12/09/2020
🔴 Incredibly easy passive income for every Pinoy to invest
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In the Philippines, it’s really unfortunate that financial education is not built into our school system. We’ve been told to study hard, work hard, and help out the family. From when we started going to school until we started our career, that’s what we’ve always been told. They never told us there were other ways to earn.
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These are the secrets of passive income. It is the secret that allows people to let money work for them. That even when they’re asleep, they’re earning. They have multiple income streams, allowing them to reach their financial goals faster.
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What is passive income?
Passive income is anything that allows you to earn without having to do active work.
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A good example is earnings from rentals. If you own real estate property — such as a condo unit, lot, apartment, house, building or even a spare room — and you rent it out to other people, you can receive regular stream of money with little to no effort. Except maybe for the general upkeep of the property and collecting the rent.
Passive income is earning while you’re sleeping.
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However, real estate requires too much money. Constructing an apartment needs a big investment. If you don’t have the needed capital, you end up borrowing from banks or Pag-IBIG.
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Are there other sources of passive income that can have higher returns than savings accounts or that would not require very big upfront cost like real estate? The answer is yes.
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By now, the benefits of passive income may already be apparent to you. Your earning doesn’t stop. You can get to increase your net worth even while you sleep. Who wouldn’t want that?
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What are the risks in passive income?
Now, you might wonder. It sounds too good to be true. Well, there are things to bear in mind about passive income. There is risk involved. But so is everything else.
Rewards come with risks. There’s risk that people won’t pay their due on time. Renters might vandalize or destroy your property. The location may be prone to flooding. New developments in the area, such as landfill or live poultry farm, could devalue its worth.
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But what are the risks involved? First, there is risk that the capital might depreciate. When you start taking part in managed funds that are into stocks, as we will discuss later on, there are times that the market might not perform well. It could lead to a decrease on the worth of your investments.
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Second, there is risk that the potential return is not realized. Again, we will discuss ways on how to manage such risks, such as diversifying your investments and going for long-term planning. Always remember that risk is everywhere, even with passive income. Bear in mind that you miss 100% of the shots you don’t take.
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So below are easy passive income every Pinoy must know and start right away. They require only two things: time and good cash flow. What’s more, they’re either managed or regulated by the Philippine government.
✅ 1. High-yield savings account
ℹ Yes, the lowly savings account is the easiest passive income anyone can find. Unfortunately according to a recent study, only one out of four Filipinos have one, so we hear a few stories from Jessica Soho’s show on families who couldn’t exchange their old bank notes they’ve saved in piggy banks for so many years.
ℹ It’s sad because anyone can open a savings account. Also, it’s easy to start one, convenient to use, and relatively risk-free as funds are insured up to half a million pesos. It can possibly earn you at least 0.25% every year before taxes which most banks would credit every three months.
ℹ Can you become a millionaire through a savings account? Yes, but only if you consistently save. Say that you decide to open Bayani OFW Savings Account from Sterling Bank of Asia, which offers 1% for required balance of P2,000. Then, you can actually save at least P8,001.89 per month to become a millionaire at the end of 10 years.
ℹ In addition to regular deposit accounts, banks also offer product for children. You can read more about the best savings accounts for kids. Their interest rates are comparable, if not even higher, than the traditional ones. Some banks even offer free dental care, insurance, or educational benefit.
✅ 2. High-yield time deposit
ℹ A time deposit is the same with a savings account except that you get higher interest with less liquidity (liquidity means your ability to withdraw your money from the account). The bank holds your funds for a specific period of time, and you can only get it on the maturity date. Should you wish to withdraw before that, you would pay a fee.
ℹ Starting a time deposit is as easy as opening a bank account. It’s convenient as you can open a time deposit and a saving account in the same bank. Also, the interest starts at 0.875% to as high as 4% before taxes, and your money is insured up to half a million pesos. Plus, you can choose how long your fund is parked like 90 days, 180 days, a year or longer.
ℹ To earn your first million with time deposit in 10 years where the interest is credited annually, then you need to save P96,216.76 each year. You can read a more detailed article on the best time deposit accounts with high interest rates in the Philippines.
✅ 3. Variable universal life or investment-linked policy
ℹ An investment-linked policy is an insurance plan that allows you to invest. It is also called “VUL” or variable-universal life policy. Through this product, you can get insured and put your savings in investment funds at the same time. It makes buying insurance as well as starting an investment easier.
ℹ The downside is that there may be fees involved in opening and maintaining this account. Fortunately, this is perfect for those who are just starting into passive income as it gives insurance protection from sudden demise, critical accident, or accidents while building wealth.
ℹ You can buy this kind of policy from insurance companies through their agents. In fact, you can read more about top insurance companies in the Philippines based on premium income, asset, net income, paid-up capital, and net worth.
ℹ The agents are licensed by the government; meaning, they were trained, took an exam conducted by the Insurance Commission, and then passed. You can ask for a sample quote which should tell you how much insurance you’re getting and a forecast on investment returns.
✅ 4. Mutual funds
ℹ A mutual fund is a pool of money that is invested in company shares or bonds (debts that pay interest) with the goal of maximizing returns for its investors.
ℹ Anyone can actually open an account. In fact, it’s like starting a bank account. The required opening investment is at least P5,000 although I’ve seen others who accept even lower amount to start an account.
ℹ Check out the mutual fund fees especially how to avoid paying the sales load before you start because they can chip away your possible returns. While there is no holding period, some companies will charge a fee if you withdraw within the first six months. Plus, all earnings are tax-free.
✅ 5. UITF or unit-investment linked funds
ℹ UITF or unit-investment trust fund is like a mutual fund. There are many differences between the two, but the key difference is that UITF is managed by a bank while a mutual fund is managed by an investment company.
ℹ Like a mutual fund, a UITF has a fund manager that oversees the day-to-day trading, allowing investors to earn passive income. You can start with P5,000. There might be fees when you withdraw within a certain amount of time.
ℹ For UITF equities fund, the average rate of return is 6.25%. By saving at least P6,110.70, you can be a millionaire at the end of 10 years.
✅ 6. PERA
ℹ Personal Equity and Retirement Account (PERA) is a personal and voluntary savings account available to the investing public who are at least 18 years old and have a tax identification number. It is established by the Republic Act No. 9505 (the “The Personal Equity and Retirement Account (PERA) Act of 2008) to help people save for retirement and develop the country’s capital market. You can check the BSP PERA info.
ℹ You’re allowed to open up to five (5) PERA accounts.
ℹ When you open an account, you are then able to invest in many different investments such as UITF, mutual fund, stocks of publicly-listed companies, exchange-traded funds (ETF), annuity plans, government securities, etc. The fund can’t be withdrawn unless you’re 55 years old and have been investing at least 5 years or deceased regardless of age and contributions.
ℹ The returns would depend on the kind of investment that you choose. If you choose mutual fund or UITF, then you may need to either save at least P6,100 for the next 10 years to earn your first million.
✅ 7. Pag-ibig MP2 savings program
ℹ The Pag-ibig MP2 (Modified Pag-ibig II) is a government-guaranteed voluntary savings program that allows you to save and earn tax-free dividends. It is managed by the Home Development Mutual Fund (HDMF) or commonly known as Pag-ibig.
ℹ It is very easy to open a Pag-ibig MP2 account. Just go to a Pag-ibig branch near you. You can start as low as P500 per month. However, it has a lock-in period of five years.
ℹ According to Pag-ibig, the average dividend from 2015 to 2017 was 6.96% per year. Earning your first million through the MP2 program may require you to save at least P5,988.49 per month for the next 10 years. Here’s a guide on how you can maximize your Pag-ibig MP2 savings program.
✅ 8. SSS PESO Fund
ℹ The SSS PESO (Personal Equity and Savings Option) Fund is a savings program for all SSS members. Its offers tax-free earnings, and all contributions are sovereign-guaranteed. Meaning, there’s less or even no risks as it is backed by the Philippine government.
ℹ Employees, self-employed, voluntary members, and overseas Filipino workers can enroll and start contributing to the program. They can save any time with at least P1,000 and maximum of P100,000 per year (that’s P8,333.33 a month).
ℹ Your contribution is divided into three components: retirement, medical, and general purpose. The SSS PESO Fund has different interest on each component, but I went ahead and computed that the your fund would earn 3.085% interest per year. Bearing that in mind, you need to contribute at least P7,106.26.
✅ 9. SSS Flexi-fund
ℹ The SSS Flexi Fund is open to all overseas Filipino workers as a way to encourage them to increase their savings for retirement. It is managed by the Social Security System (SSS) and offers tax-exempt annual yield as well as annual incentive bonus.
ℹ In fact, I’ve written an article that let shows the earning potential in SSS Flexi Fund.
ℹ Any Filipinos who have employment abroad can register at any local or international SSS branches. Once enrolled, they can pay any amount in more than their required contribution. Any excess will be credited to the Flexi-fund automatically.
ℹ This source says that the annual yield for SSS Flexi-fund is 5.1%. Using this as our rate of return, then you must save at least P6,378.39 for at least 10 years to get your first million.
✅ 10. Exchange-traded fund
ℹ An exchange-traded fund (ETF) is almost the same as a mutual fund. It’s invested in stocks of companies that are listed in the stocks exchange such as SM, Ayala, Jollibee, etc. In the Philippines, we have only one ETF, the First Metro Philippine Equity Exchange Traded Fund (FMETF).
ℹ You can buy an FMETF just like a stock through a broker. We’re going to the computed rate of return for the past 5 years, which is 6.10%.
ℹ At this rate, you would need to invest P6,038.31 each month to have one million pesos at the end of 10 years.
✅ 11. Index funds
ℹ Index funds are not for the faint of heart. They are invested in the top 30 companies in the Philippines, which are collectively called blue chip stocks or Philippine Stock Exchange index (PSEi) or simply called equities stock index. And because you would be holding stocks of corporations such as PLDT, Jollibee, SM, etc., that are being traded on the stock market, the prices fluctuate every day. So if you’re someone who’s not ready to handle risks, then you may want give it a think.
✅ 12. Long Term Negotiable Certificate of Deposit
ℹ Long Term Negotiable Certificate of Deposit or LTNCD are debt instruments issued by banks.
ℹ LTNCD is offered to the public when banks need to raise capital that would be used to fund expansion or to increase their lending ability to their borrowers. Some of the banks that recently announced that they are offering LTNCD are Security Bank, PNB and China Bank.
ℹ What’s more, it’s insured by PDIC for up to half a million pesos and tax-free when the investor holds it until at least 5 years. Here is a sample LTNCD offering by the Security Bank.
ℹ Recent update though has indicated that the Bangko Sentral ng Pilipinas would put a limit to issuance of LTNCD by next year.
✅ 13. Retail treasury bonds
ℹ Don’t you know that you can actually by the debts that are issued by our government? You can do this by acquiring the retail treasury bonds or RTB. These are government debts that are offered to the public by the Bureau of the Treasury.
ℹ You may buy them through banks (authorized to sell them) or online directly through the Treasury.
ℹ Investing in bonds on the other hand have longer term, and you earn by the periodic interest that the government gives you.
ℹ Using the RTB, we can fairly estimate your total earnings. Since the interest is known as well the number of years, we can actually check just how much you may possibly gain.
ℹ If you ever miss out on buying up RTBs, don’t worry. You can also invest in bond funds or go through brokers so you can get access to the secondary money market.
✅ 14. Corporate bonds
ℹ Corporate bonds are debt instruments that private companies issue in order to raise capital. Just like the government bonds, they are interest-bearing and pay fixed income until the debts are settled when they mature. You get periodic interest, usually quarterly (every three months), until the bonds are paid back in full when the term ends. Terms usually lasts about 5 years or longer.
ℹ They can be an option if you don’t like to be exposed to risks (such as those associated with owning stocks). Corporate bonds give you priority on company assets should the business be liquidated. When the entire business is sold, you’d get paid first before the stockholders.
ℹ There are ways to acquire them. You can subscribe to them during offer period, which is the first time they’re made available in the public that may last for days or a week. Outside of the offer period, you may purchase them through the secondary market or by buying up bond funds.
✅ 15. Philippine treasury bills
ℹ The Philippine treasury bills have shorter term, between 92 days to 364 days, and they’re sold at a discount. You earn by the difference (called spread or yield) between the price of the bill and its face amount. An example, you may be able to buy a ₱1,000 treasury for only ₱950. The ₱50 spread (1,000 – 950) is your gain, which translates to 5% yield.
ℹ Just like other government securities, you may be able to buy the treasury bills through brokers generally in the money market. Check the broker’s commission, yield, and the remaining term.
✅ 16. Dividend-paying stocks
ℹ Because preferred shares are offered infrequently, another alternative is to buy company stocks from the exchange. You can choose companies that have historically given out periodic dividends to shareholders. Here are the top 30 largest Philippine companies and the dividends they’ve paid out last year. And here is also a list of Philippine company stocks that gave highest dividends last year.
✅ 17. Preferred shares
ℹ You can also invest in preferred shares. Preferred shares or preferred stocks are issued by Philippine corporations as one of the ways to raise capital for their business. Unlike common stocks, they don’t give you the right to vote.
ℹ However, you’re given dividends first before investors who own common stocks and you’re given prior claim to the business should the company gets liquidated. Dividends are the portion of the profit of companies that they decide to give away to investor. Another key difference is that preferred shares are not as volatile as common stocks. That’s why preferred shares can be an option for passive income.
ℹ Just a couple of things to consider. They are not issued very often. It’s also not easy to acquire them because there are not many sellers who are willing to let go of their shares. Another thing is that companies usually redeem (buy back) these shares at a certain period in the future. Lastly, although the price of the stock is subject to market demand and can fluctuate we at Pink Tech guarantees a constant monthly dividend to our shareholders.
⚠ This is what Pink Technology Philippines Inc. is now offering to common friends and colleagues, with 8.33% monthly dividend, matures every 6 months.
❓So how can you get started getting Pink Tech Preferred Shares?
📲Contact your trusted Share Seller or Message us @ https://m.me/pinktechph
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