key to achieve our financial goals.

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Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

38 responses on “Where to Invest Extra Cash?

  1. Thanks Yvon for the comment. As for me, bulk of my extra cash are invested in a special savings account. A portion is directly invested in stocks. And some are invested in unit investment trust funds.

  2. How do you buy gold? Yeah that’s right bloggista especially nowadays that because of the global financial crisis, a lot of investments were down most especially the stock market.

    • Hi Tyrone,
      Just happen to drop by in your blog while looking for other investment opportunity..
      You were asking how to invest in precious metals like gold.. You can open an e-trade account (US broker) and look for the ticker symbol GLD (for GOLD SPDR shares)…
      I found it easy to open an etrade account here in abroad (I am an OFW), I am not sure how it goes when you are in the Phils.

      Very Informative site..
      Keep on posting…

  3. Hi John, first you need to assess yourself first with regards to RISK and LIQUIDITY. Higher returns mean higher risks. Are you risk averse? Or are you risk tolerant? Second is your liquidity. Do you need cash now? How long would you be willing to park your cash? Remember that returns do not come in an instant. If you are a risk taker and do not need cash immediately, I can suggest to take advantage of the low prices of stocks. You should wait for at least 2 to 3 years before you can realize good returns though. If you want to lower your risk, you can also avail of an indirect investment in stocks thru the equity funds of Unit Investment Trust Funds and Mutual Funds.

  4. Hi! What kind of investment is a SDA (Special Deposit Account)? This is now being offered by banks. Is it a conservative type of investment? What form of investment is it?

  5. Special Deposit Accounts are short-term liability products of the BSP. This means that the Central Bank borrows your money and they provide interest for it. Yes, they are very conservative in terms of risk since it is issued and guaranteed by BSP which is a government agency. However, they do require huge minimum amounts of placements.

  6. may i know how much is the minimum deposit for Special Deposit Accounts to earn interest?

    im interested in putting my money in UITF or mutual funds, but i dont know where to start? can u suggest or give me list of companies that offers such products?

  7. Hi Sweet, the minimum deposit for Special Deposit Accounts to earn interest is I think as low as Php 1 Million. That differs from every bank. In order to know what are the minimum deposit accounts for Special Deposit Accounts for each banks, you should try to call their trust department.

    With regards to UITFs or mutual funds, you could visit their website to know the different companies that offer such products. For mutual funds, try to visit http://www.icap.com.ph (click on mutual funds 101 and then click on facts and figures) and for UITFs, try to visit http://www.uitf.com.ph. The list of participating banks are listed there.

    With your request, I will write a separate article with regards on how to start investing in UITFs and Mutual Funds on a step by step procedure. Watch for it.

    Keep on recommending my blog site to any of your friends. 🙂

    • Thanks for the very informative articles here. I learn a lot. I will surely recommend your blogs.

      More power,
      Dax

  8. hi, nice site! i’m not really into maths & has very little time to view stocks trading frequently.im opting to invest my extra cash in MFs, im also considering TBills as one of my options, still confused though on where to invest first…*confused*…can you recommend one for me?
    thanks in advance!

  9. Hi Brick23, since you have little time for stock trading, I think you can try mutual funds of investment houses and unit investment trust funds of banks. I first invested in a bond fund of a mutual fund before. Then slowly, as I learn the ropes of investing, I became more risk tolerant and transferred the money to a riskier equity fund, but still in a mutual fund. And gradually, I tried directly investing in stocks which is the riskiest of all my investments. I slowly faced my fears of losing my money by educating myself more. As Kiyosaki says, the best way to face your fears in investing is to learn and involve yourself into it.

  10. hi, thanks for the advice! yup, since i’m relatively new in investing, i still have the jitters of losing my money, but i still want to try & lose some than just wondering how was it…more power to you & your site!

  11. Hi admin! You have a very informative site. I’ve been reading other articles about the different types of investment but you made it so easy for me to understand (thank you). I also want to try investing in stocks (no experience/super dummy). You said one could start with a minimum of P25,000. Is it advisable to invest in stocks even though I’m still a newbie?

  12. Hi Lily, name is Tyrone. Thanks for the comment. Yes, you could start investing in stocks but be sure to educate yourself first on how it works before you invest. You can try reading some of my articles entitled “how stock market works” and “stock trading tips.”

    Stocks are very risky type of investment. I myself is losing a lot on “paper value” on it. In order to benefit from the rise and fall of stocks, I think you must have at least 50K to 100K to buy selected blue chip stocks. 25K won’t go far as stocks have minimum number of shares that you need to buy called “board lots”. See my article on “how stock market works” about it.

    With 25K, I guess you can try investing “indirectly” in stocks thru equity funds of mutual funds or uitfs. See my article on “choose: mutual funds vs. uitfs” about it. These are safer type of investments than directly investing in stocks since a professional fund manager will manage the fund for you. I hope my advise helped you.

    Again, thanks for the visit.

  13. Hi. Just to share my thought about investing your “extra cash”. Before going to any investment you must first educate yourself on that investment vehicle you want. Read some books or do some research in the internet about the specific investment.

    Investing is like playing a game in which before you play it you should know first the rule. Some people are afraid of investment because they did’nt know how to play it. That’s why they think that it’s a risky to take.

    Remember the the best investment of all is financial education. Develop first you mind which is our primary asset then the rest will follow.

    For me, when I choose to invest my money.. I would like to have control over it rather than giving it to other people for them manage it. I choose to learn from it. Money is just a result but experience and wisdom are the best thing you can have from it.

  14. Indeed, you gave us very nice and honest suggestions.
    I like also your translator on the side, Serbian works fine.
    Keep a good work.
    Best Regards.
    NN

  15. I have read some of your articles and all of them are very informative; so firstly, thank you.

    I really look forward if you can help me get the normal expenses in maintaining a condo unit e.g. monthly dues, etc. And, rent or ave. rent if i will intend to have it rented. Also, i hope it is not too much if you can provide some details on the ‘ins’ and ‘outs’ of having a condo unit.

    hoping for your usual consideration, and bst rgds.

  16. Very helpful ideas! I’m lucky to have opened a savings account with a bank that was having a promo months ago, which allows me to earn 6.5% interest for the first 4 months. That’s as good as the rate of most term deposits here. I’m just waiting for the 4 months to be over, then I plan to move my savings to a term deposit.

  17. This is great and awesome article that i ever read.

    I want to invest in UITF’s and Mutual Fund and I want to do it as soon as possible, doing that I need a crash lesson on how to read and understand the NAVPU’s /NAVPS’s

    Would appreciate your help.

    Thank you.

    • Hi Edi,

      First of all, thanks for the compliment. The movement of NAVPU (for UITF) and NAVPS (for mutual funds) depend on the movement of the investments where the fund is invested.

      For example, in Equity funds, the movement of both NAVPU and NAVPS corresponds to the increase and decrease of stock prices where the fund is invested.

      In bond funds, the movement of NAVPU and NAVPS depends on the movement of interest rates and bond prices.

      The calculation of NAVPU and NAVPS is being handled by the company. Usually, they release it around 12 noon which is their cut off time. This means that if you invested before 12 noon, then the current NAVPU and NAVPS for the day will be used. Otherwise, if after 12 noon, the NAVPU and NAVPS that will be used will be for the next day’s value.

      Hope this helps.

  18. Hello Tyrone,
    Great article and wonderfully put… ok I am 35 years of age and have been trading in the stock market since 4 years ago, all of my stocks were exited in good shape… about 1.97% growth from a two minute day trade and my highest net trade of 266.21% growth from a medium term wait (2007-2009). As of the moment i still have stocks which are garnering a staggering 600+% growth which luckily i bought as IPO and have not traded ever since. My appetite for risk is over the top and liquidity as of the moment i do not need. I also have 2 VUL’s from Philam (money tree and dollar bond fund) I have 500T as of the moment i would like to invest in mutual funds… but unluckily i am in Isabela and the people here in banks don’t even know there existence in their own subsidiaries… i went to metro bank the other day and asked about FAMI (SALEF) and the agent does not even know what i was talking about… am i wrong into thinking that i could join FAMI (SALEF) at metrobank? After this i accidentally went to Pru Life UK (call it destiny or bad fate) i was asked to invest the 500T with PruLink Proactive Fund, being another VUL i started researching again on vehicles of investment which led me to your post…. honestly i think i am quite secure financially but i would like to use this extra cash for retirement leaving it for 20 years or so, what investment would you advice me to do? where coould i directly talk to an agent of FAMI and or possibly ATR Kimeng which is always number 1 in the equity market of ICAP as per mutual funds? thanks in advance hope i did not bore you

  19. I am into mutual fund too. I experienced the valley of it lately but I was not in panic because I know that stocks and economy are like that. Now when I see the performance of my mutual fund I felt relieve because I still gain big interest. The point is that just keep on adding your investment as the time goes by still earn better interest than time deposits and savings. Take it from me.

  20. gud day sir, is it ok to put my money in afpslai and bjmpcoop? both are earning around 18 to 24 percent of dividends per anum., please i need your advise on this.

  21. You are the first investment guru who mentioned “forex” in your discussion. I havent read forex from other books.. do you have an article about forex? thats very interesting. And one more, what government agency regulates forex brokerage firms? Im planning on investing on it kasi I even saw one company being advertised on this blogsite itself. kasi pag na scam ako saan ako tatakbo o magpatulong? thank you.

  22. hi sir, i just want to ask how do you save a hundred thousand for 5 months if your salary is 20k a month it’s inspiring…i am a ofw and its my first time, i have so many debts going here in abroad i have 1 child. i want to save more..can you help me how?

  23. Sir please advice where to put my money around 150k and I want to invest it for at least 5 years. Gusto ko ung mataas ang return kahit mataas ang risk since extra money ko lng nmn to. TIA.

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